This is part of my ongoing series on Raising Venture Capital.

I often tell people that raising money is worse than getting married.  I have to be careful in how that sounds because I love my wife and am happily married.  But the truth is that in marriage if you’re unhappy you can at least get divorced (in most countries).  Not so in venture capital.  You’re tied at the hip to your VC.

So my first advice is not to rush in the fund raising process.  Get to know VCs over a long period of time so that when you’re ready to get engaged you feel you know their character.  As in real life – those that rush into marriage often find out what their partner is really like after the fact.  I wrote a post linked as follows about how to build relationships with VCs over time.

But what about once you have a term sheet?  How do you then reference check your VC to be sure that you’ve chosen a good firm and partner?  First, I would say that most entrepreneurs do almost no reference checks or at least do them very informally.  Don’t let that be you.  Most VC’s will happily supply you with a list of CEO contacts of the people who will speak to you about working with them.  Don’t be afraid to (politely and respectfully) ask for this.  In fact, they will think better of you because you’re demonstrating that you’re the kind of thorough person that they wanted to invest money into in the first place.

Don’t stop there.  This list is the equivalent of the reference list that you’d give your VC (or any other potential employer if you’re interviewing for a job).  What I mean is that this is the “friendly” list.  The one where they HAD BETTER say good things about you because if they don’t then you’re really messed up for not suggesting the right people and calling them in advance to control the process and make sure that they say good things.  Good recruiters never stop at the official list and neither do VCs.

For some reason most entrepreneurs do.  Don’t let that be you.  I always tell entrepreneurs, “in good times of course everybody loves their VC.  They made great introductions, they helped you get financed, the put in more money themselves, they helped you strategically and they helped you with your exit.  It’s an effen love fest.”

BUT (and there’s alway a but …) what were they like when the chips were down?  When the world was ending?  After Sept 11th?  After Sept 08?  After some random date
when you missed your targets, when your co-founder quit, when the competition chose your competitor or when the other investors around the table lost confidence?  Don’t take my advice, take Eric Clapton’s.  Nobody Knows You When You’re Down and Out.  If you’re so inclined click on that link and launch this video while you’re reading the rest of this post.  I love this song.   I’ll highlight the key lyrics:

nobody knows you
When you're down and out.
In your pocket, not one penny,
And as for friends, you don't have any.

When you finally get back up on your feet again,
Everybody wants to be your old long-lost friend.
Said it's mighty strange, without a doubt,
Nobody knows you when you're down and out.

Make sure to call the companies in that VCs portfolio that didn’t succeed.  Feel free to ask the VC after they give you the official list for a list of 3 CEO’s where the company stumbled.  Do a web search to find companies that they didn’t give you.  Ask the CEO’s about the VC when the chips were down.  Do research and find some CEO’s who were fired by the VC.  That would be instructive.  I’ve met some that actually say positive things about the VCs.  I’ve heard others that say the opposite.  You’ll have to sort though how much is sour grapes versus reality but … wouldn’t you rather have all data points?

My story briefly.  My chips were down in late 2000 / early 2001.  I had 5 investors at the time.  That “nobody knew me” was being polite.  Nobody wanted anything to do with Internet companies.  Hard to believe but true.  Except GRP Partners.  They said that they back entrepreneurs who show promise even when the chips are down.  It might sound self serving since I now work here – but there’s a reason I now am a partner here.  They got me through the tough years by rolling up their sleeves.  They did the same with places like Envestnet (now a major success story), UGO Networks (bought by Hearst), Kyriba (left for dead in 2002 and now raising a major round of capital and growing at a fast clip) and countless others.

I’m not saying they’ve backed every company, every time.  Nor that any VC should.  I’m also not saying GRP is perfect or the only VC who rolls up its sleeves when times are tough.  What I’m really saying is, any VC would have had their share of having to deal with companies when the chips are down.  Find those companies and find out the truth.  Better now than when you have kids.

One small hack – go to LinkedIn and do a search for the company name.  You’d be surprised how many ex-founders and ex-CEO’s you can find this way.

Happy reference checking.

This is the final part of my series on Entrepreneurial DNA that was originally published on VentureHacks.  OK, it’s not really my final part.

I started with a Top 10 list for Nivi (at VentureHacks), but I couldn’t cram it into 10 so it became a Top 11 list.  I originally conceived it as the Top 11 things that I believe “all entrepreneurs need to succeed.”  If it stuck to this theme then I would stand by my top 11.  But Nivi envisioned it being the “Top 10 things I needed to see before I wrote a check.”  I think the title sounded better to him

This became comical as I published my “attention to detail” post because some people noticed that the Top 10 list had 11 items.  Made ME laugh, anyways.  So sticking to my definition of “attributes for success” it had to be my  Top 11 +1 rather than a Top 12.  There’s one attribute (coming soon) that I need to have in order to write a check but I don’t believe is vital for success.  It will be controversial – I know.

I’ll publish the final post in this series this week and then move on to my next series – sales & marketing.  I’ll be covering my PUCCKA sales methodology.  But I’ll probably wander around a bit before then as I tend to do.

11. Domain Experience – “Domain experience” means that the founders have worked in the industry before.  It isn’t a “must” for me but it’s certainly a huge positive when entrepreneurs have it.  When you’re researching a market you can spend a year putting your hypotheses on paper but you somehow never really have a handle on the minute details of the industry until you’ve lived in it.  It’s not an absolute requirement for me that you have domain experience but if you do it’s a HUGE plus.

Are you launching a mobile application?  If your last company was Apple, Blackberry, AdMob or JAMDAT and you have some experience in the sector then I know that your product will have your experiences baked into it.  When Evan Rifkin of .App/Ads launched a new ad network for iPhone (and soon to be other devices) applications I knew he would have a very strong offering out of the box.  He’s built two ad network companies – he knows what he’s doing.  I’ve now validated with 3 independent sources that he’s really on to something so if you have an iPhone app that you’re looking to better monetize you should check it out (no, I’m not currently an investor.  I’ll always point out when I am.).

I learned the domain lesson myself.  My first company launched in 1999 and we were offering a SaaS document management in the cloud (we were called ASPs back then).  I didn’t have first-hand experience in document management systems other than as a user and nobody had SaaS experience – the market was too new.  We made lots of assertions about what features we thought people would want, how to price them and how to overcome the objections that people have to managing data in the cloud.

When I began to hire product managers, sales reps and implementation staff from existing document management companies like Documentum and OpenText is when I got first-hand input into what lessons they had learned in their companies over the previous decade.  I know this stuff cold now.  So when I launched my second company which was also a SaaS Document Management company we already had a vision for what would do well in the marketplace.

Domain experience also brings relationships.  I have a good friend who spent years building relationships with senior executives at media companies.  He’s a star.  He wanted to launch his next venture in financial services because it was a bigger industry.  Fine.  But I pointed out that he would be up against competitors that had spend years building relationships with the big financial services companies (as well as channel partners) and he was going to have to start from scratch.  I’m not sure why you’d do that unless you had to.

Examples: There is a company called GreenLink Networks based in San Diego and Philadelphia.  Their first company was called Traffic.com, which they sold in March  2007 to Navteq for $180 million (not too shabby).  I met the CEO Brian Malewicz several times.  He’s a classic entrepreneur and exactly the kind of person I look to work with.  Traffic.com sold 10-second in-content advertising spots to local TV broadcasters.

They had built significant relationships with the local broadcasters and a knowledge of how to sell non-standard ad units.  So when it came time to start their next company the starting questions was, “OK, what big problem could we solve for local TV broadcasters?”  They’re taking on the declining revenue streams of local TV and creating new, measurable ad activities.  In no time after they had researched their market they were up with pilots with local TV stations in 3 key DMAs.  They had relationships – trust – that couldn’t easily be replicated.  I’ll be they’ll build a successful business.

This is exactly the reason I like people who present to me to start with their personal bios.  Before they’re presenting I want to know “what unique experiences you bring to the table that are going to give your business a faster time to market, a better designed product, more knowledge of your customers problems – a higher likelihood of success.”  It’s what many VC’s call, “An unfair advantage.”

Another example.  We recently met the management team of Assistly – CEO Alex Bard and COO Gary Benitt.  When I first met the team in San Diego they had only been working on their software for 5 months.  I was ASTONISHED (yes, it was worthy of all caps) by how good their V0.9 version of their product was.

Assistly is a customer support product designed to meet the needs of the current era of multi-channel touch points (think Twitter, email, chat, forum in addition to phone calls).  The exact same team had worked on 2 previous customer service startups (and 1 non-CS product).  So the whole customer development cycle is very streamlined.  I absolutely love their product, team and vision.  And the progress since my first product review is also great.

