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Charlie O' Donnell
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A few years ago, a friend of mine got hired by a company as a software developer. She was an early riser and liked to get into the office around 8AM. A diligent worker, she was super focused from the moment she sat down at her desk--and so by the time 6PM came around, she had gotten a lot of work done and ready to call it a day.
Her young male colleagues had a different approach. They strolled in at around 10 or 11AM, and didn't really get going for real until about noon. They spent a lot of time distracting themselves, but worked deep into the night--doing the same amount of work as she did, but stretching it out until 10 or 11 at night.
Because my friend would take off "early", she got a reputation for not working as hard as everyone else, even though the results said otherwise. Eventually, they let her go.
What struct me about this situation was that it was a culture that obviously couldn't scale past young, single people. I thought, "Wow, there's no possible way anyone with a kid can ever work at this company."
As I spoke with Adam Milligan about in the Startup Recruiting Podcast, tech companies are idea factories--and they win by bringing the best ideas to light. That means that successful environments are ones that foster a diversity of perspectives, support great communication, and favor quality of solutions over the speed and hours of simply "typing" the code.
That's why a great barometer of your potential for success can be found in how ready your company is to support a mom (or a dad, of course) returning to the workforce after taking time off for family. If your hiring process really does favor the people who can bring the best ideas to the table, statistically speaking you should have a lot of moms in that process, particularly when they're often your biggest customers. The question is, can they find success in your environment, and what might hold them back.
That's where efforts like Path Forward come into play. Path Forward is a nonprofit organization on a mission to empower people to restart their careers after time spent focused on caregiving--not just moms raising a kid, but all sorts of family situations. They fulfill this mission by working with companies to create midcareer internships — sometimes called “returnships” — to give women (and men) a jump start back to the paid workforce.
I interviewed Path Forward's founder, Tami Forman, on the Startup Recruiting Podcast (or here at Soundcloud, in case iTunes hasn't updated yet) to talk about companies can go about making their environments supportive of this transition and how the companies involved in the program have tapped this underutilized talent pool. (Over 80% of the participants in their program wind up getting hired by the companies that they intern at.)
I'm a big believer that companies should rethink their purpose in order to achieve sustainable success. What if the goal wasn't to create shareholder value, but to create the best place for the most talented team (not just individual people) to work? Remember, teams are more than the sum of their parts. Wouldn't product and sales success flow naturally from that? So why not focus on it as a priority? Seems to me that's something that should be done from day one, not just when you get around to hiring your first Head of People.
Today, I can finally announce Brooklyn Bridge Ventures' investment in The Financial Gym's $1.8mm seed round, which I led, alongside Alpine Meridian, Secocha Ventures and several high ranking execs from the finance world.
What's the Financial Gym?
It's a membership based space and service where you can work with a Certified Financial Trainer 1:1 to get financially healthy.
What's the Financial Gym?
This is the Financial Gym...
The Financial Gym is the culmination of founder Shannon McLay's desire to eliminate the "fear and shame" that comes with financial difficulty--something people are facing more than ever before. Two-thirds of people in the US have no more than just a few hundred dollars in savings. Seven in ten college grads finish with an average of $40,000 in debt, adding up to a record high $1.4 trillion dollars in total--a 150% jump in the last decade. And wages? Wages have grown 0.2% annually since the 1970's, lagging inflation. Each new generation is forced to do more, with less, despite startlingly low levels of financial literacy--only a quarter of millennials can demonstrate a basic understanding of personal financial concepts. People are graduating with sky high expectations of themselves and what they can do in the world, but no one ever bothered to teach them how to manage a shrinking checking account in a world of low pay, suffocating debt and high costs.
Apps might work for the most disciplined and well off people--but the moment you have to make hard decisions about selling things to downsize, when you want to talk about a purchase, or when you need some extra accountability to stay on track you'll fall right off of them. Anyone who has ever had a personal trainer give you a 6AM wake up call or who has gotten grief for missing your regular Soul Cycle class knows you can't cheat a human coach.
Membership provides you planning meetings, follow ups, regular check-ins, as well as events at their beautiful new space in Flatiron (with more locations to come, obviously!). There's no downside to scheduling a free 15 minute warm-up call to learn more.
What I also want to add into this story is a little bit about expectations. I don't think I've ever met a founder who has more expectations of themselves than Shannon. Sure, we have a financial plan, but Shannon's got a whisper number of her own that she's managing to herself that I'm sure is an order of magnitude greater than the plan we set out. Much of our interaction is around making sure not every move she makes at the Financial Gym is going to go right--even though she's proving me wrong so far. :) Her bio reads that she runs "the world’s greatest financial services company" and I honestly think it's true--or it will be when the Gym is in every city across the country. I don't think there's a single company in the finance space whose customers have the same kind of positive emotion towards a company as members of The Financial Gym.
She also faced a ton of expectations during this fundraising. Other investors wanted her to be anything other than what she was. They told her to play down the brick and mortar in her pitch. They said she should be an app. They said she should be a bot.
People have asked me how I've come to fund 20 female founders and counting, and I think I realized after meeting with Shannon what gets in the way--expectations. I can think of countless deals that I got to a yes only after asking the question, "What do you really need to raise?" or "Are these numbers really as far as you think you can take this company?"
I asked her if building physical spaces was really important to her and she said it was--so I asked why it was so played down in her deck. When she said that it wasn't what investors wanted to see I just told her she wasn't pitching the right investors--that if she really wanted to build a brick and mortar company, she should just own that and find people who see her vision. She fixed the deck to include her plan for multi-location, multi-city world domination with Financial Gyms everywhere and I responded with a term sheet.
So I'll end this story with a motto the Financial Gym uses with its clients:
"What are you working for?"
If you want to get funding, I think your best chance is if the answer isn't "VCs".
In the last couple of weeks, I've had two similar conversations with my portfolio companies. They were just starting to build out their marketing strategy and they were faced with the challenge of how to staff it. Do you hire someone senior who might feel like the execution of the work was beneath them--or who simply hadn't done it in a while? Or, do you hire someone adept at the actual creation piece, but who needed guidance around how things were strategically put together at a high level?
We had opted to create the high level strategy as a board--since no one knew the companies and their customers better than those that created it and invested in it. What we realized was that we were in a search for consistency. What would be the common thread across all of these available channels?
What we needed was an atomic element of our marketing. What was it that we actually wanted our marketing to do or to show? Do we inspire? Do we tell stories? Do we help? Do we show off? Are we all about people?
If we're about people, than people need to be in every single piece of marketing collateral that we create. If we tell stories, than everything you see from us--from the TV ads to our packaging to our Instagram posts, will be stories, because that's what we do.
Once you figure out your atomic element, it becomes a lot easier to fit your brand message into various channels, because you know the vessel of delivery--the atomic element of your marketing.
Last week, on Martin Luther King Day, I decided that instead of saying something in my weekly newsletter, I would do the opposite--I would listen.
I asked, "What is your experience of being be black in tech today and what can allies do to improve it?"
The responses I got came at a time when I've been having a lot of conversations with female founders as well about their fundraising experiences. At this moment, I'm in the process of backing three companies that have at least one female founder and I just finished a round for a black female founder in December.
While being female and being black are clearly not the same thing, they do fall into the category of "not white men", which the fundraising environment favors--but perhaps not in the way people assume.
