How The HyperNovelty of Online Media Is Building a Generation of EntrepreLosers
Posted on June 20, 2010
Filed Under Critical Thinking, Decision Making, Entrepreneurship | 5 Comments
They don’t intentionally lie to you, it’s just part of the game. The new new thing is always more interesting than reality. That is why the stuff you are learning is mostly crap.
I hear it regularly, as people tell me their business ideas that show a total lack of recognition of what business is all about or how it works. And I’m blaming the media (aren’t they always the scapegoat?).
You see, hype and novelty always triumph in the short term, so when you live in the short term, you build your ideas around hype and novelty. Let me provide you an analogy. I used to play basketball at an open gym every Saturday where, every week, the “kids” (15 - 18 years old) took on the “adults” (25 - 55). It never started that way, but at some point in the day the kids always wanted to take us on. They never won. They always wanted to play because they couldn’t understand why they could never beat us.
They had flash and pizazz. They were more athletic. They had more energy. They watched Kobe and they thought they were playing his style. What they never understood is that, at most levels of basketball, flash and pizazz doesn’t win games. The older guys (granted I was on the younger end of the “old” spectrum) always played like a team. We did very basic stuff that was basketball 101: pick and roll, give and go, blocking out - nothing flashy at all.
Everyone wants to be flashy. Not just in basketball, but in business too. Of course, you wouldn’t read boring but useful business articles, so the business media writes about the new new thing. They cover the flash stuff. They cover novelty. The problem then, is what you read is more a reflection of its novelty value than its underlying business value.
That is my point. If everything you are learning about business comes from online media, you are probably learning mostly crap.
The reason I am bringing this up is because I never realized the extent of the problem until I got plugged more deeply into the entrepreneurial community after Backupify took venture capital. Now I know many more entrepreneurs, and I know too many people who think their business should be run like Twitter. They don’t realize Twitter is the outlier, not the norm.
So when I say “entrepreloser” I don’t mean it in the derogatory social sense of “loser”, I mean that your company is going to go to a big fat 0 because you aren’t focused on the right things. The incessant need of online media to present novel business ideas, and the obsession with outliers instead of the norm, are creating a generation of people that know all the wrong things about business.
Your body is healthier if you seek out the right things to eat rather than consume whatever it is that is pushed in front of you. Your business mind is the same way. You are what you eat. There is a Buddhist saying that “the mind is everything. What you think you become.” So think the right things. Turn up your filters. It’s noisy out there, and sometimes all you really need are the basics.
Heading to SXSW
Posted on March 8, 2010
Filed Under About | Leave a Comment
If you are going to be at SXSW and want to meet up, let me know. I’m there Thursday through Monday.
What I Learned Raising A Million Dollars For a Startup With No Business Plan and No Financial Projections (While Drinking a Beer)
Posted on March 2, 2010
Filed Under Business, Entrepreneurship | 48 Comments
For years now I’ve read startup and VC blogs just like many of you. I read a ton of posts about what my business plans should say or how to do financial projections. But in the end, that stuff was always painful for me. I’ve always been more of a doer than a planner, and more of a boostrapper than a fundraiser. The thought of wasting valuable business time working on a business plan made me want to puke.
Over the last few months, as I finished the fundraising for Backupify, my perspective has changed a lot. On the one hand, I was able to raise money without a business plan or any financial projections. That felt good. On the other hand, I learned some things that changed my perspective on the fundraising process. When I go through it again for our next round, and for future startups, I will approach it much differently than I did this time. So I thought that now, while these thoughts are all still fresh in my head, it would be good to write about my experience going from a newbie to the VC scene, to the CEO of a VC backed company. If I wait too long, I know I won’t remember things correctly, so this post is about what I learned and what I would suggest to those of you going through it for the first time.
There Is No Right Way To Do It, But There Are Wrong Ways
Posts that tell you what VCs look for should be taken with a grain of salt. In my experience, they all look for different things. At best, that post tells you what that particular investor wants in a company and team. I sat in front of VCs who thought I was crazy for not having a business plan. I was asked “how can you run your business if you don’t have a written plan?” I also sat in front of VCs who said “glad you didn’t waste time writing a plan, because we wouldn’t read it anyway.” It’s really more of an art, not a science. It’s kind of like dating. What I mean by that is…
It’s Not About Convincing Them, It’s About Whether There Is A Natural Fit
I always thought the goal was to be so smart and savvy in the presentation that some skeptical VCs would be won over by my impressive arguments. It doesn’t work that way. They either like you and your idea, or they don’t. It’s like dating because your goal in dating is not to convince someone who is a bad match for you that somehow you are really a good match. That’s a recipe for divorce. It’s really about finding the person that is naturally a good match. Same way with investors.