I normally don’t talk about specific companies we’re in the process of looking at but I guess when teams Twitter that they met your or check in on FourSquare it’s pretty hard to hide it  Note: every time I use CoTweet to find old Tweets (as I did with Alex’s Tweet that he met with GRP) I feel compelled to plug them.  I’m not an investor but the ability to so easily go back and pull up old Tweets is vital.

So summarizing my message to you – I know that not every entrepreneur has deep domain experience when they launch their ventures.  That’s OK.  Bill Gates, Steve Jobs and Mark Zuckerberg didn’t really either.  Some people claim that too much domain experience can actually harm you because you become cynical of all the things that can’t be done – you’ve got the scars to prove it.  There IS some truth to this argument.

But if you have it – use it.  If you don’t have it – see if you can pick up team members that do.  There is no doubt in my mind that on balance it offers you a huge Unfair Advantage.

This is part of my series on Entrepreneurial DNA that was originally published on VentureHacks.  I know this series has been running for a while (and is getting long in the tooth) – I promise it’s nearly over.  I started with a “top 11″ list – only because I couldn’t fit them into a top 10.  But in the end I ended up with 12.  So only two more after this.

I’m not anti VC.  Obviously.  I am one.  But there are a lot of things that become norms in the VC industry that always drove me crazy from entrepreneur’s side of the table.  They still do.  One of them is when VCs say, “I’d like to ‘noodle’ on that for a while.”

Translation for any first time entrepreneurs can mean one of:
a. I’m not interested but it’s easier to say than “no”
b. I’m not really sure whether I’m interested but if you suddenly get a lot of “traction” I’d love for you to see me soon
c. I’m super busy with other stuff.  I’d love to spend time thinking about whether your business would be successful but I’m not gonna.

In short Noodle = No.  I’d love it if VCs gave more honest and direct feedback.  But I’m totally off topic.

In the VC industry you can’t take daily actions.  It’s our job to say “no” 99.9% of the time.  Literally.  That’s the one thing that sorta sucks about being a VC because nobody enjoys saying “no” all the time but we have to.  Right before I got into the industry I was at a cocktail party in Palo Alto and spoke with James Currier, the founder of Tickle and a former VC for Battery Ventures.  He said that as a VC he really struggled to have a job where he had to say “no” all the time.  So he left and focused on starting companies.  I get that.  As an entrepreneur you’re used to being optimistic and finding a way to make things work despite the odds.

But as a VC you simply can’t do the majority of deals you look at.  So our job is to think a lot about things but not to take action on most of them.  When looking at new deals we analyze, consider, contemplate, talk to colleagues, go to conferences, reference check, triangulate, debate and … noodle.  Mostly we say “no” a lot.

That’s not you or you’re dead.  In an entrepreneur I need to see the anti VC character.  You need to be “The Decider.”  OK, maybe not.  But you need to be uber decisive.

10. Decisiveness – As I’ve said previously, being an entrepreneur is about moving the ball forward a few inches every day.  What astounded me when I switched from being a big company executive to being an entrepreneur was the sheer amount of decisions I had to make on a daily basis.  The minutiae.  Some of it incredibly important.

The decisions sound so basic when you’re not the one having to make them.  Should you go with Amazon Web Services (AWS) or have your own servers hosted at RackSpace?  Should you build in Ruby, Java or .NET?  Should you sign a 2-year lease or rent month-to-month?  Should you hire an extra developer now or a business development resource?  Should we take angel money or just go for a seed round from a VC?  Is venture debt a good idea?  Should we launch at TechCrunch50?  Should we charge for a product or offer fremium?  Should we ask for a credit card up front or after their free trial?

It never ends.  And there is no such thing as a startup decision with complete information.  The best entrepreneurs have a bias for making quick decisions and accept that at best 70% of them will be right.  They acknowledge that some decisions will be bad and they’ll have to recover from them.  Building a startup might be a game of inches but you don’t get timeouts to pause and analyze all of your decisions.  As I’ve posted about before: my startup motto is JFDI (think Nike).

And it is so easy to spot entrepreneurs who struggle to make these decisions.  They’re slow to hire new staff.  They’re slow to fire even when a person isn’t performing.  They lollygag on deciding whether to raise money, how much and from whom.  They are reluctant to quit their day job and jump in head first.

I was recently considering investing in an entrepreneur in Silicon Valley.  He was deciding between taking another senior role at a prominent Silicon Valley tech company or starting his own business.  I told him I didn’t think he needed any more resume stuffers and now was the time to go do something big on his own. It was time to earn! Within a week he had me a deck with a strategy for a new company.  He offered to fly down on 24 hours notice and meet with my partners (which he did).

He then booked tickets to China to talk with suppliers and he promised to revise his strategy by the time he got back.  He is getting stuff done in entrepreneur years which is a step change faster than dog years.  The next time I spoke with him he had a customer order for $125,000 – and he doesn’t even have a product built!

But I have the feeling by the time we speak again he’ll have made so much progress that he’ll question whether he should take my money.  I’m certain he will have talked with other funding sources.  This is how it should be.  (If he reads this he’ll know that I’m still open to being an angel investor )

If you’ve been “thinking about doing something” for a long time and batting this idea around with your favorite VC for six months to a year, don’t be surprised if they’re not prepared to back you in the end.  VC’s understand the difference between the way their job function works and the way yours does.   Entrepreneurs don’t “noodle” they “do.”

This is part of my series on Startup Advice.

When I worked in London there were a ton of Aussies.  I love working with Aussies because their outlook on life seems very similar to what I grew up with in California.  Pretty laid back and non-hierarchic.  I also loved learning all of their sayings.

My favorite was when a guy told me to beware of Crocodile Salesmen. What’s that?  ”You know, big mouth and no ears.”

That’s always stuck with me.  Crocodile Salesmen are people who are always talking.  They’re pitching to you.  They don’t take the time to realize what your true motivations are because they’re too busy telling you what they THINK you want to hear.

Trust me – your chances of selling are much lower if you’re talking rather than actively listening.

I’d like to talk about Crocodile Salesmen in 3 scenarios: 1) when YOU are selling (or someone on your team), 2) when you are trying to recruit a sales person and 3) raising VC

1. YOU Selling – My wise old friend & mentor, Ameet Shah, once told me after a meeting we had with clients (when I worked at Accenture), “there are two ways to run a meeting: asking or telling.  You’re a persuasive guy but be careful not to always be telling people the answer.  Nobody likes that.  You learn much more about how other people think when you’re asking.  And you get to better results.”

That stuck with me long before I was ever a CEO (aka chief salesman).  It is my natural style to want to “tell.”  I’m an ENTP.  Many of you are “tellers,” too.  I know because many entrepreneurs I spend time with I can tell are in their own brains when we’re meeting rather than trying to understand what my position is.    You’re in sales mode.  I still do this sometimes, too.  But I’m keenly aware afterward when I’ve done it and kick myself.

This point is also echoed by the author of my favorite business (life) book of all time – The 7 Habits of Highly Effective People (by Stephen Covey) – in which he says as one of the habits, “seek first to understand, then to be understood.”  If you follow that mantra I assure you it will lead to more positive results in whatever you’re doing.

But how to apply “listening” in a sales meeting?  Let’s assume you run a Customer Support software company.  Do you simply begin by asking, “I’d love to understand what your objectives are in customer support?  Where are your current pains?”

Never.

You need to first establish two things: credibility and rapport.  I recommend starting the meeting with a VERY brief introduction of your company, your background and why it’s relevant to the job you currently have.  I would then always say, “Obviously we know a little bit about you but if you feel comfortable we’d love to know just a little bit more about you and about your role.”

Too many people are racing through the pitch, pitch, pitch that they don’t realize it’s polite to let the “opposing team” talk and do intro’s also.  They’re into crocodile mode.

After that you need to begin discussing your company.  You need to identify a customer problem and talk about how your solution meets the needs of that problem.

What I personally recommend is that you use “What We Find’s.” Highlighting a few problems that you have seen in some of your existing  customers.  You can mention them generically.  Even better if you have permission to discuss actual names as a “reference client.”

So you would say (in the Customer Support example), “What we find is that many of our clients have existing ‘trouble ticketing’ systems.  But many of these aren’t integrated with the way that their customers want to communicate with them in 2010.  They don’t handle Twitter feedback, emails or IM.  So ‘what we find’ is that many of our customers are using separate tools for managing these but don’t have a holistic view of the customer.”