This will be the post where I dangerously attempt to walk the minefield of a white male VC opining on the topic.
After backing a higher percentage (around 50%) of founders that would fall into various diversity categories and listening to a lot of people's perspectives, here's what I've come to believe about diversity and the fundraising environment--and I'm open to new perspectives on it.
But first, a disclaimer:
I'm a straight white guy and come with all of the requisite biases and privilege--and so while I cannot speak for anyone outside of this category, I'm attempting to provide a helpful perspective from the funding side of someone who is listening and actively backing diverse founders.
I've opened the comments on this one--because while I normally think comments are kind of a pain in the butt to manage and I'd much rather someone e-mail me if they really cared to have a conversation, I think it's important enough for this post to get into as much dialogue a possible. I will not, however, tolerate hate in anyone's direction.
Ok, now that those two things have been addressed, here's what I believe is true--and, more importantly, simultaneously true:
1) Diverse founders face conscious and unconscious discrimination.
2) Yet, the vast majority of investors would back anyone they thought could make them and their investors money. Why they haven't is not an uncomplicated issue and does not have easy answers.
3) The fundraising process favors white men.
4) The diverse background of the founder is not the main reason why most diverse founders get turned down for investment.
5) Both diverse founders and investors need to change their behavior if the funding statistics are going to change.
Ok, let's dive in...
There is discrimination in the world. This should surprise no one. This was what one of the founders who wrote back to me last week sent.
On an app advertised to "meet inspiring people" for meaningful networking, someone tells this black founder, whose last name is "Youngblood" that is name is inappropriate.
Clearly he assumed that he was using some kind of username, and that it was a gang reference of some sort--like, "Young Blood" as in the bloods and the crips or something to that affect.
The person goes on to blame the uncommonness of the name. Do you think he would have had the same reaction to former Major League Baseball utilityman Joel Youngblood?
I highly doubt it.
Diverse founders here that kind of idiocy all the time, and undoubtedly it's incredibly discouraging. Investors need to give some serious thought to what comes out of their mouth before speaking if they're going to make any improvements. They need to do more to be conscious of their unconscious biases and that doesn't come without real work.
They also need to be not only receptive to feedback, but they need to create a space where they appear like it is welcome.
That being said, that doesn't mean that just because you run into an investor who says something unintelligent or insensitive doesn't mean they aren't interested in funding you because of who you are.
This is where the power dynamics and frankly the social dynamics get tricky. An investor might say something they shouldn't and now, as a founder, you're put in an awkward position. You have to decide whether or not to say something, potentially risking your funding.
I'll say two things about that.
First, if any investor isn't open to getting feedback about their actions, especially related to diversity and especially in today's ecosystem, that's not the kind of investor you ever want to take money from. That relationship is just going to go from bad to worse and will be more trouble than it's worth.
Second, there does not exist a world where you have an idea that should get backed, but only one human being on the face of the earth will fund you--and that person is an asshole. Move on, keep looking and find people who are truly supportive, on your terms.
Ok, second--most VCs are just looking to make money for their investors. There a lot of systematic things going on in the ecosystem but investors specifically not backing women or people of color or any other specific groups just because of who they are is not a widespread phenomenon. I am not excusing why their pipelines are so skewed or how their filters for vetting potential success are biased--those are separate issues that need to be addressed. What I'm saying is that the vast majority of investors are open to backing lots of different kinds of people. That is what I believe, in spite of the industry's piss poor outcomes thus far.
Third, there are a lot of aspects of the fundraising process that favors straight white guys.
The need for a warm introduction is bullshit. I've written about this before. It's been proven that most people's networks look like them--and so if you're only interested in backing people who look like you, warm intros are the best tools for perpetuating the lack of diversity in your pipeline. If you don't want to respond to cold e-mails, you don't have to. No one is owed a response just because they reached out to you.
However, if you don't want to evaluate your inbound deal opportunities, that's the job, my friend. Your network never signed up to do your outsourced job for you. If you can't handle the cold inbound, hire some help. If you can't afford it, then your firm model is broken and you should get out of the business. Vetting deal flow is part of the job. Just put up some clear criteria, like "I only fund NYC companies" or "I only fund enterprise" if you want to improve the filters. If the founders ignore that and bust through anyway, that's their fault and they shouldn't expect you to respond.
Besides, how effective of a filter is it that someone can get coffee with a non-VC and convince them that you'd want to see the deal? If these people were any good at vetting deals, they'd be an investor, too.
I don't want to outsource my deal vetting to people who don't do what I do for a living.
Another thing that skews the process is the lack of accessibility of many partner-level VCs, especially to diverse communities. Look, I get it. You're a partner at a firm, you're married, have kids, etc., and you don't have as much after work time to go to every random meetup. At least go to *some* and start asking the people who run those events what they're doing to diversify the audience. Do they have a Code of Conduct? Have they marketed the event to any groups where diversity is a criteria or part of their mission?
If you're going to mix up your normal "in network" dealflow with an open event, perhaps you should think about ways to make that event look more like CUNY than Harvard--because the Harvard founders can undoubtedly get to you in other ways.
Another issue with the kinds of events people have to participate in for fundraising is the type of events and how they obviously appeal to certain demographics. Golf, according to Nielsen, has a demographic that is 87% white--so if you're looking to expand your pipeline, perhaps that's not the right sport. What about pitch competitions that sound like Ancient Roman death matches? How enthusiastic are women going to be to participate in shark cages and battlegrounds? They do, and I'll join these events, but when you name your pitch event after something violent, you shouldn't be surprised when you've gotten way more men to apply.
Funding isn't a zero sum game, so you shouldn't tell all the Christians that it's either them or the lion, best Powerpoint wins.
Yet, after all these hurdles, the fact of the matter is that most founders do not get funded.
It doesn't matter if you're white, black, gay, straight, male, female.
Most founders strike out.
Most straight white male founders strike out.
And, in fact, we don't actually have good statistics as to the percent of each that attempt to get funding--so we don't actually know whether any particular group does better. We know the outcomes--but we don't actually know the top of the funnel.
In other words, if 10 female founders pitch a fund, and one gets funding, that means 10% of the founders that pitch a fund get funded. If 100 male founders pitch that same fund, and only 9 of them get funded, then men are actually doing statistically worse than the women at getting funded by that firm.
Does that fund potentially have a pipeline problem? Yes.
Should more of those female founded companies have gotten funding, because they were better companies? Maybe, but there's very little objective way to fish that out. Just because you have revenues and someone else doesn't doesn't mean
We could have a whole conversation as to why certain groups are pitching or why they or not, and ways to increase the attempts to get funding--but I think what gets lost too often is the fact that getting funding is really difficult for everyone.
What I notice is that when straight white guys get turned down, they tend to blame the investor.
When everyone else gets turned down, they tend to blame themselves--they are more likely to assume it was something about themselves, maybe just that they're black or female, that led to the turndown.
It's difficult to assess whether the reason why a black female isn't getting funded is because of a problem with her business model or whether it's because she isn't getting taken seriously because of who she is.
What I do know is that both sides need to adjust their behavior in the face of this--to make sure that everyone is getting their fair shake.
Diverse founders need to get right to the heart of why the investor says no, and try hard to objectively take the critique. For example, if someone says "too early" ask them very specifically what is the measure of early, and what's the earliest along those lines they've made an investment, and what's the average. You might hear that the firm has never made an investment in someone with less than $25k worth of monthly revenue, which is a fine criteria to have, but at least it takes you to an objective place where you know why you're falling out of their process--and you have a goal if you ever want to pitch that fund again.
