Startup Lessons


The Silent Benefits of PR


Posted on Oct 25, 2014 | 0 comments

I’ve been having this PR discussion with three separate portfolio companies at once so I thought I’d just publish my thoughts more broadly.

I have written many times about PR so if you want a deep dive on the “how” of PR you may enjoy reading some of these posts.

PR is an insanely valuable activity in early-stage companies. Very few investors understand this and even fewer startups. When you’re an early-stage business every dollar matters and because many startup teams these days are very product & technology centric they often miscalculate the importance of PR. I believe PR is often not tangibly measurable and for quant-oriented people this is hard to accept.

The benefits of PR are exactly that: Immeasurable. They are silent. They don’t show up in a calculation that says I spent $7,000 and I got X-thousands inches of press. It doesn’t work that way.

Why PR?

1. Recruiting – One of the hardest tasks of any startups is recruiting world-class talent. It is possible, of course, to recruit great people as an underground startup but it is 10x easier when qualified candidates whom you may not even know read about your company and are excited by your vision. I work with a startup who has an insanely talented & connected team but still struggled to add staff. After their recent PR they reported back to my that candidate inflow has gone up dramatically. As I said, PR has silent benefits that you barely recognize until your newly acquired team is firing on all cylinders and many people sort of forget the reason they attracted such great staff was from great press coverage / world-of-mouth.

2. Business Development – Biz Dev is hard.

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Much has been written about when it is time to hire a “professional CEO” to run a startup company and of course that has long been a norm in Silicon Valley when founders find that their inexperience may be a limiting factor in company growth (know as the Peter Principle).

Much less has been said about when the technical CEO is the best person to run the company.

Yet if you look at some very successful market changes in the last few years it does point to technical prowess in the number 1 seat. Case in point is the return of Larry Page to the role as CEO of Google. I don’t think that Google would have become the success story we all know without the leadership of Eric Schmidt through the years he led the company.

So why did Larry need to return?

It seemed that Google was being out innovated by another Silicon Valley technical leader, Mark Zuckerberg. Somehow in a world of rapid change Mark had been able to right his ship much faster than the highly bureaucratic organizations that places like Google, Yahoo! and Microsoft had become.

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Prorata rights are one of the most important rights of private market technology investors and yet are seldom fully understood. They often create the biggest tensions between investors who are investing at different stages in the business.

politics of money by bastera rusdi on 500px

These tensions seep out in some angels or seed funds publicly or semi-privately deriding later-stage VCs for their “bad” behavior. I have seen bad behavior from later-stage VCs, believe me. But I have seen equally bad behavior from super early stage investors.

As always a balanced perspective is in order. Here’s what you need to know.

1. Why investors care about prorata rights
Prorata investment rights give investors the right to invest in a startup’s future fund-raising rounds and maintain their ownership % in the company as the company grows and raises more capital. This is important for nearly every institutional investor because once you have 25-50 investments being able to “follow” the investments that are working well is critical to making money. It’s why

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Marc Andreessen kicked off another great debate on Twitter last night, one that I’ve been talking about incessantly in private circles for the past 2-3 years – what actually IS the definition of a seed vs. A-round.

Cautionary note: No competent VC is actually fooled when you show up after raising $6M in seed financing and say you’re now raising an A!

— Marc Andreessen (@pmarca) October 7, 2014

This is something I think entrepreneurs don’t totally understand and it’s worthwhile they do. My view:

“Spending any time or energy trying to game the ‘definition’ of your round of fund raising is a total waste. Nobody cares. No VC will be so naive as not to see straight through it. And actually many will probably find the gamesmanship as a bad sign of lack of property priorities or perspective.”

Here’s how all the drama started for me.

When I first became a VC, seed rounds were typically $500k – $1.5 million.

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Note: this is a non-religious post.

This weekend was Yom Kippur, holiest of the Jewish holidays and the day of atonement. It’s also the day when most Jewish minds are least focused since one needs to fast for 24 hours.

I sat in schul listening to the rabbi’s sermon and given my mind is prone to ADD anyways I must admit that my consciousness often floats around the room but even more so on Yom Kippur. But our rabbi captivated me this year and reminded me of one of the most important lessons I learned myself 15 years ago.

She started with a story — a parable — as Jewish people are wont to do. She told of the teaching of the Talmud – a book which scholars use to debate doctrine and from which Jewish people are reminded to always learn and to debate.

“A rabbi is teaching a young Jewish scholar and he says, ‘Two men go down a chimney, one is dirty and the other is clean. Which one takes a shower?’

‘The dirty one takes a shower says the young scholar.’

‘Are you sure? What if the dirty one saw the clean one perhaps he would assume that he himself was clean.

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I was reading Danielle Morrill’s blog post today on whether one’s “Startup Burn Rate is Normal.” I highly recommend reading it. I love how transparently Danielle lives her startup (& encourages other to join in) because it provides much needed transparency to other startups.

Danielle goes through some commentary from Bill Gurley, Fred Wilson and Marc Andreessen about burn rate and then goes on to discuss her own burn rate and others publicly weigh in.

But what IS the right amount of burn for a company? Turns out like most things there are no simple answers. Let’s set up a framework. Here’s overall what you need to know.

1. Gross Burn vs. Net Burn

Burn rate in case you don’t know is the amount of money a company is either spending (gross) or losing (net) per month. (it is also the title of

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