So you’ve identified a problem.  But DO NOT crocodile into your solution page.  You have hopefully established enough rapport and credibility by this point to enable you to ask a question.  Start very simply and subtly, such as, “do you find similar challenges at your company?”  Hopefully this will elicit a long-enough answer for you to engage in a discussion.

If you get no love after that you might be in for a tough meeting.  You have no choice but to jump into solution mode for a bit to see if your case studies on a successful implementation at other customers opens up the person you’re meeting a bit.

The end goal in your meeting is to get the customer to trust you enough to talk about their existing problems.  You should be actively listening the whole time (actively listening as in listening, writing important things down and asking relevant questions as they talk about their problems).  At the end I normally like to say “I’d love to list out what I  think I heard are your issues to test whether I had properly understood them.”  Normally after I read off my summary they clarify points a lot and I realize that I was only directionally correct.  Always “test your understanding.”

The art of building rapport, establishing a base of credibility and then shifting to a discussion is how the best sales processes work.  The quicker you slip into Crocodile Mode the greater the chance that you’re telling somebody about solutions you have to somebody else’s problems – not your prospect’s problems.  Or you’re not speaking in their company’s vernacular so they’re not making the connection.

Beware of Crocodile Sales.  They are seldom productive.

2. Hiring a Sales Person – So you’re running your own startup and you need to be able to hire a sales leader and ultimately more junior sales people.  You conduct an interview.  How do you know if you have the right person?  The best sales people understand that an interview is a sale and they demonstrate that they understand the process by conducting your interview in the format I outlined above.

If they start the meeting with, “I’d like to know what you’re looking for in your VP Sales person – what’s important to you?” then it’s going to be a long meeting.  They clearly don’t understand that until they’ve established rapport they haven’t earned the right to ask that question.  This happens in about 10-15% of the candidates I interview.

The much more common is – you guessed it – the crocodile sales person.  After some basic banter of getting to know each other I turn to their resume and ask some questions.  A good sales person knows to answer each question briefly and then check back with you, “would you like me to go into more detail in that area?”  A Crocodile Salesperson is off to the races.  Turn on your stop watch – they’ll be talking for the next 12 minutes about all of the great and successful campaigns they’ve led – even before you’ve asked.  Zzzzzzz.

I always politely listen even though I may have already written them off.  I probably will jump in with a few questions about their industry and start a discussion.  I know they’re not going to get the job but I don’t want to be rude and end the meeting in 10 minutes.  But to spare me from 50 minutes of totally wasted time I figure I might as well use it as a chance to learn a bit more as an industry.  Unfortunately this happens in at least 40% of my sales person interviews and confirms my theory that at least 40% of sales people suck.  Probably higher.

The GREAT sales people know how to turn an “interview” into a “discussion.”  This is a rare gift since the interviewer often feels empowered to run the meeting as he / she sees fit and doesn’t intend to cede control.  But I’ve had situations where I’ve intended to interview a candidate and he’s flipped it to a point where I feel like I’m trying to convince him what a great opportunity this is.

It’s subtle and slow.  It starts with the basics: rapport and credibility.  Then it moves to politely answering questions as asked and short bursts.  But after a few of these I’ve noticed some great sales people then throw in a question.  They are not generic questions.  They are specific ones that show that they’ve done their research.  ”I noticed that you’ve had some success with your customer support software on Twitter accounts, but how do people using Salesforce.com typically respond?  Do they want it all in one solution?  I’d love to understand how that part of your sales process goes, if that would be ok.”

BOOM.  Now I’m selling.   And just when I thought I’d answered it he finds a clever way to ask a follow on question that demonstrates both his research / knowledge of my company AND he’s asked a question in a way that he’s demonstrating his sales knowledge so that he’s still scoring points, “when I was at Oracle the problem we ran into competing with Salesforce was A,B,C.  We found some success when we tried D, E, F.  Have you guys faced similar experiences in selling?”

3. Pitching a VC – As I said in a previous post – the best VC meetings are discussions and not sales pitches.  Let’s be honest – raising money IS a sale and you need to treat it as such.  You’re running a sales campaign to raise money.  You have target customers, you have competitors and you have a product to sell.

So all the same rules apply.  Prepare for your meetings by doing research before you go.  Try to find out who in the organization is most likely to buy your product.  It’s always best to “sell high,” which means to get in front of the most senior team if you can.  But also to focus on somebody who is interested in your area – not just the partner you can most easily get intro’d to.

And importantly – when you have your meeting: build rapport, establish credibility (if you haven’t seen why I believe the first slide in your deck should be your bio’s see this post), and find a way to flip it and ask the VC to respond with their point of view on topics.  VC’s have a crocodile aversion as much as the next guy.

Most people suck at presenting to big groups.  It’s a shame because the ability to nail these presentations at key conferences can be once-in-a-lifetime opportunities to influence journalists, business partners, potential employees, customers and VCs.

This was evident at the Twiistup pre-event company pitch last week at UCLA.  Francisco Dao came up with the idea of letting 10 companies that weren’t selected for Twiistup to do a presentation the night before to a group of people and let the audience pick one company to win the final slot at Twiistup.  I was the judge.  It was mostly painful.  I’m not saying the companies were bad – many were not.  But their presentations were not well prepared, not well delivered and lacking in a compelling story that captured the imagination of the audience (or me).

So I thought I’d write a piece on how to not suck when you give a presentation.  I spoke about this yesterday on Fox Business News.  I’ll put up the video when they post it on their website.

1. Show some energy! – No great presentation can be delivered like a conversation.  You’re not lecturing to a college class, you’re not at a cocktail party and you’re not chatting with a small group in a board meeting.  You’re on stage!  People are sitting in their chairs for too long – most of them squirming.  Many of them have their iPhones and laptops ready to command their attention the moment that you start sucking.  You’re on stage – act like it!  Get out of your comfort zone.  You need to be an order of magnitude more perky than you would feel comfortable with in a normal conversation.

Project your voice.  Use your hands.  Don’t mumble.  Speak quickly sometimes.  Speak slowly to emphasize a point.  This is called “vocal variety” and it’s critical.  Speaking in a monotone voice is, well, monotonous.  A friend of mine once said about public speaking, “it’s far more interesting to the audience if you’re loud and evocative than if you’re actually making great points.”  This is so true.  Even better when you’re: loud, evocative and have compelling content.

If this isn’t naturally you then you need to learn it.  Go join your local Toastmasters.  It’s the best way to learn.  It’s how I did.  Or take an acting class.  No joke.  If you care about being a compelling presenter you need to work on it if it doesn’t already come naturally.

2. Tell a story – Every great presentation tells a story.  Stories have starts, middles and ends.  They are human and touch emotions.  The bring your product to life.  They are not buzzwords or bullet points.  Why do people think that buzzwords are going to interest audiences?

I always tell people that if you’re not creative in how you tell stories the simplest way to do so is by telling “a day in the life” of your potential user.  Establish the persona of the person who would be using your products.  Help us to get to know him or her.  Tell us what their life is like without your product – how they struggle.  Tell us about the breakthrough they’ll have when they’re using your product.

NEVER lead with features.  No one gives a shite about your features other than your product manager and your developers.  If you demo your product (which is always great) then tell us part of the story while you’re demo’ing.  Talk us through how the person using your product is benefiting through your technology.  Don’t: show us every single feature – we don’t care.  Don’t: tell us, “and now I enter my name, and then I put in my email address, and then I can pull in my social graph through Facebook Connect, and then then I can select the button here to Tweet out my actions on Twitter.”  Zzzzzzzzz.

3. Learn how to structure – Telling a story is one thing.  But make sure that you’re structured in the way you communicate.  You need to break down your message into key components.  It is generally best if you have a “theme” or “thesis” which if the main point you want to get across.  You then need sub-themes or “supporting evidence” to reinforce your key theme.  These are weaved through your story.

If you’re not naturally talented at good, logical structures you may consider purchasing The Pyramid Principle by Barbara Minto.  She wrote the book that inspired the way that people at McKinsey and Accenture do presentations.  OK, hold back on your consulting humor.  But seriously her book is spot on.

3. Know your audience - I always try to find out something about the audience before I present.  I recently spoke at the business school at UCSD.  Before the event I wanted to find out what I could about the students.  I found out that they were older than most typical MBA programs.  They had more advanced degrees.  50% of them were interested in life sciences, 50% in tech (e.g. much more focused on life sciences than most audiences where I present).

I was the keynote for a dinner.  I walked around to a few tables and I asked students what would interest them.  I spotted my fellow VC Leo Spiegel (from Mission Ventures) who had spoken previously to the same group and asked about his experiences.