With consumer products, it's a little more difficult. I've given specific feedback to diverse founders as to my thoughts on why consumers wouldn't adopt a particular app. I could be wrong, but there's really no way to have an objective conversation about that unless you get traction. That doesn't mean that traction is a requirement for me--it just means I don't believe that particular app will get it. It's important to me to be open to being proven wrong, but it's also important for the founder to understand that most ideas are being rejected for funding--and not to assume it's always because of them.
On the investor side, I think investors need to be a little extra thoughtful and constructive when giving feedback to diverse founders. Let them know exactly why you're turning them down and what they can do to improve their pitch--lest they think you're simply not funding them for who they are, which can be super discouraging for them and create a bad reputation for you.
In my mind, one of the biggest changes that needs to happen in the ecosystem for diverse founders to get more funding is for them to ask for more.
Overly simplistic? Perhaps. Mathematically accurate? Incontrovertibly.
In my experience, the fast majority of $500k rounds or less that I've been pitched for come from either female founders or founders of color--something like 90%. A tiny round might be appropriate for some companies. Maybe you've got a small set of technical founders that aren't even sure if this product will function and they're just testing it out. Maybe there's a huge customer risk and that money could test whether or not *any* customers would use this product, and if they did, that would make it a lot easier for other investors to buy into the plan. Whatever the case, that's not most of what I'm seeing.
I see far too many diverse founders asking for such small amounts of money that they're signaling smaller ambitions. If you believe in your idea and have a model that backs up what you actually need to get to the next level of value creation, then pitch for what your company needs, not what you think will get funded. Yeah, I know all the stats about who gets funded. You're not making it easier by asking for "$350k to get to break even." That pitch has never excited any VC in the history of VC funding.
I'm not saying you should be asking for $10mm right out of the gate, but I'll share a story. I had a diverse founder recently pitch me asking for $800k to get to a "Phase One". When I asked about all the cool parts of the plan that I would have gotten excited about, that founder answered question after question with, "That will be for Phase Two when we have more funding."
After a bit, I finally asked, "What's the difference between One and Two in terms of funding and time, because I want to fund Phase Two way more than I want to get stuck in Phase One without funding." Turns out that Phase two was just a few months difference in time, but about 2x the funding--still well within what people raise in seed rounds, however.
I offered a term sheet to lead a $1.6mm financing.
That doesn't happen too often and that needs to change. While the onus should be on should be on founders to pitch the right amount, if you're a VC and you're dealing with a founder who has a good idea, it would be worth your while and there's to get at the heart of why they asked for a specific amount of money and what the right size of the round is. I'll bet the majority of the time, the diverse founders are undercutting themselves and not asking for what they really need, and I'll also bet it's affecting how ambitious you think they are, probably unfairly. If I was reading all of what's out there about funding and diversity, I might ask for just a little bit to prove myself, too!
BTW... that founder wound up raising an oversubscribed round of $2mm! Pretty sure they wouldn't have gotten there with just that $800k pitch.
What's also happening in the ecosystem is that diverse founders, even when they get offered investment, are getting worse deals. I'm not 100% sure what's going on here--but I believe the perception is that they're less likely to push back, or maybe they don't have as many options. If you think less VCs are going to back a diverse founder simply because they're diverse, and therefore, you're going to give them a worse deal, that's not in the least bit ethical in my book. You should ask yourself, "Is this the deal I'd give to a white guy with the same resume?"
I recently backed a female founder who raised some notes that had a conversion cap (a de facto price) of $1 million. It's literally the first time I've ever seen a cap that low and I really don't believe a guy would have been offered that cap, or if nothing else wouldn't have been expected to take it.
Instead, the founder asked around about the deal. Do you know what a VC backed male founder told her? He said that it's hard for women to get funding and she should take what she should get?
Makes my skin crawl.
How could that founder have been a better ally? He could have offered to vouch for her to the angel investors, and told them how that wasn't really a market deal--and encouraged them to offer something more in line with the market. Maybe they get there, maybe they don't--but it would have been a lot more helpful for a small investment of time.
Lastly, I think one of the missing components of the fundraising process is simply empathy. That's what struck me most about the responses I got to my e-mail last week--the need to understand what diverse founders are going through and encourage them to participate more in the ecosystem.
Candis Best wrote,
"In response to your MLK inquiry, as not only a Black tech founder but a Black female tech founder, my experience can best be summed up in one word - lonely. In fairness, that has as much to do with being a solo founder as it does with my background. However, I can also say that I feel less isolated in this role now than I did 18 months ago for one main reason - I had the good fortune of being part of the 2017 class of SLP. That experience did more to open my eyes to the connections, knowledge, and resources needed to build a business than all the pitch events I've attended and TechCrunch articles I've read combined. Had I not participated I don't how long it would have taken for me to realize how much (or how many people) I didn't know but needed to. I have no doubt there are many worthy Black-led startups who are wandering in the wilderness right now because they're still where I was then."
I can't echo that sentiment enough. You're going to be pretty discouraged if all you do is read headlines. You need to get out there and make those connections, because you need to.
The other note that struck me was this one, about the additional cognitive load that diverse professionals in tech experience:
"From my experience, I believe that being black in tech is about making a series of choices every day that other people simply don't have to think about. When I walk into an office of 70 people and see no other black or Latino/a person (my current situation) I have to choose to ignore how alarming that is so that I can get my work done. (blacks and Hispanics combined make up 52% of the NYC population, yet <6% of the tech workforce...that should alarm everybody.)
As the only person of color in all of my team meetings, I have to decide whether it is wise to give input or ask a question, knowing that I not only represent myself but all black people, and that a wrong answer or uninformed question could trigger a negative stereotype or foster a bias. For many of my white and Asian coworkers, the only black person they interact with regularly is me, so I can have a big impact on their worldview of minorities in tech.
Finally, when someone exhibits offensive or uncomfortable behavior (whether they realize that it's offensive or not), I have to make a decision to either call out that behavior at the risk of alienating myself from the 'tribe', or ignore it and maintain the idea that I'm 'chill' and a team player. In most cases, it's better to push past it.
For people of color, having to make these daily decisions on how to represent yourself is what takes away from tech being as amazing of an experience as it could be, certainly for me but I think for everyone. "
I really appreciate this response from Justin Sharp, because, not surprisingly, it's just not something I ever thought about--and it really does sound exhausting. If nothing else, it's help to understand the next time you drill down on someone's actions critically and assume we're all on an equal social playing field to start with. His advice:
"You nailed it when you said the best thing allies can do is listen, I can't emphasize this enough. Listening with empathy and believing what your peers are saying is invaluable. The other thing allies can do is check in with themselves about the diversity problem - do you really believe it's a problem, and do you understand why? Do you believe that it negatively impacts your equity in the company? If you don't personally feel the pain of a homogenous workplace or don't see the reward of being more diverse, then you may be less compelled to demand change."
Ok, well, this was longer than I intended and probably didn't even cover a tenth of what I could talk about on the topic, but, at some point, people are expecting me to send out this newsletter and it's getting late in the morning.
Thanks for listening.
