Let’s face it: entrepreneurs are entrepreneurs, and once they see a need/strike upon an idea, they’re going to do what they naturally tend to do: start newcos.

That’s the easy part.

Then you have two paths to helping to establish your company: find paying customers/getting traction, or approach investors for funding.

As June Choi of Serval Ventures noted at our investor breakfast recently, the latter is not easy, as even so-called early stage ventures seem to look for considerable traction, mostly in the form of revenue, and the bar seems to be higher than ever for early stage. So the question is: are many so-called early stage venture funds truly early stage? It’s a chicken-and-egg scenario: you often need money to do the build to get to traction, but you need traction and/or preferably revenue in order to get to the money.

Having been in numerous investor pitch sessions and participated in and/or been a fly on the wall in direct investor pitches, we’ve always wondered why no one has ever done a sort of takeoff on Abbott & Costello’s Who’s on First for investor pitches.

And we decided to have a little fun for a change:

Entrepreneur: Our product does X; we’ve been in the market for six months. We’ve been bootstrapping, and we’re now seeing X in month-over-month revenue. Now we’re looking for $3M seed round to build out more features and hire sales and marketing and hit profitability.

Early Stage Investor (ESI): Thank you for choosing us for this opportunity. Sounds like you’re doing really well, but we generally look for at least $1M in annual revenue, and while you’re certainly getting traction, the numbers aren’t there yet, but please do consider us again when you’ve hit that number.

Entrepreneur: But you’re an early stage investor. We do understand that your fund will invest up to $1M early stage, but $1M in revenue is quite substantial traction for that level of funding.  Isn’t that a high benchmark for a so-called early stage investor?

ESI: Like all investors, we look for unicorns. We want that one-in-a-billion that’s going to knock it out of the park, coming out of the gate.

Entrepreneur: Do you know how many investors turned down Google (These Entrepreneurs Were Rejected Hundreds Of Times Before Bringing In Billions)? And Airbnb? Brian Chesky wrote a Medium piece (7 Rejections) about some of Airbnb’s rejections. Bessemer Ventures has a section on their website called the anti-portfolio, listing the companies they turned down, including Apple! And Airbnb…

ESI (chuckling): Well, what you might not realize is that at one point, Apple nearly went out of business. Microsoft had to bail them out.

Entrepreneur: Smart bet! You do realize that Apple is one of the most valuable companies on the planet right now, right? Bessemer passed on Zoom, too, by the way.

ESI: They did invest in Zoom’s IPO. We stay away from crowded and tough legacy spaces, too, btw.

Entrepreneur: How do you know that one isn’t the outlier? There were plenty of platforms similar to Zoom before Zoom came along. They had been around for years, more or less unnoticed: now Zoom part of the lexicon.

ESI: They got ‘lucky’ with Covid.

Entrepreneur: Or they had a better product and the market decided. When was the last time you WebEx’d someone?

ESI (dismissively): Thank you for considering us – and that’s why we left the door open. When you hit $1M in annual revenue, please do consider us again.

Jeff Bezos said that in order to get things done, you have to be stubborn and focused, to the point where others might find unreasonable. Bezos is no doubt stubborn and focused and dollars to donuts, unreasonable as well. And he does get things done. Amazon began as a bookseller and pivoted. Airbnb started as a site for conference goers to find an airbed to crash on.

All companies pivot, re refine the business model.

The next Amazon is hiding in plain sight and there are a million reasons not to invest in a potential competitor: crowded space, not enough traction (at the moment), team are not subject matter experts – and we always recall what Jeanne Sullivan said on the subject: that the Wright Brothers didn’t have a pilot’s license. Investors, especially early stage VCs, are shy about pulling the trigger – especially now – so even though you might have broken down some of those barriers to entry, now you’re up against the barriers to funding.  It’s a crap shoot, on both sides of the table. Always a good idea to keep the investors with whom you met in the loop on the progress you’re making. We will remind you once again that ‘No’ is an acronym and that, after all, investors have LPs to whom they must answer – another reason why they may be somewhat loath to pull that trigger initially. They may come in later, or once you’ve gotten an initial investment in. Early stage investors need some sort of validation and many prefer not to be the first money in. More often than not, they want to know who’s on first.

Onward and forward.