My choices – talk about the VC industry and where it is heading (which is what the dean asked me to cover), talk about how to start companies (which is partly what Lada Rasochova, the director of the entrepreneurship program asked me to cover), talk about how to get into VC (which a few students asked me to cover) or give advice on what the Rady School’s venture fund should think about when investing (the event was a kick off for this new fund).

My constituencies were broad and I felt like going deep into one single area would have bored large groups of the people on any topic I picked.  So I decided at the last minute to do a very quick & punchy version of all of them.  I had prepared notes in advance for any of the topics because I felt so confused before coming on my remit.  I think (?) it went down pretty well.  Usually you can tell when it does and when it doesn’t.

I also sometimes start a speech by asked for people to raise their hands if they fit a certain demographic.  ”Raise your hand if you’re an entrepreneur, raise your hand if you plan to raise venture capital in the next year, raise your hand if you’re a service provider to the startup industry,” etc.  I can then change my focus based on the results.  But ONLY do this if you plan to adjust your approach.  If you don’t think you’re skilled enough to do it then asking my make you more nervous at the last minute than you need to be.  Also, asking is not appropriate at a marquee conferences like TechCrunch50, DEMO, Twiistup and the like.

4. Be unique / memorable – The stand out presentation at the actual Twiistup event was Geodelic evidenced by their winning the “audience award” for best presentation.  The CEO, Rahul Sonnad, played the ukulele and sang a song about what their product did.  He did a great parody of a heavy Indian accent.  They had slides with moving images and music.  They planted fake questions in the audience with Geodelic team members posing as normal audience members shouting out something like, “can’t you just tell us what this means in normal words?”

OK, it was WAY over the top and I don’t recommend it for most people.  Rahul and Co. obviously have a great sense of humor and pulled it off.  But for you it is worth thinking about what you can do in more humble ways to be unique – memorable.  Remember that at many of these shows you’ll be up against 9 or 10 other companies that have also been selected (or in the case of TC50 – 49 other companies!).  They all start to blend together.  Do SOMETHING that makes you stand out.  For almost everybody – DO NOT attempt humor.  If you’re not already the funniest person you know in social situations you’re not likely to be funny on stage.  Nothing is worse than bombing at jokes on stage.

5. KISS – (keep it simple, stupid) The goal of the presentation is just to give the audience a basic sense of what you do and why it matters.  Don’t confuse this with a tour-de-force education on the finer details of how your company operations.  They simply need to know: who has a problem? how are you solving this problem? why does this matter? how big of a problem is it – really?

So I recommend that you GREATLY simplify your message.  The conventional wisdom is that the audience can only remember 3 simple things about any presentation 10 minutes after they’ve seen it.  I think 3 might be an exaggeration.  You’re there to leave an impression – not to educate.  It’s OK to throw in some facts & figures that people won’t remember because giving people numbers helps them understand the magnitude of the problem you’re solving.

6. Summarize – The old line about presenting was, “tell us what you’re going to tell us, tell us and then tell us what you told us.”  If you literally do this it will be very boring.  But the core idea is right.  If you want the audience to remember what you covered you need to be slightly repetitive with your key take-away message.  I like to have an “anchor line” which is my big take-away point and have it repeated three times throughout the presentation.

Example: you’re a fitness tracking company like FitOrbit.  You might say early on, “75% of Americans are overweight.  They’ve tried diet plans but nothing works.  In fact, they spent $2.4 billion on such plans last year.  You manage what you measure so the key to solving the problem is getting people used to tracking their performance.  You need to make it easy.  We’re offering an online community that connects personal trainers and people who want to get fit.”  Then you go deeper into the problem and the solution.  You remind people that it’s a big industry and people need to get online and track their eating and fitness to be successful.  Connecting to a trainer helps keep you in line.

Closing line: “FitOrbit is an online community for the $2.4 billion diet & fitness industry that connects people who want to be in better shape with trainers who can help them online.  Remember, you only manage what you measure.”

All numbers above made up.  Actual lines used are not from FitOrbit, they’re from me just for an example.  The point is – you need to revisit your key theme repeatedly for it to stick and you NEED to close with it.  Don’t make the audience think too hard – spoon feed them.

7. Make it visual – Bullet point were the worst thing ever created for group presentations.  Nobody wants to read your text on a big screen.  If you’re going to do that why not just print out your presentation and leave it on my seat.  Far more expedient.  You presentation should have almost no bullet points.  The way to capture an audience’s attention is visually.  Pictures set the image, your voice tells what would have been in the bullet points.

You need to memorize what you’re going to say when each image comes up.  If you wants some words to support the image – fine.  But make them sparse and make the B-I-G!  If you really get nervous and are afraid you’ll forget your lines have one 3X5 cue card in your hands for each slide.  Don’t write sentences on the – only key words to help you remember what you’re going to say.

One strategy I often employ.  I often do two versions of my presentations – one that has mostly images and one with a lot of supporting text.  I use the latter if I send out the deck after the presentation.  Sending out a follow up deck with a lot of images is silly – no one remembers the “meat.”  But writing lots of words on a slide you put up on a big screen so that later people will be able to understand what you said is also suboptimal.  My dual approach solves both needs.

8. For fawk sake, practice! – It was clear many of the people who presented at Twiistup’s Pre-Demo Night hadn’t practiced enough.  It is not sufficient to write yourself notes and read them before hand.  You actually need to do a dry run in front of friends, colleagues and others.  People don’t like to do this because it feels funny “pretending” to deliver a presentation.  That’s not you.  You’re going to read out your points like it is for real.  You’re not going to stop and go out of character and say, “oh, that didn’t sound right.  I’m gonna do this page over from the start.”  You wouldn’t say that on stage.

There is only one way to know how your presentation will go – to do it in advance.  Get real feedback from your listeners.  Ask them to be harsh.  Better that you know now than in front of 300 people.

9. Stick to your fracking time – If you’ve been given 6 minutes then plan a presentation that can be done in 5.  Trust me – whatever amount of time you’ve gone over in practice it will be longer when you’re on stage.  And if you’re done a minute early – bravo!  The audience will love you.  The best way to manage to a time is: a) practice with a stop watch and b) have less slides than you think you’ll need.  There is nothing worse than a presentation that runs over the end of the allotted time.  Oh wait, there is.  A presentation that is CUT OFF because it ran long.  And you don’t get to finish your points or summarize at the end.  Don’t be this person.

10. Have a “Plan B” – the show must go on –  As was evidenced at the UCLA event and at many, many events I’ve been to – there are times when you have technical difficulties.  The show must go on.  Have a plan b that you can fall back on.  Where you planning to demo?  Fine, but if it isn’t working you need to call an audible.  If it’s a really important show there’s an easy solution.  Have a PowerPoint deck with screen shots that you can walk through.  Simply say, “Obviously I preferred to do a live demo but I have a deck with screen shots just in case this happened.  Whew.”

11. Have someone else drive the demo – Don’t try to be super human.  Have somebody else drive the demo.  There’s nothing worse than the presenter constantly stopping their speaking to concentrate on typing text, clicking on tabs or futzing with the computer.  Have another person that drives the demo.  There actions need to be scripted so that you know exactly what’s going to happen.  They obviously need to practice just as much as you do.  If they do something out of sequence don’t hesitate to politely instruct them.  Tell them in advance to listen for your cues in case this happens.

Some final “no no’s”

- “how’s everybody doing today?” – lots of people start with stupid chatter like that at the start of their presentations.  It adds nothing.  You’re not a comedian warming up the audience.  Get right down to business.  I hate time wasters at the start of a presentation.  You’re already trying to stick to a rigid time plan.

- how many of you “X”? – OK, I already said above that you can ask if people are entrepreneurs, investors, etc.  But please don’t say things like “how many of you have ever had problems with Outlook?” or “How many of you are frustrated with Facebook?” or some similar line to prove your point.  You never know how the audience will react.  If you don’t get the response you expect it ruins your tempo and the audience will start to question your premise.  The risks outweigh the benefits.

- don’t turn around and read the screen – ooooh.  Big pet peeve.  If you don’t put up bullet points this will never happen to you!  But it looks really stupid PLUS your voice projects in the wrong direction.  Many, many people make this mistake.  Yuck.

- never say, “I know this slide is really busy and hard to read” – if it’s so busy and hard to read then WTF did you put it in your deck?  Are you a moron?  If you practiced you sure would realize that nobody could read it.  People say this all the time.  I cringe when I see it happen.  It definitely is an IQ test thing for me.

TechCrunch ran my article yesterday as a guest post but I wanted to have a copy here for anybody who missed it and for future readers of this blog.  This is a slightly longer version and also has an update at the end.