Sidenote: I'm raising some money for a few charities and I'll be adding the links to each of my blog posts until I'm done. The first is the Challenged Athlete's Foundation, who I'm running up the Empire State Building for. Thanks for your support.
The amount of work that goes into a job at a growing startup is insane. As soon as you put one project to bed, three more pop up.
However, the most difficult aspect of the work isn't necessarily the effort required, but the emotions, with fear perhaps being the greatest one of all.
When you're part of a small team, you're indispensable. You are literally doing three jobs at once--three jobs that should probably be done by two people each. It's crazy, but there's also a certain security in that. You won't be fired, because there's no one else to do the work.
As the team grows, however, you're asked to do something most people find really uncomfortable--you're asked to start letting go. You're asked to document how you do your job, maybe your favorite aspects of your job, and to teach it to other people who, on day one, can't do it as well as you've learned how to do it.
The same holds true for relationships. Maybe you were interfacing with inventory buyers, or interviewing every candidate--but at some point, you have to hand over those relationships, too.
If other people start doing your job and leveraging your contacts, what happens to that security? What happens to your sense of identity in the organization?
Every early startup employee faces this choice. Do you dig in and play the territorial game, or do you step up to become an indispensable manager?
An indispensable manager not only builds teams, but recognizes a new level of professional responsibility. You speak with the weight of the company behind you, so you need to make sure you're actually on the same page as the rest of the company. As an individual contributor, you may not see the effects of not being on board with management decisions--but as a manager, people look up to you.
Sometimes you just have to say your peace behind closed doors and then get on board for the good of building something bigger then yourself. At the end of the day, you're not the founder or the CEO--and the decision you have is to stick around and row in the direction everyone else is rowing or jump ship.
Successful startup execs build bridges and consensus. They recognize that what the enable the company to accomplish is their track record more than the series of their own person accomplishments. This means ceding credit to a team and abandoning the "I" for the "we". You don't want to win every last argument--you want the company to win.
This is an extremely difficult thing for the type of go-getters and hard workers that are often attracted to startups. A great individual contributor isn't necessarily a great team builder--but that doesn't mean it can't be learned. The keys are professional feedback and self-awareness. Knowing the ways you get in your own way are key to not letting it keep your career down. Taking both outside and inside feedback--from above and below--to heart is a good first step. I generally assume that any criticism someone has of me is true, until I can as objectively prove to myself that it isn't, and I wrote about that a while back here.
Startupping ain't easy, and neither is developing as an employee into a manager and executive.
I've rewritten a lot of pitch decks over time and a lot of them are really bad--mostly because founders have been told what should go in them without a lot of consideration as to why. Somewhere along the line, someone came up with things that are supposed to go in a pitch without ever asking investors how they take in a story.
Here what I want to see in the video below...Powered by OpenReel
Here are the notes...
1) Don't keep me in suspense as to what it is.
2) The team slide isn't as important as having the human in front of me, or hearing about your reputation elsewhere. Team is important, but team slides are boring.
3) Get to the money part soon! How do you make money?
4) Then, how do you make A LOT of money? You sell lemonade for 50 cents a cup, but how do you sell enough lemonade to go public??
5) Why is your product special? This isn't that stupid competitive chart where you have all the checkboxes and no one else does. I want to understand if there's a reason why all of the sudden this angle is possible, and why others aren't likely to have the same advantage you will.
6) What are you going to do with this money--specifically, what are the GOALS for the round, not how long will it take to spend. Anyone can spend a million bucks in a year.
If you think you could use some help formulating your pitch for an investor, and you might want to do some good in the process, I'm running a series of pitch workshops called "Fix Your Pitch for Good!" for charity.
Startups can sign up to go through an abridged 30 min VC meeting, and then we'll talk for 30 minutes about what could be improved, how to organize it better, and what VCs need to see.
And if you're just curious, you can just come watch.
For startups pitching, the donation is $250, which will be 100% disbursed to some charities I'm currently raising money for, like the Challenged Athletes Foundation, Team for Kids, and ScriptEd. For attendees, the suggested donation is $25.
I have to be honest, I'm a little suspect when one of the first questions a founder asks me is about valuation. So many things about startups are difficult and so few startups raise *at all* versus the number who try, that this seems like not the most important question.
That being said, you want to feel like you got a good deal--and your lead investor should be able to walk you through how they got to a particular valuation and why they thought it was appropriate. They should be able to provide examples of other deals, and talk openly and transparently about their thinking.
Look, at the end of the day, I'm incentivized to buy up as much of your company as possible, and you're trying to sell as little of it as possible. On valuation, we're not aligned, but we can meet somewhere in the middle, both feel a little regretful about where we wound up, and that's probably the right price. :)
With each passing year, we get another set of lists:
Startups to Watch
Founders Who Crushed It
Bald VCs in NYC You Should Pitch
When you're on the list, you're tweeting the heck out of it, very modestly of course, and getting all your investors in friends to do the same. When you're not on it, you tell yourself the list was bullshit for whatever reason, or that you don't have time to pitch yourself because you're too busy running a real company.
Unfortunately, these lists do matter and when you're not on them, you're missing out on opportunities for press that can cascade over time. For one, journalists often use existing lists as the basis for other lists. Also, when event organizers are thinking about speakers, lists of founders and companies represent easy references for invites. Later stage investors would also be lying if they don't reach out to see what's up and why a company might be featured.
So how do you get on one of these lists? Simply put, you need to make yourself known to the people writing them! But how? Ok, well, here are some tips:
1) First, figure out who we're talking about. Make yourself a comprehensive list of who is covering your space. Who has written about the five startups most like yours or most likely to get mentioned in the same conversations? Who has written about the five companies most likely to acquire you? What influencers are building a brand about being an expert in the space? Are there any podcasts you'd make a great guest on and who runs those shows? Who runs the conferences you'd make a great speaker at (like, literally, which person picks the speakers?)
2) Reach out. The best way to contact someone is when you're not asking for anything. Offer yourself as a resource. You're an expert on something, otherwise you wouldn't be starting a company around it, right? Write to all these contacts and just say that you're available if they need a quote, some background info on the space, or they want to spitball trend pieces. Perhaps you might offer them 3-5 interesting facts they could use in future pieces--the kinds of surprising stats you might have had in investor pitch decks that made you want to start this company in the first place.
3) Interact over time. Follow all of these folks on social media. You decided to build your career in this space and they're pushing out content about it. You should have opinions, be able to ask questions, and certainly be willing to share their content if you're looking for them to eventually share what you're up to. It's a lot better to have 3-5 different touch points with someone and then wind up in their inbox than to be a complete stranger. The best way to do this, obviously, is to do this authentically. These journalists and influencers are people, after all--and they do more than just follow Fintech or the On Demand Economy. Maybe they run or cook or they follow the same college sports team that you do. Find ways in which you can connect on a more personal level and stand out for them as a person they identify with instead of just as a founder looking to get a story placed.
4) Offer up your own lists. Share your view of other founders who are doing awesome stuff or offer to make introductions. You're obviously not going to be the only company on a watchlist so if you can help someone fill out the rest of the list, you're more likely to be included. And if you hate what everyone else is doing in the space, you're likely to be obnoxious to talk to and probably won't end up on anyone's list. Don't be a hater.
5) Invitations! Host some group dinners of interesting founders and other movers and shakers in your space. If you're a means of meeting other interesting people for a journalist, they'll likely stay in better touch with you because they think of your network in addition to thinking of you when they might need something. Having a reputation for being in the flow of things is a good reputation to have.