A perfect example is to look at the questions I got after each presentation. If someone said “interesting, but why does anyone want to backup Twitter?” I knew instantly they weren’t a fit. They saw the small version of Backupify. They saw where it was, not where it could be. The people who eventually invested realized after just a few slides that it wasn’t about backing up Twitter at all.
Look For Vision
The best thing that can come from your presentation is lots of ideas generated by the potential investors. When investors start asking questions like “what if you could do X?” or “have you thought about creating a feature for Y?” that is a really good sign. It means they get it. It means they can add value. It means they are a good fit.
Moving the Needle Trumps EVERYTHING Else
I’ve been involved with startups that spent months working on a business plan to go out and raise money. And I’m not knocking plans overall. They can definitely be a great exercise in thinking through your company. But the single biggest thing you can do to impress these guys is go out and move the needle on your business every day. Mark Suster says entrepreneurs need to Just @#$% do it, and I couldn’t agree more. There are so many people who think they want to be entrepreneurs because it sounds fun to run your own company and “be your own boss” (which isn’t true anyway), one good way to weed them out is to see who can move the needle without many resources. All VCs know you could do more if you had a boatload of money, so to go in whining that “we can’t do anything because we don’t have money” is a waste of time. Figure out how to maximize what you have. Investors see all kinds of people who have day jobs, little free time, little spare cash, but big ideas. Most of those people don’t move the needle. Others figure out how to do it. Those people get funding.
At Backupify, we did whatever we could with the little cash we could scrounge up. We got free labor at times, we used whatever connections or resources we could find, we nagged people to help. At times, I felt embarrassed showing the product to people because it sucked so bad. But look, even if you have no cash, you always have time and creativity. Find a way.
When I presented at the Open Angel Forum in L.A., I told investors if they were interested they had to talk to me before 10pm (the presentations ended at 9, I think) because I was leaving to catch a redeye to Boston for a morning presentation to a VC firm. Somebody in the back yelled “I love it.” Many of these angels were in your shoes once, and they love to see you display the same suck-it-up, gritty determination that made them successful. Show them you are going to do whatever it takes. Move the needle. Eventually someone will fund you.
Practice, and Listen
I did my presentation a BUNCH of times. The first time I presented to an investor group, I had 30 minutes. I went 40 and only got through half my slides. Each time it got better. Each time I revised the slides to make them clearer. It was boring as hell, but it’s exactly what you have to do to get better. It’s the same stuff you do on the product and marketing side, just apply that mindset to your slide deck. And most importantly, listen to the feedback. Early stage investors see tons of startups, and as a result, they build great filters for what works and what doesn’t. They aren’t always right, but their experience in the meta-patterns around what you are doing may be helpful, so give it serious consideration.
Be Yourself
David Cohen commented on my drinking a beer during my OAF presentation. It’s not something I would generally recommend that you do, but for that specific event, it just fit. It’s very tempting to listen to potential investors tell you to be this way or that way, but in the end, you have to be yourself and you have to be comfortable around them. Once you get funded you have to make lots of hard decisions and the last thing you want to do is built fake rapport with investors, because that is going to lead to lousy discussions about serious problems.
The point of all this, and the reason I wanted to dump this out of my brain while it was fresh, is that many of the people who write about startups have either been it so long (or else have never been on your side of the table) that they look at it through lenses that won’t work for you. Don’t think that there is some magic bullet, some secret phrase you can say or slide deck order you can use that will make it easy to raise money. It’s never easy, not even when you have a good idea. That’s the point. That’s why so few people ever do it. That’s why the best thing you can do is to accept that and just trudge forward trying and trying and trying.
Reading about things and doing things are very very different. If you want to learn to raise money, the best thing to do is go try to raise money. It will suck. But at least now you know you can skip that business plan.
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