TechCrunch Europe ran an article in November of last year that European startups need to work as hard as those in Silicon Valley and I echoed the sentiment in my post about the need for entrepreneurs to be maniacal about their businesses if one wants to work in the hyper competitive tech world.

Of course articles like these are going to inflame people because not everybody who is running their own business (or aspires to) wants to believe that you need to go all out to compete and win on a global scale.  I agree that not all businesses require this level of dedication and the lifestyle choice isn’t for everybody.  But … global tech does require an absolute, singular commitment level.

Having been through this all before myself I would like to tell a cautionary tale that can happen to the best of us: The Yo-Yo life of the tech entrepreneur.  Mine started this way …

I started my first company in the “go-go years” of the Internet: 1999.  We were based in London.  We raised a seed round of capital in 1999 and our first venture capital round was the first week of March 2000 (e.g. a few days before the wheels came off of the market).  We were immediately thrust into a globally competitive market for B2B collaboration tools.

Our first big institutional round was $16.5 million, which by any normal standards was too much money.  But this was early 2000 and our US competitors had already closed rounds North of $45 million.  They announced their European expansion plans and put pressure on us to feel the need to keep up.

Within a year I hired 92 permanent staff and another 30 full time contractors.  We built 4 products simultaneously to compete with the perceived need to offer end-to-end solutions like our US counterparts.  I was on an airplane 2-3 times / week meeting potential customers, investors, employees, business partners and the press.  I stayed up late every night after a day of meetings doing email until 3am so that I didn’t feel out of touch with our product and sales pipelines.

Dinners were consumed with customers or in hotels and often past 10pm.  Alcohol wasn’t consumed in enormous quantities (ok, well, occasionally it was) but it was an ever present fixture in our socializing.  It also served as the trophy for any big business win.

We had a $40 million round lined up to close in the Autumn of 2000.  But the stock market continued to tank and one of our investors who had committed $12 million pulled out. So I hustled around and convinced a new investor to put in $18 million.  We were now set to close at $46 million in new capital.  The only problem was that the pesky stock market kept declining and that new investor pulled out.  Fawk!

I canceled my first ever extended family trip to Hawaii less than a week before going.  My family went without me.  This no doubt upset my mom but luckily my girlfriend (now my wife) saw what I was going through and understood.  I flew from San Diego (where I was visiting for Thanksgiving) to New York to persuade investors to stick with us.  I then caught the red eye the same night to Paris to meet our investors there.  I took the night train that night to London to try and hold investors firm.  I didn’t sleep much for days on end.

We worked out a plan to merge our company with another European competitor, raise money from both sets of investors, cut the cost base and live to fight another day.  I had very little cash in the bank yet the stories were still coming out about how we were going to change the world of online engineering and construction.  The investors of our competitor agreed to a merger and we were going to raise $15 million between the two companies.  And at the 11th hour they pulled out.  We were weeks from bankruptcy.  I tell that story in my post about the need for entrepreneurs to show resiliency.

We cut all 30 contractors immediately.  We also cut staff from 92 to 38 in one day and then immediately afterward to 33 employees.  We found a way to make our venture capital last when it shouldn’t have, at around the same time one of my all time favorite New Yorker cartoons was published on this topic.

We found a way to get a round of venture capital closed after all of this.  Our existing investors supported us and a new lead came in.

I somehow never really felt stressed during all of this.  At least not externally.  Immediately following the closing of the round I flew out to a big real estate conference in France to meet with prospective customers.  On the trip I nearly collapsed.  I felt dizzy and had an aching in my chest.  I started feeling panic attacks.  I had never had any symptoms like this in my life.

I was now 33 years old.  I had always been very athletic: running half marathons, able to swim 2 miles in a single session, had competed in triathlons, etc.  But a combination of no sleep, late night food, too much alcohol and stress that I didn’t acknowledge started to take its toll.  I had probably gained 15-20 pounds in the previous year.  I had finally appeared on the front cover of a magazine (TornadoInsider – then the top European VC magazine) but I felt so fat in the picture I never sent it to anybody.  I have a stack still sitting in my drawer at home.

I plodded through the conference and went straight to a doctor in London.  I was convinced I was having heart problems.  After an EKG and a treadmill test it turns out that my heart was fine.  The doctor suspected I had ‘acid reflux’ because the symptoms are very similar.

The doctor told me that while I didn’t ever show my anxiety to my friends and colleagues or even acknowledge it myself, my body still went through the stress internally.  How had I let myself get to this point?  If you’re still young I’m sure you think it would never happen to you – you’re fit, right?  Age and life catches up with you.  I was you, too.

I immediately cut out all most of the things the doctor ordered: coffee, orange juice and spicy foods.  I cut down on the volume of food that I ate at any one sitting.  I cut back dramatically on alcohol but wasn’t prepared to totally give up red wine.

My life changed dramatically.  I took up running again.  I woke up extra early (often before 6am) to get my runs in.  I still traveled for work all the time but I planned runs everywhere I went.  It was awesome.  I got to see more of the cities and not from a taxi cab.  I scheduled runs with teammates and even with customers.  It became a social activity.  8-miler in Munich with the CEO of a company we were trying to buy. 7-miler in Dusseldorf with Stuart Lander, my close friend and associate.  10k in Cologne with the CEO of my largest customer.

Then I got engaged to be married in late 2001 and had the motivation to get really serious.  I planned a half marathon, which I crushed in a personal best 1:42.  By the time of my wedding in July 2002 I was super fit.

So I decided to run the London Marathon in April 2003, just 3 weeks before my son was born.  I completed this in 3:57 and was on top of the world.  I’m normally a very upbeat guy but when I’m in great shape I’m INSUFFERABLE.  I carry my soap box with me everywhere and evangelize nonstop on the merits of staying in shape.

But the story doesn’t end there.  April 29th, 2003 my first son was born.  Sleep deprivation kicked in but my work responsibilities did not wane.  My exercise routine was torpedoed but my travel schedule persisted.  We set up a development center in India and I had to be there for three weeks to tour all of the prospective cities.  We opened a US office which increased my air mileage.  We hired a new executive management team that had to be stormed, normed and performed.

Then we merged with a US competitor and I moved from London to Palo Alto.  I started my second company while retaining a board seat at my first company.  I had my second child and commuted every month for 18 months between Palo Alto and London. We sold the first company to a French services company and were racing around getting our second company off of the ground.  About 18 months after building the product for the second company we received an offer to be acquired by Salesforce.com

I was now 38 and in worse shape than my previous experience.  The time zones, the travel, 2 kids, pressure, managing the sales process, speaking at conferences  Somehow I had yo-yo’d back to where I was previously.

We had agreed to sell the company to Salesforce.com and between the offer in December 2006 and the closing March 27th, 2007 I focused exclusively on the sale to Salesforce.com.  I stopped doing conferences, traveling or pitching to VCs.

As a result I freed up the time to get back into shape.  I swam every morning and ran every afternoon.  I started “pulling doubles” often doing the swim then run one after the other.  I began bike riding and dreamed of become a triathlete again.  I lost 22 pounds between January 1st and March 27th through a combination of serious exercise and a Weight Watchers eating regime.  I was on top of the world again.

Except that after the acquisition Salesforce.com required that I commute more than an hour each way from Palo Alto to San Francisco.  The work pressure mounted, the food piled in, the sleep disappeared and the exercise was non existent.

I would like to finish this post on a happy note but I can’t.  After I left Salesforce.com I moved to LA and became a venture capitalist (no, that’s not the sad part ) and had a new challenge to prove myself in a new field.  My hours picked up, I worked hard to establish myself in a new city and a new industry.  My wife said to me, “I thought you weren’t supposed to work entrepreneur hours when you’re a VC?”

I lost perspective and my life hasn’t been in balance.  Exercise hadn’t been enough of a priority in 2008-09.  But now I’m nearly 42.  This time it’s for real.  After a recent international trip with limited sleep I went to the doctor with chest pains again.  It’s still acid reflux.  But this time it’s combined with high blood pressure. I’m still in the manageable zone of hypertension but the doctor said I’ve got to change my ways.  He also ordered me to take medicine to control my blood pressure.

So the yo-yo continues.  But with 2 beautiful kids and a lovely wife I have much more to be serious about.  It’s easy in your 20’s to imagine you’d never be in my shoes.  I thought that, too.  One doesn’t have to look beyond the most prominent technology bloggers, early-stage Silicon Valley angels or even some of the biggest names in tech (Marc Andreessen, Reid Hoffman, Marc Benioff) to find people suffering like I have been.