BONUS: This should be obvious, but actually accomplishing something helps more than anything else. Sometimes, you're working towards a really audacious goal that will come over time, but keeping smaller wins in mind that you can talk about is a great meetings of getting known. Each month, as a company or just as an individual, set out to do something that might be press worthy. Maybe it's just a simple co-marketing deal. Maybe you're going to start a new podcast. Whatever the case is, make sure you're not just always working, but you're actually launching as well.
Now go get on that list because it's going to be checked twice!
A post shared by Charlie O'Donnell (@ceonyc) on Dec 20, 2017 at 8:06am PST
When you're Ample Hills Creamery, the #1 rated ice cream shop in the country you can pretty much throw everything you've been told about fundraising out the window. Nothing seems to apply--you're not a tech company, you bootstrapped your way to millions in revenues before taking on capital, and you sell mostly through brick and mortar. Yet, the lessons learned from their $8mm round of funding announced this week are still widely applicable to every startup--particularly food startups and those in four walls retail that struggle through the traditional venture process.
Here's what I think everyone involved learned in this process.
1) Find backers who love you for what you are, even if you're a square peg.
When Ample Hills first raised $4 million in 2015, people asked if it was a seed round. Technically, that's what we called it, but it didn't seem entirely appropriate given that it had already been up and running for years and had millions in revenue. When we raised that first round, we needed to figure out who was even open to the idea of backing an ice cream shop with national and global ambition. We hosted meeting after meeting, stuffing as many investors in the room as we good in groups, invited via waves of mass e-mails to anyone I thought might be interested. What we found is that while most of the people turned down the invite, most of the people who showed up invested. Ample Hills wasn't a deal for everyone, but for those that were open to it, they loved the company.
Did that seed make this round our Series A? Would we pitch Series A players? I pushed that we should just say what it is--an $8 million raise to grow the company. Who cares what we called it? In fact, I thought we should have named our rounds after ice cream flavors but that was quickly shot down by the lawyers.
The truth is, it doesn't matter--that you can very easily get caught up in positioning, but at the end of the day, an investor who really wants to invest is going to invest. It's too easy to think that if you tilt the pitch just a little one way or the other, that's going to make the difference, but that's Monday morning quarterbacking. Rounds aren't close--they either happen or they don't, and an investor on the fence is a pass. Investors who want to be in will find a way to come in and will structure an economic deal that makes sense, no matter what they call it.
2) When you stray from traditional tech investors, leave yourself twice as much time, because they're twice as unpredictable.
Tech VC is a pretty mature marketplace--the players are known, the process is established, and so while relationship building might take time, usually you can estimate how long a deal will take with some accuracy (besides, of course, that it takes longer than the founder wants). AH kicked off this raise based on some inbound conversations with high net worth individuals back in the first quarter of this year--over nine months ago. These types of folks, who may or may not have family offices that they work with, range in difficulty to work with. Sometimes, the person whose money it is could just say yes, and points to a person to make it happen. Other times, they hand it off to a team that could take months to do their work. You just don't know.
In AH's case, ultimately, the person we started talking with didn't actually wind up participating, but still remains a valuable contact and potentially a key partner for the future. However, someone they introduced the company to wound up a writing seven figure check on a quick turnaround. Point being, if you're working with family offices and high net worth folks, leave yourself plenty of time. Investing in you isn't always their immediate priority, and they're used to dealing with people they know a lot better than the typical VC knows a founder when they pull the trigger.
3) Find a flexible lead.
One of the best things a lead can be, especially when you've got a company that doesn't exactly look like every other company, is flexible. Mike Murphy over at Rosecliff was actually one of the last people Brian and Jackie at Ample Hills spoke to in this process--but he said exactly what any founder would want to hear. He wanted to be an investor and was willing to fit into the round any way he could. He didn't come in asking for some crazy ownership or with lots of caveats about minimum check size, etc. As it turned out, we were oversubscribed with a bunch of individuals and smaller funds that wanted to participate but wouldn't lead, and the round the founders liked the most was one where everyone got to participate. What was needed was for someone to set the price and to be flexible enough to allow these strategic and helpful new investors to participate. That was in stark contrast to other folks the company spoke to who wanted to eat up the whole round--so, in the end, he won out by being the most reasonable to work with in addition to all of his great experience investing in the space.
There's really no better way to win around than to make the founders feel the most comfortable working out a transaction with you.
4) Don't be afraid to wait for the deal you're happy with.
Ice cream has gotten to be a pretty hot space, ironically, for high profile investors to get into lately. Sometimes, you run into big name investors who have great potential value as a strategic investor, but they want to get paid extra for their brand's value in the form of equity or lower valuations.
Ample Hills has been offered these deals and turned them down.
Other times, you might meet a great investor you like a lot, but who isn't as familiar with your space. They may want a lower valuation as a kind of risk premium for investing in you. That happened with Ample--they found an investor who spent most of their time in adjacent spaces but didn't quite have the same risk tolerance to participate in a vision that included a big bet on a particular strategy. It was tough, but the company felt like it could do better economically--which was pretty stressful given how long the process was taking.
It turns out the right investor and the right deal was worth waiting for as we got a fair price and a great lead that believes in the company. I see so many retail and CPG deals that get hamstrung by bad investment deals they felt forced to take that only limit them later on. Of course, a key to this strategy was knowing that there was a critical mass of insiders who would have bought the company another 6-9 months if needed, so we knew the company wasn't going anywhere.
5) Give all of your existing investors homework.
We wound up with about two dozen investors in the first round of Ample Hills, and we had a bunch of those people pitch in to help with the second. Closing this round was a real team effort.
Taylor Greene from LHV was the first to bring up Mike at Rosecliff as a potential investor. Adam Struck brought on significant additional capital from his network. I introduced the company to Bullish as well as the Allana Group who, amazingly enough, cold e-mailed me out of the blue from a Bloomberg article. (Sometimes, foreign strangers offering business deals aren't spam after all!).
Also, Brooklyn Bridge Ventures LPs contributed a big chunk of the round as co-investors, adding to their participation in nearly 40% of the firm's deals. One investor, Morgan Johnson of Nucleus, wound up spending so much time helping to coordinate negotiations with some of the potential new investors as well as bringing new capital to the table, that he built up a lot of trust from Brian and Jackie. This led to him actually joining the company as President.
While some companies might feel that having so many investors on the cap table creates a lot of people to manage, I can easily say that without almost every last person on this capital, we wouldn't have been able to close this deal. I can't say enough about putting your investors to work with specific homework.
We're excited about the future of Ample Hills, our new factory opening soon and a lot of great deals in the works for expansion and creative collaborations like their fan favorite Star Wars themed ice cream.
There's a thread going on Twitter about doing a BarCamp in NYC again. I started with a tweet from Jeff Namnum about how he joined the tech community...December 8, 2017
It touched off a whole discussion about putting on a BarCamp here again--a collaborative, open "unconference" where people could come together to share and learn about a wide variety of topics. We haven't done one in NYC in a while, but moreover it feels like the sense of a common community we used to have in the early days of the tech community has been replaced by scale and a lot of heads down work. Where there used to be the same crews of people attending the NY Tech Meetup every month, there is now 5 tech oriented Meetups a night on specific things like cryptocurrencies, ecommerce conversion best practices, and Clojure. Sure, it's great that NYC has scaled into the second largest tech community in the world, with layers upon layers of knowledge and experience, successful growing companies, etc., it feels a bit like we've lost a little something about how we used to convene in smaller, more consistent and intimate groups.
I've been thinking about why this has happened and I can point to a few things:
1) My peer group of twentyish somethings grew up a bit, became super successful, coupled up, procreated, moved out to Brooklyn, etc., and just doesn't have the social flexibility they once did. Or, they just got a big fatigued with running around doing events they weren't getting paid for all the time.
2) The larger companies outgrew the community. Holiday season used to mean getting invites to holiday parties at companies like Squarespace and Foursquare. Back then, they were in offices that were yet unfilled, and opening up to the community still meant a manageable number of people. Today, their own companies are communities unto themselves--and marketing and recruiting has gotten a bit more mature than just e-mailing a lot of people to consume egg nog.
3) In some cases, it was a reflection of what was big at the time. There were no better spokespeople for their own products than Dennis at Foursquare, David at Tumblr, Jacob at Vimeo, Kortina at Venmo, etc, etc... Participating in the community was almost part of the job. In today's NYC, you wouldn't market Warby, Datadog, MongoDB or Casper with photos from last night. No one is coming up to you at a bar anymore trying to get you to try their social app (RIP Hot Potato.)
4) Space doesn't seem to be as easy to come by these days. Remember when Sun used to host events at 101 Park? How many events did Jack open CRESA's doors for us? These days, there's much more competition for space to hold events and a lot of the spaces have professionalized, charging because they're now in the business of space.
Whatever the case, it's hard to figure out where to tell someone to go in NYC's tech and startup community if they want to meet up with awesome people doing cool stuff. You can't just swing by Tom and Jerry's anymore.
That's one of my 2018 goals--is to help make NYC tech feel smaller again, and more connected. I'm starting with building up some cohorts of new seed-funded companies. Raising a first round of capital is as good a proxy for "Someone vouched for you and you're a legit founder doing cool stuff with actual resources to give it a shot." I'm trying to bring together every single founder in NYC who raised their first $500k or more of capital in 2017. (If that's you, check out the group signup here and we'll invite you to the first meeting tomorrow (Tuesday) night on the 12th).
We'll do a 2018 cohort and so on... and more water cooler style events that bring NYC's community together. Check out our dinners and Stackup talks as well. NYC can be a huge platform for anyone to make an impact on the world, but it would be great if it could still feel like a neighborhood you grew up in as well.
As I sat in the movie theater watching Justice League, I thought a lot about the idea of a hero in the context of 2017.
Generally, we've thought of heroes as possessing some kind of special power--or larger than life. We've confused the powerful and influential for people we should look up to. Yet, as we've seen in the retelling of a lot of the comic book stories on screen, our heroes aren't always purely good, nor are they as good at being people as they are at being powerful.
This year has seen a toppling of those heroes the likes of which we've never seen before--Hollywood Actors and Directors, Former Presidents, US Senators, Would Be Senators, Midas List VCs, and yes, Confederate Generals. We're being forced to reckon with our ties to everyone from slave-owning forefathers to Bill Clinton.
We look up to heroes because we see them exhibiting power over others--yet it's this power they often seen to struggle to control and use appropriately.
As 2017 winds down to a close in the next two months, perhaps we can all think about what kind of heroes we'd like to have in 2018. As many heroes fell this year, many others found the heroes in themselves--taking to the streets in protest for the first time, sharing their stories of mistreatment, and taking the time to listen and learn about the struggles of others.
What kind of hero do you want to be? Will you risk speaking up on behalf of others when it isn't popular? Will you be vulnerable? Will you admit when you were wrong, and try to make up for when you fell short with people?
Not all of us have a cape. Not all of us are rich.
But we can all be heroes.
CEOs, founders and managers are more worried than ever about issues in their organization that they might not be aware of. We've seen a ton of stories come out recently around bad workplace environments, and business leaders know that for every really bad story, there are a thousand festering smaller issues that need to be gotten out in front of before they get worse.
That's why it's critical that they understand the one question that can fish out whether or not there are workplace issues lurking underneath the surface of their companies.
Here's the question... are you ready?
Ask yourself, "Does my company have more than one human working in it?"
If you answered "Yes" then your company surely has workplace conflict and issues. There is a 100% chance that when two individual humans work together in the same place, things will come up. It's perfectly natural, but it's also something they don't have good tools to work out on their own.
Bringing up conflict is difficult. First, a lot of people are embarrassed that they can't fix a situation on their own. They might feel like they're making a big deal out of nothing, even though it's making them more and more unhappy each day.
Second, even when a company does have outlets, like manager reviews or HR staff members, these relationships can easily be perceived as conflicted. Maybe you're not ready to talk to HR or the problem is with your direct boss, and you don't want to make the situation worse because you can't change your boss.
Whatever the reason, these issues most often manifest themselves in unexpected churn. How many times is the first hint of employee unhappiness the day they give notice about leaving?
At worst, these issues come out in headlines. In so many of the worst stories we've seen this year, there was a moment where someone could have head something off before the issue grew.
That's why Brooklyn Bridge Ventures recently funded Bravely.
Bravely that offers conflict and communication coaching for employees navigating issues in the workplace. Through Bravely’s application, employees can confidentially describe the issue they’re facing and schedule a phone consultation with a ‘Pro’, an expert coach or HR professional with deep experience in helping resolve conflict, structure effective communication plans, and develop skills for constructive work relationships.
Every single company has issues. Hopefully not all of them are as serious as the ones that make headlines, but 65% of performance problems are linked to strained personal relationships, which happens everywhere. Effective communication among colleagues, even for the small stuff that a lot of people let go, yields a significant impact on workplace wellbeing.
The secret sauce of Bravely is to help employees feel empowered--given them strategies and language toolsets to address acute issues right on the spot. Bravely is that first step; that safe place for venting, getting advice and putting a game plan together when you are not yet ready or lack the confidence to approach your boss or HR business partner.
If your workplace has more than one human working in it, there is absolutely no reason why you shouldn't talk to Bravely now.
Two years ago, Brooklyn Bridge Ventures became the largest seed investor in The Wing--a network of co-working and community spaces for women founded by Audrey Gelman and Lauren Kassan. They recently opened their second location in Soho after raising an $8mm Series A from NEA earlier this year, and their 3rd and 4th will open in the next few months. It's perhaps the most well executed company I've ever been involved with, and there are some key lessons to be taken from watching how they've become one of NYC's fastest growing rocket ships.
1) Don't assume anything.
What I said above isn't exactly true--I didn't really invest in "The Wing". At the time, the company was a Powerpoint about a space called "Refresh"-- a four walls experience that was a lot more utilitarian than today's incarnation of The Wing. What changed? Well, instead of resting on the initial idea after a successful seed round, the founders surveyed their potential customer base to make sure the space had exactly what people wanted. While there was interest in a women's space that had showers and a place to clean up between work and going out, among other amenities, there was a ton of interest and curiosity around who else might be at the space. In fact, the desire to network and connect with other women in a safe and supportive space was so strong, it drove the brand in a more community centric direction. Just because some investors put money into your idea doesn't mean you can't question it--even at its core.
2) Make big asks.