I’ve spoken with many entrepreneurs in their 30’s who are going through some of the yo-yo health issues that I have brought on by work, travel, food choices and stress.  It’s far more productive to make sure that exercise and healthy eating creeps into your routine.  Find something else to cut out – not this.  You know what I’m talking about – it’s far easier to stay in shape than it is to get into shape.

So no prizes for guessing my New Year’s resolution for 2010.  I plan to be 25 pounds lighter by December 31st, 2010.  Based on experience I know I can do this much more rapidly but I care more about that longer term goal of maintenance.

I’m normally too cool to write posts like this.  I prefer to write the December 2010 post about what a great year I had.  Somehow this is more honest.  And the first 2 steps of achieving any goal are to set metrics (”you manage what you measure”) and to make your goals public (it’s easier to shame yourself into compliance than to be the only person holding yourself accountable).

I plan to keep track on DailyBurn to measure my weight through a new wi-fi enabled scaled from Withings.  I’ve written about the technology to lose weight in this post.  Anyone care to join me in this challenge?

Update: I wrote this post a month ago but waited until TechCrunch Europe posted it before I published.  I’m now down 8.6 pounds and working out 5 days / week.  I am not “dieting.” No crazy plans for me.  Just keeping track of daily calories through DailyBurn.  You manage what you measure.  And when you enter in your intake every day you can’t lie to yourself.  You can do it.  Good luck.

This is part of my series on what makes an entrepreneur successful.  I originally posted it on VentureHacks, one of my favorite websites for entrepreneurs.

I started the series talking about what I consider the most important attribute of an entrepreneur : Tenacity.  I then covered Street Smarts, Ability to Pivot, Resiliency, Inspiration, Perspiration, Willingness to Take Risks and Detail Orientation.

The list is getting quite long.  Funnily enough I was at the Twiistup conference yesterday and I was chatting with an engineer whom I really like and he told me that he enjoyed reading this series but that now he wasn’t sure he was ready to see me because he wasn’t sure that he scored highly enough on all attributes.  So I thought I better set the record straight.  First, I personally am not super human – I hope I’ve never implied that.  I’m just a normal person with strengths, weaknesses and idiosyncrasies - just like you.

Nobody can be super human all all fronts.  Mark Zuckerberg seems to be me to be one of the most talented young technology professionals of his generation and seems to have an amazing vision for technology and product.  He has a willingness and ability to both pivot & take risks in a way that is astonishing to me.  Yet I don’t find him to be personally inspirational nor have I heard that he is from those who have worked around him.  So I’m personally not looking for a 10/10 on every front.  You need to be extremely gifted on some fronts to be enormously successful as an entrepreneur – but still human.

OK. I had to say it.

9. Competitiveness - One attribute that I believe most VCs look for in entrepreneurs is competitiveness.  I know I do.  I like to work with people who hate to lose.  Anyone who has ever been around me when I’ve lost at anything I care about will tell you I’m not pleasant.  I’m not a poor loser at all.  It’s just that I stew on it.  I don’t recover easily.  I lose sleep.  If I have any angle of changing the outcome I will.  I replay things in my mind about why I lost and I try to correct my mistakes.  If you haven’t read my post on the topic it’s here –> why you need to embrace losing to learn.

I look for people who share this obsession about winning.  If you stumble on to a really good idea believe me it will get competitive really quickly.  It amazes me how quickly a modest success story gets replicated and any initial product / market advantages get narrowed.  You can’t accept simply ceding part of the market to someone else because it’s big.  You need to fight for every inch.  Every win.

The trait spills over from personal life to business and back again.  My wife finds it curious.  Family scrabble games are fun – but I still want to win.  We played against her parents and I was focused.  I wanted to take them down!  Poker night is social, but if I’m playing, it’s to take your money.   GuitarHero is seriously chilled out way to hang out with friends.  But even more so if my score is higher than yours.  I ran a marathon with my colleague in 2003 – I’m still bummed that he beat me even though he was clearly more athletic.  For me winning IS the fun.

I know that people who aren’t competitive always find competitive people slightly distasteful.  They feel that there’s something egalitarian about everybody getting a trophy.  They complain that trying to win at everything is in being over zealous and is unnecessary.  Maybe.  Anyway, I’m sure this will play out in the comments section – it won’t be the first time I’ve heard it.

It is what it is. But I want to work with people who thrive on winning.  I look for that fighting spirit in those that present to me. Entrepreneurs play to win and they take losing seriously.  Think Mark Zuckerberg doesn’t have some sleepless nights about Twitter despite having more than 350 million users himself?  Think Yelp doesn’t wake up daily thinking about how to crush FourSquare?  Think Marc Benioff is content with being a billionaire?  I’m sure he seethes at any losses to Larry Ellison.

Steve Jobs is famously known for being obsessive about people not leaking Apple information prior to announcements (unless it’s intentional.)  It is rumored (and much debated) that Jobs dropped McGraw Hill (the book publisher) from any iPad announcements because their CEO went on CNBC the day before and talked about the iPad.  Certainly sounds plausible to me.  You don’t like leaks? Send a message and people will think twice next time.

Don’t take it from me.  Take it from Leo “The Lip” – “nice guys finish last.”  Steve Jobs isn’t a “nice guy.”  Nor are Bill Gates, Steve Ballmer, Marc Benioff, Larry Ellison, Tom Siebel, Rupert Murdoch, Barry Diller or any number of people you’ll find who built empires.

I’m not looking for people to be mean and certainly not unethical.  Just people who play to win – every time.

Simple example. We were once looking at a very hot market segment (which I can’t name or the people I’m speaking about will be obvious).  We were considering funding one of the players in the category – call them Company A.  I knew the CEO of one of their competitors – Company B.  I called her to talk about her business and disclosed that I was talking to one of her competitors so that she didn’t feel compromised talking with me (we also disclosed to Company A that we were talking to multiply parties before reaching a decision).

Company B had already lined up a significant funding round ($20 million) from some of the most elite VCs on Sand Hill Road but hadn’t signed the term sheet.  She asked if she could fly the next day to meet with me and my partners.  I didn’t understand why she wanted to do this if she already had lined up such A-list investors but it was in a segment where GRP Partners is very strong so I it sort of made sense to me.  We rallied the troops to do a 6-8pm session the next day.  She brought her key team members and emphasized why their strategy was so much better than Company A and other players in the market.  It was very compelling.

In the end we decided not to invest in either company (retrospectively a good decision as the market is no longer “hot” and both companies have struggled).  I later reflected on why the CEO of Company B was so eager to meet my firm and at a moment’s notice was willing to fly her team to LA to take an evening meeting.  We’ve never discussed this but I’m convinced it was her competitive juices.  She couldn’t stand the thought of her main competitor locking us (or anybody else) up as an investor.  My gut says that she came 70% as a spoiler for Company A and 30% because GRP has a great reputation in this space.  I only say this because if you’re close to closing with A-list VCs – why rock the boat?  Closing funding of her own wasn’t enough – she wanted to affect the ability of her competitors to raise funding.

This competitive streak paid off.  We backed off our investment consideration because we were convinced that Company B was going to be a very fierce competitor (amongst other reasons).  Company A never raised their round.  6 months afterwards they laid off 75% of their staff and are existing on fumes to protect their IP to this day.  Brand name Silicon Valley firms had put in about $20 million into Company A.  Company B is struggling, too.  But they’re a viable business today and they have one less fierce competitor to contend with.

Another example. Everybody these days is fascinated by the “private sale” concept offered by companies like Gilt, Ruelala and HauteLook.

There are some great companies in this category but the initial category killer was a company called Vente Privee (which in French literally means private sale) from France.  From what I’m told the founders were already in the Schmatta (Jobber) business selling other people’s excess end-of-line inventory at bargain prices before there was an Internet angle.  There wasn’t the same end-of-life retail infrastructure that we have in the US (think TJ Maxx) so they had an early lead.  When the Internet part of their business took off there were a number of initial competitors.

Vente Privee already had market power.  They made it clear to suppliers that if they supplied these newly formed competitors then Vente Privee (by then a powerhouse) wouldn’t carry their products.  This was a bare knuckle industry.  It wasn’t good enough to win the largest market share – they wanted to crush their competitors.  Money was at stake.  Good competitors fight to win (within the boundaries of legal practices, of course).

Just ask Overture about Google (the “do no evil” company) and how they competed in international markets.  It wasn’t all smiles, hugs and let the best man win.  A lot was at stake and Google competed fiercely.  And won.

Whaddayouthink?