The Wing raised a $2mm+ seed round on a Powerpoint and they made no bones about asking for a big Series A to launch three more locations. The founders knew they had something special and desired to make it appropriately impactful, which could only be done with real capital. It sent a strong signal to the investor community that they had national and global ambitions, more so than if they had asked for "just enough to break even" or a smaller round than they knew they could execute on. This is something I see with too many non-male/non-white founders in general, and I often find myself asking, "Is this the right amount to raise? What would you do with more?" Undercutting yourself on a raise is fixable, but it makes even me worry about whether or not you'll make the big asks the company needs down the road--for that NYT piece, for that hire that would be crazy to take that leap, etc.
3) MVP and great product aren't mutually exclusive.
The original Wing location is smaller than their new spaces--but it's a beautiful, extremely well done and expertly designed space. It served as an example of what could be done when you create such a community space, but it was built on a reasonable budget and less space than what future locations would entail. Too many products cut experience and design instead of cutting features, making the limited number of data points users and investors have about your MVP that you can't build something interesting. The Wing showed that they could build a great product, even if a little smaller, without breaking the bank, but also without scrimping on who they worked with around the design and the brand either.
4) Build a network ahead of building a company.
When I first got the pitch deck, I had no shortage of people telling me that Audrey Gelman was a rock star and that I had to meet her. That stood out more than anything she could have put into a deck. Having that kind of network and reputation is wind in the sails of any business--and should be worked on years in advance of setting out on your own to build something. Who needs to know you to help you with this business? Go build a relationship with them before you even start the business--because after, it will be less authentic and more transactional.
5) Stand for something.
If you follow The Wing on social media, it makes no apologies for making bold statements and standing for more than just a consumer value proposition--nor should it. In today's environment, people want to know what side your own and what you believe in. A more conservative partner might be put off by their content--but if conservative means not standing up for women's rights, then that's not a partner The Wing would want to work with. In a sea of competition for your customer's time and money, I don't think companies should be afraid to take stands on issues they would be proud to share anywhere, anytime and fight for.
It's exciting not only to watch the success of this company based around these kinds of moves, but moreover to see the value they contribute to the community creative and impactful women.
Influencers. Kingmakers. Sharks. Power brokers. Visionaries.
There are a lot of ways the startup world describes venture capitalists that portrays a certain power dynamic, real or perceived, that I believe is at the heart of so many of the industry's problems. The industry treats VCs as if they hold all the cards, and the worst behaviors of investors reflect that.
Frankly, it makes me uncomfortable, because it's undeserved.
Who's really chasing who?
Do you think there is more money out there looking for good opportunities, or more fantastic opportunities?
Right. Clearly, truly great ideas and great teams are at a premium--and there's a ton of money in the world. It's rare that you really only have one option as a seed investor (follow on rounds are different, because it is expected that insiders are your first option, and their actions can influence others). The idea that there's only one human on the face of the earth that will back you, and if that person is an asshat that you have to accept them is false. If you can get one investor, you can get others. Remember that we're lucky to be investing in your company, because ideas as good as yours don't come around too often, and that will change your approach as you try to gather your first check.
A lot of our success is on paper, or just dumb luck.
There was a time not too long ago when VC bios read "Fab investor", "Quirky investor", and "Gilt investor". None of those companies produced great returns to their backers, so as the old saying goes, "Don't count the money until it's in the bank." Today's Postmates might be tomorrow's Fab.
On top of that, you've got companies like Bebo that were huge exits that were eventually folded or written off by their acquirers. Be careful giving too much credit to an investor who lucked out because a stupid acquirer mistook a flaming pile of dog poo for the greatest thing since sliced bread.
Founders do most of the hard work.
VCs can provide a useful piece of advice at a key moment--or help make a key hire, but the day in and day out grind is done by the work of the founder and the team, and they deserve 99.999999% of the credit. Most of the time, if that VC didn't back them, someone else would have and they would have been just as successful.
Good investor doesn't mean good person.
I wish that only high character people were allowed to make boatloads of money, but that's not the way it works. Some people are complete scumbags, make a fortune, and karma just never catches up with them. It's not how I would want to reach success, but for some people, it doesn't bother them. We can debate whether they're sociopaths, but we definitely shouldn't assume that every "great investor" is "great" at being human.
No one is perfect.
Kind of the same as the prior one, but backed off a bit. Even if you're not one of the worst, and you strive to do your best everyday, a VC isn't perfect. They're just a regular person and they don't always get it right. Founders are in that boat, too.
Few of them made sacrifices to get where they are.
There are a lot of things you don't get to choose--like the gender you were born with, your race, and whether you were born into money or not. All of these increase the chances that someone winds up being an investor. I hope that, in the future, a more diverse population of investors will come from more humble and less privileged beginnings, but the majority of VCs out there were born with advantages. To put us up on a pedestal as if we built up our career from scratch is giving many of us too much credit.
There... If you go into your next pitch meeting and the VC seems cut down a notch, you can thank me after. ;)
Last week, I heard the word "difficult" describing investors twice. Once was about me and once wasn't.
The founder and investor relationship is, in fact, a difficult one to get right. Both sides walk in with a lot of cognitive biases and style differences unique to every pair. Meanwhile, the work of trust building is hard and takes a long time.
In one instance, there was an investor holding up a round after agreeing to sign off on something verbally. They weren't wrong about the term in question, but the dollar impact to their investment was so small that it wasn't meaningful to a fund of their size. That's the kind of thing where you have to choose between being right and seeing the bigger picture in order to facilitate a transaction that was good for the company.
No one wants that kind of difficulty in an investor and it frustrates me on behalf of my founders to see that.
That being said, I can be difficult in other ways.
On my side, I was told by a founder that they found some of our interactions difficult--a little too blunt without enough understanding of where the entrepreneur was coming from, doing all of this for the first time.
The most successful founders have often told that they're crazy or stupid or both on many many occasions on their way up--and none of that helped them get there, at least, not on a productive way. It's important as an investor in the company to make sure that when you have constructive feedback, it comes with support and respect. Founders are going to hear a lot of naysayers from the outside, and so when you're on board with the company, you want a founder to feel like you believe in them personally, even if you disagree with them.
This isn't always easy.
VCs get the benefit of having worked with dozens and dozens of companies--and so it's easy to have a dismissive reaction to what you might see as a bad course of action, without realizing that the founder doesn't have the benefit of your experience. Not only that, but a founder is basing their decisions on a lot more information than you--so while you're concerned about the what, perhaps you should be diving deeper into the why before you react.
Being a founder can feel like driving a car for the first time. You're nervous enough--the last thing you need is a parent yelling at you for clipping the curb with the back tire on a turn.
Doesn't mean it isn't hard to freak out when you're a passenger in that car when you hit something!
Still, it's something I need to work on more.
At the same time, there's also a "good difficult"--being willing to deliver tough feedback or pushing the founder to do difficult things they'd rather not do that are better for the company in the long term.
This is something I'm unapologetic about.
I can think of a few instances where I've been "difficult" and I think ultimately it was better for the founder and the company.
For example, I've been putting in a spending clause in my term sheets lately, where above a certain one-time spend triggers a conversation. The founder can spend whatever they want whenever they want, but we just have to talk about it. It's a seed round, and so it winds up happening around hires, rent, and contracts with agencies or lawyers most often.
Some might see that as a pain because other investors won't ask for that--but it's already facilitated a lot of great conversations.
For example, it helps to hear why you're hiring who you're hiring early on. I want to understand your thought process and make sure that you have a method to salary and equity compensation. That's not only good discipline, but it helps me figure out who to send you to help with recruiting in the future, because I have a sense of how you evaluate candidates.
Still, it's always your call.
Communication is important to me. The more I know about what's going on, the more helpful I can be--and everyone's got blind spots. (Especially your investors!!) Sharing more with your investors is critical for founders because the number of things a founder has to keep an eye on is overwhelming. It's just good practice to have a few people around asking the right questions at the right time.
It doesn't mean they don't trust you.
They're being difficult because being a great founder and building a great company doesn't come easy.
I've requested a meeting with you during the first week of March. Here are ten reasons why you should take the meeting..."
This is an e-mail I got from Amanda Weeks in February 2014, and the beginning of a two and a half year journey that culminated with Brooklyn Bridge Ventures leading a pre-seed round for Industrial Organic that kicked off about a year ago. The round, which was raised in two tranches, was recently announced by Inc Magazine.
Amanda and her co-founder Brett Van Aalsburg researched for two years and developed an anaerobic fermentatio process that quickly breaks down food waste in a matter of days. Byproducts of the process can be turned into other goods like organic fertilizer and natural surface cleaners. When I funded the company, it was little more than a science project in a garage in Brooklyn and soon, they'll open up a waste processing facility in Newark--one that didn't require tens of millions of dollars to setup and also won't pollute the local neighborhood with odor. It won't throw off dangerous gases, and yes, the process will make a profit.
A post shared by Charlie O'Donnell (@ceonyc) on Jul 6, 2017 at 9:31am PDT
I was once asked by a potential investor what I thought the exit of this company will be. The conversation went like this...
"Well, acquisition or IPO."
"You think this company will IPO??"
"Can you prove to me that a company serving a market where every last human being on the face of the earth creates organic waste, which they get paid to process and then paid again for what they turn it into, *won't* IPO?"
That's how I think of this company--a huge problem, bet on early, with a solution exponentially cheaper, faster, safer and more urban friendly than the competition, built by scrappy founders knowledgeable enough to be dangerous but not so experienced as to get held up by old paradigms.
You give me 30 opportunities to make that bet at pre-seed valuations and I'll give you a winning portfolio, and a very very interesting set of companies to work with and be proud of.
A post shared by Charlie O'Donnell (@ceonyc) on May 19, 2017 at 11:28am PDT
Also, very excited to once again be investing with Nisha and Susan at BBG Ventures in our fourth investment together (goTenna, The Wing, Ringly being the others), as well as Newark Venture Partners, 3G Investments, and several angel investors who are LPs in Brooklyn Bridge Ventures.
I'm a lead investor.
That means I'm usually the first person to put down a price on what your company is worth--a dollar value on months, if not years, worth of your work, blood, sweat, tears, stress, etc.
"Here's a piece of paper that says how much I think your dreams are worth."
The reality is, any price that I put down at the stage that I invest isn't going to feel like enough--and if it doesn't feel like enough, I'm probably grossly overpaying. But, you don't feel like that as the founder.
Your company is special, which, I 100% agree with.
That's why, out of the 2,000 opportunities I saw this year, you and your company are one of the 8-10 I gave a term sheet to. So, congrats! All the reasons why you think you should get a much higher price for this round are the very reasons you made it past the 1,992 other companies.
But, at this stage, starting from a Powerpoint, prototype, or even a demo product, you probably have just as much chance of going under as any other company. It's sooo early in the life of the company that it's nearly impossible to determine if, in 7 or 8 years, whether or not you have a better chance at success than anyone.
If picking out the winners were so easy at this stage, VCs would be a lot better at it.
Really, the biggest determinant of price is supply and demand--and so, more so than a qualitative judgement on your worth as a human being, consider this bid a data point. This is where I think the market is for this company right now.
That other company, I can't speak to what happened there and why they got a $10mm pre-money. I passed on that deal. Maybe those investors were smarter than me.
What they aren't, however, is harder working--and I have to say, it really bugs me when I invest in someone super early and then the next round comes in and the price isn't that much higher than what I paid for it. It's like, "Why did I take all this risk at this stage if the next round is going to be a $3mm round on a price of $12mm?"
Makes my $7mm pre seem not really worth the risk in the grand scheme of things.
But back to us.
Look, we're just not aligned here. I'm just trying to get the best price possible for my investors, and you're just trying to take the least dilution.
I hope we can meet somewhere in the middle, but yeah, this part is kind of going to suck. The only thing I can really do is tell you how I came to this price, what other deals I closed with similar pricing, and show a willingness to be flexible if it turns out we underpriced it and the round is oversubscribed.
Besides, the only thing that matters is how big it gets in the end, and how self-sufficient we can make this company over time. A million dollars on the pre-money now pales in comparison to the dilution of having to take a few more rounds down the line.
Posted this in what used to be my tech newsletter, and what has lately been about more...
Yesterday wasn't just any given Sunday, was it?
I would imagine most of the NYC-based readers of this newsletter don't take the position that "these athletes should just stick to sports" nor do they feel that way about Jimmy Kimmel and his recent conversations around healthcare. So, telling you that I support their willingness to share their views and why seems a bit like preaching to the choir.
What I will say is that there's no way either side of this conversation is going to "win" unless both sides start asking each other why they feel that way, and actually listening. No, I don't mean listening to Trump and asking him why he feels the need to call private citizens SOBs. Honestly, he's got the least important opinion in this whole equation--it's just the wasted noise of an old racist without any character or class.
No, I mean that athletes need to understand and listen to people about what the flag and the anthem means to them--and why they feel offended by the protest, as is their right.
And anyone who says anything about these athletes needs to open their ears and listen to their stories. They need to listen to firsthand accounts of what it means to be black in America. Go read a book like The New Jim Crow. Then, feel free to say you disagree with the protest.
But never tell someone they don't have a right to *peacefully* protest--because then you simply don't understand the basis on which this country was even founded.
The Lovett or Leave It podcast recently had Normal Lear on--the creator of All in the Family. He was saying how "in love" his generation (he's 95 now) was with America. We had not only won a World War on two fronts, but we were successful in helping to rebuild wartorn Europe and Japan. We had a lot to be proud of.
What strikes me about these protests is what kids and young people likely think about this country today and whose side they're likely to be more sympathetic to. They see the widening gap between the rich and the poor. They see our inability to deal with drug addiction and gun violence or our problematic education system--all things other countries seem to have a better handle on. They see us mired in a war in Afghanistan that, in two years, will start recruiting kids who weren't even born on 9/11. I have a feeling that the idea that the flag and the anthem is unquestionable in any way isn't something that's going to hit home.
One thing Trump got right in the election is that there are a lot of people who feel like America isn't so great anymore--but what I hope he's wrong about is that the people fixing that aren't turning back the clock for answers. We're not going to regain greatness by waging war or nation building. We've got to do it by coming together to solve tough problems like inequality of all kinds. We've got to get healthier and smarter--and that's going to take creativity and courage to change systems full of friction.
People wanted change last November. They didn't get it. When a politician doesn't listen, that's not change. That's more of the same.
When every single NFL game has players protesting in solidarity--that's different. That's change. That's going to make an impression that people will notice.
If they ask why and actually listen, Trumpism is done.