*** oh, and to close with some Leo Durocher quotes that are fun:
“As long as I’ve got a chance to beat you I’m going to take it.”
“Buy a steak for a player on another club after the game, but don’t even speak to him on the field. Get out there and beat them to death.”
“How you play the game is for college ball. When you’re playing for money, winning is the only thing that matters.”
“Show me a good loser in professional sports, and I’ll show you an idiot.”
“What are we out at the park for, except to win?”

This is part of my series on what makes an entrepreneur successful.  I originally posted it on VentureHacks, one of my favorite websites for entrepreneurs.  The full list is now posted there if you want a sneak preview.  I’ll try to add a few extra comments in my posts to keep it interesting.

I started the series talking about what I consider the most important attribute of an entrepreneur : Tenacity.  I then covered Street Smarts, Ability to Pivot, Resiliency, Inspiration, Perspiration and Willingness to Take Risks.

8. Detail Orientation / Hands On – One of the easiest ways to rule out people who are pitching to me is when they don’t know the details of their business.  There are easy tell-tale signs.  I’ll start with an obvious one – I talk with the entrepreneur about competitors.  You can always tell during this discussion whether the entrepreneur has logged into their products, talked to their customers, read all the news stories and gotten all of the back channel info on the competition.  You can tell if they have a deep-seated competitive spirit.  Can’t go a mile deep on competition?  Buh-bye.

Let’s talk about your product or let’s look at your financial projections.  Can’t walk me through it on a granular basis?  Did someone else pull you’re financial model together while you did “your job?”  Not good enough.  The best entrepreneurs focus on details.  They can tell you the square foot costs of their property, they can tell you how much they spend on Amazon Web Services every month, they can tell you the 12 features that you’re working on for your next release.

One other big tell for me is the CEO’s grasp of the sales pipeline.  I can’t tell you how many CEO’s I’ve met with who can’t walk me through the details of their sales pipeline.  I want the names of the key buyers, the last time you met them, who the competition is and what are the criteria for a decision.  You think we’re just going to talk about your largest lead?  Sorry.  Let’s go through the whole pipeline, please.  I care about the details but I’m more interested in finding out whether you do.

Along with detail orientation I have a strong bias for “doers.”  When I ask for a quick demo and the CEO tells me that he’ll schedule a follow-on meeting with his sales rep because, “I’m not a demo guy.  The sales team doesn’t like me to give demos,” I usually think to myself, “a follow up meeting probably isn’t necessary.”  Similarly if you need your CFO to walk me through your financial model you’re probably not the right investment for me.  Ask any of the previous CFO’s when I was the CEO – they did the hard work but I edited the spreadsheets cell-by-cell.  In fact, I usually built the first 3 versions of the financial model (but then my ADD took over and I needed a great closer to make the model complete.  Luckily I had CFO extraordinaire, David Lapter, who’s now the CFO at KickApps.  One of his investors called him, “the best CFO in our entire portfolio.”)

I wrote a blog post about being hands on where I argued that startup founders need to be hands-on or in my words, “you can’t run a burger chain if you’ve never flipped burgers.”

I once had a startup team pitch me for an investment where the President of the company led the first call with me on his own.  I told him that “president” was a strange title for a startup.  He announced that they also had a CEO.  Interesting, “what are your different roles?” I asked.  He told me that the CEO set the strategy but that he, the President, traveled to all of the conferences evangelizing on behalf of the company.  Hmmm, “so who runs the company on a daily basis?” “Oh,” he responded, “we have a COO.”  The company had sub $1 million in revenue and was burning $850k / month.  It had a strategy-setting CEO, a limelight-seeking President and a COO who ran the company.

I gave one of the cheekiest responses I have given in my 2.5 years as a VC, “You don’t want to raise money from me.  The first thing I would do is fire you.  Then I’d fire the CEO. Then I’d cut the burn to a realistic level and build a company.”  (yes, I really said this)

They got their round done anyway from a big late-stage VC.  One of the large parts of the burn was PR, Marketing and attending conferences.  As I said, there are VCs who are fooled by all this but it doesn’t equal success.  12 months later the president and the CEO had moved on.  Bad VCs funded this madness in the first place and weren’t close enough to the company to see what was going on.  When the CEO of an early-stage startup tells me that they plan to hire a COO I’m usually not interested in the next meeting.

It’s different when you’re co-founders and one person gets the title COO. But even then I think it’s funny.  Anyone who’s ever presented to me with these titles hears the same questions: “OK, so who does tech report to?  Who does finance report to?  Who does sales report to?  You’re slitting that stuff?  Then what does COO mean?  Isn’t it a confusing title?”  My vote is that co-founders should pick one lead as the CEO and the other should have a functional role & title like Head of Sales & Marketing, CTO, VP marketing or whatever.  But that’s a digression.

Funny side-note:  The company was recently nominated for a Crunchie Award.  Money can’t buy you ultimate success but it’s clear that money CAN buy you awards. Unfortunately.

Funny side-note 2: The title of the post was orginally published saying 7/11 when it is clearly the 8th post.  Obviously I updated it.  Thanks to Phillip @fillup for spotting.  How ironic on a post titled detail orientation.  Thanks for spotting, Phillip!  Originally it was the 7th post when I wrote the whole series back in November but I ended up editing before VentureHacks published. Still, pretty funny.

Chris Dixon wrote a blog post last week titled, “Techies and Normals” in which he defined “Techies” as people who are not just “early adopters” but also have more of a geeky, technical, product bent.  Normals (or “Muggles” as Catarina Fake called them) are people who, unlike Techies, don’t just use products simply because they’re infatuated with them and with showing the world how cool it is that they’re using the latest tech product.  They use products because the products solve a need they have.

If you don’t already read Chris’s blog you should – it’s very well written, often takes a strong POV and speaks from an entrepreneur’s perspective but with a huge knowledge of the technology investors as well.  He is both.

Anyway, Chris’s blog got me thinking about Techies and Normals.  I think this is a perfect way to think about the world when you’re designing your product / company.  Quite honestly I see way too many company pitches that are designed for Techies but I only want to invest in products designed for Normals.  Here’s my take on the topic:

1. Start by defining the problem you’re solving – I see way too many early-stage entrepreneurs who start their companies with a product definition rather than a market problem.  You can always tell these companies because they come in talking product, product, product.  ”And here’s how we integrate with Gmail, Flickr and Freshbooks.  Here’s how a user exports all of their data to a CSV file.  Here’s how we use oAuth to integrate the user’s social graph.  Here’s how users can show their friends what products they want to buy – let’s call that social shopping.”

Blah, blah, blah.  Now remind me, why TF would a person use your product in the first place?  It’s hard to get users to your website.  It’s even harder to get them to use your product.  As per Chris’s article, Techies will use your product.  Sometimes it’s to play around with new technology.  Sometimes it’s to brag to everybody else that they got the private invitation code.  I call the latter the “Emperor Has no Clothes” syndrome.

But either of these scenarios is part of the “TechCrunch bump” and it will come and go.  You will only build a sustainable company of you’re solving a real problem that people have.  I covered this a bit in my post about the market definition slide in fund raising

2. Explain how you’ll solve the problem.  Kind of the obvious next step.  Once you’ve defined a problem that exists in the market you need to talk specifically about how you plan to build a product that addresses the perceived problem.  ”Problem: People don’t trust Craigslist anymore but still want to buy / sell goods to local people.  We solve that trust issue by A, B, C.  Problem: People using Service Magic are only given three potential vendors to do business with and each vendor has to pay whether they’re selected or not.  Our solution allows you to see many vendors and each vendor only pays if they are selected for business.  I talk more about this in my post about solving the problem in fund raising.

3. Assess your market size – Most investors care about the size of the market you’ll serve.  You should, too.  The tech world is obsessed with cool features, the investor world is concerned with how big of a return they’ll make if your company is successful.  For you it may not be all about the money.  But whatever reason you’re doing this crazy startup thing make sure you do basic market segmentation and know the size of the market you plan to serve.  I cover market sizing in this post entitled, “It’s the size of the wave, not the motion of the ocean.”

4. Show me the money - I think many companies naively think that financial modeling is no longer necessary.  It seems to be the meme of Silicon Valley these days.  Launch a product, iterate, fail fast.  Bollocks.  That’s called laziness.  If you haven’t thought about how you might make money some day with your product you’re being exactly that: lazy.  I’m not saying that you need a 30-tab Excel spreadsheet modeling out 5 year’s of detailed profit & loss accounts with gross and net margins that would be realistic for year 5.

But you do need to give some thought to economics.  It’s a very important part of explaining to yourself (and your investors) what features are commoditized and should be free, what features you believe could be monetizable and whether you believe the money will come from primary sources (e.g. the user) or secondary sources (marketeers, data analytics companies, etc.)  Zero thought = flying blind.  I cover the topic of financial modeling in this post.  I think so many Silicon Valley firms skip this step because when you’re a developer your core competence is building product and not thinking about markets.  Or as I like to say, “when you’re a hammer, everything looks like a nail.”

5. Make sure you know whom you serve – It’s one thing to define a market problem.  It’s another to understand the actual users who you will be serving.  This is an exercise savvy companies will go through in creating something designers call a “product persona.”  If you aren’t already familiar with this term please click and read the link I provided. It’s a very important concept in user created designs and too few companies do this.  You need to understand the mind of your potential user.  How they operate, what their needs are, what they do everyday.  You need to understand what other tech products they use and their technical competence.

If your product solves a big problem but is designed to be used by a small segment of users, that’s OK.  It means you won’t likely build a company for mass adoption, but not everybody has this as their goal.  My perfect example is delicio.us (which now apparently also has the domain delicious.com).  I first played with this product many years ago and immediately understood the value.  But I thought, “there is NFW that anybody other than a tech geek is going to use this product as designed.”  It was too opaque.  It wasn’t easy to figure out how you were supposed to use it and how to find other peoples’ lists.  I still wonder why nobody has solved this important problem for the masses.

6. Solve the problem, don’t “keep up with the Joneses” – First time entrepreneur’s often get swept up in the “keep up with the Joneses” mentality.  They read the press releases of competitors or see them at a trade show and race to keep up with their feature sets.  Or even more common they notice that everybody is implementing (insert: posting results out to Twitter, integrating social graph with Facebook Connect, an iPhone App, augmented reality features) and they feel compelled to do so also.  Don’t build features that will wow tech journalists, raise eyebrows on stage at a conference or make your competitors envious.  Build features that will delight your customers.  Obvious, I know.  But you’d be surprised just how many companies fall into this trap.

7. Design for the novice, configure for the power user – This is the last point and one that I’m going to cover in more detail in a future post.  This is one of my favorite topics on good product design.  It’s my view and not necessarily accepted wisdom.  But I shout it from mountain tops.  Technology products that want mass adoption should be designed for novice users.  ”Normals” as Chris calls them.  Products need to be blindingly simple.  You take your User Persona and try to see the product through their eyes, not yours.

You then invite people who match this User Persona and watch them use prototype of your product.  There is only one way to really know whether you’ve achieved product nirvana: film users playing with your product and watch them interact with it.  I’ve seen this many times first hand and even your best attempts at designing “simple” products will surprise you when you see Normals trying to use them.

But my other point is that power users can always figure out how to configure your product to super charge it.  That’s what “Techies” do. So if you want to have lots of really cool product features that solve the problems of Techies make sure that they initialized using a tab or another configuration method.  Let them have the complexity they crave and are capable of using.  But then your core product isn’t bent to the needs of Techies at the exclusion of Normals.

Normals vastly outnumber Techies.  If you want mass adoption of your product you must serve Normals.

I recently read a post over on VentureHacks titled, “Top Ten Reasons Entrepreneurs Hate Lawyers” written by Scott Walker (who blogs on legal issues for entrepreneurs).  I know that people have an allergy to lawyers out of fear of being screwed.  Much of this is unfounded – some is not.  If you’re a startup and you don’t have a close relationship with a few law firms you’re really missing one of the most important relationships that any entrepreneur can have.

If you don’t follow the image reference above or the tag line,“You don’t need double talk; you need Bob Loblaw“ (try saying it out loud), and if you care! the link is here.

This all got me thinking about a post on how to best work with lawyers.  This is stuff I tell people verbally at least twice / month so I’m glad to finally get it into written format.

1. When to get a lawyer - If you plan to be a venture or angel backed technology company (what I mostly write about) the best time to start meeting and getting to know lawyers is long before you ever start your company.  Many people start companies arse backwards.  They get together with a few buddies, bounce around ideas, build some code (sometimes internally, sometimes through contractors), start talking to potential angel investors and then register their company.  This is one of the biggest source of future problems for the company.  I write about some of the lessons in my post on Startup Mistakes.

So eventually you have your company funded but only 2 of the 5 people who started the company are still around.  You never got around to agreeing exact equity splits but you had many conversations about it.  I wonder how the shunned three are going to feel when you make your millions?  Your memory – they never worked very hard and didn’t want to commit.  Their memory – the idea was theirs in the first place and you ran with it and didn’t include them.

Your contractor wrote a great V1 of the product and it helped you get angel funding.  Now you have money and a crack new tech architect and you’ll have to rebuild everything.  Shame about not getting it in legal writing that you owned the original IP.  But I’m sure he’ll never remember your company when Google buys you for $500 million and he’s still eating Ramen – right?

Founded it as a California LLC but your potential VC wants a Delaware C-Corp?  Forget to get around to setting up that Employee Stock Option Plan and want to be able to give the early guys their options at a low strike price?  Shame about that pesky FAS 157 ruling.  Oh, they didn’t cover that in your Stanford CS course?  Sorry. I’m sure the IRS will be flexible and your friends will forgive you for their big, unexpected tax burden.

2. But I don’t have money to pay a fancy lawyer – I’ll just have my cousin do it - Don’t.  Your cousin specializes in entertainment law – that’s different.  I know he’s smart but you wouldn’t hire a Javascript developer to do your database design – would you?  Here’s a hack for you.  Most lawyers that  work with startups are willing to work on a deferred payment schedule.  They’ll only do this if they believe you’re a high potential team and are likely to raise money at some point.  Consider it a sales & marketing expense for them.  They want to lock in future clients at an early stage.

If you make this cut then they will usually defer the payment until your funding.  For a very small fee they can get your Delaware C corp registration, make sure that you have IP protection and ensure you didn’t make an early bumbling mistakes that you’ll pay for dearly in the next 7-10 years of hard work.  They’ll help you ensure that any money you raise doesn’t come with surprise terms that are hidden in legalese.  They usually ask for warrants (basically like a stock option) in exchange for taking a deferred fee.

Like anything in life, if you want a fair deal on the deferred fee and warrant percentage you need to talk to a few lawyers to make it competitive.  They’ll find a way to get to the right price if they believe you’re high potential.

3. Additional value outside of legal documents – Most lawyers who work with early stage startups secretly want to be entrepreneurs but they earn too much money to quit – the golden handcuffs   I’ve found that the best of them think like entrepreneurs, though, and hang out at startup events.  So you can become friends with these people just like NORMAL people and, don’t worry, you’re not going to get a bill for having a beer with them.

I find that one of my best sources of deal flow is from lawyers.  Because many great entrepreneurs work with lawyers in registering their companies they have their ear to the pavement on the earliest of company formations.  I recently wrote a post on how to get access to VCs and angels where I outlined why lawyers are such an important tool for VC introductions.

Think about it – on every company we fund there is a lawyer representing the company.  We spend hours with them discussing and negotiating the details of the company.  When we invest they are often the company counsel so we see them at board meetings.  When we want to sell or IPO companies they’re there again.  Our lives are intertwined.

So I tell you this because if you build a strong relationship with an early-stage VC they can be a great source to help you with your funding.  They can and will provide introductions.  The best firms have whole departments dedicated to just this.  I know that DLA Piper does.  I think they’re one of the best firms nationally at this.  The website for their Venture Pipeline group is here.  I’m sure other firms have similar – feel free to add in the comments section.

4. How to choose a lawyer -First, you need to pick a firm.  I personally like startups to work with firms based on three criteria: local, right sized and startup focused.

Local: many entrepreneurs like to use their old friend from Boston even though they’re now living in Boulder.  That makes no sense to me.  The additional benefits of working with a local law firm or the local branch of a national law firm are too big to ignore.  As I said previously they’ll tap you into the funding source.  They’ll invite you out to events in which you’ll meet their other clients, you can get to know them socially and hopefully develop a real mentorship relationship where every conversation is not on the clock.

Right sized: I tried to work with one of the best known firms in Silicon Valley.  In the initial stages I found that I struggled to get their attention because they also represented all of the biggest titans in town.  My piddly little funding deal was dwarfed in comparison to the huge M&A deals they were negotiating.  Sure, they’ll take you on.  But try getting the time of the A players.  You’ll get the scraps.  I think you’ll end up with a newer lawyer who’s trying to build her book of businesses.  And worst still, you won’t even be her top priority.  You’ll also suffer from their billing rates.  I learned all this the hard way.  Every town has firms that focus on startups – find them.

Startup Focused – My one carve out for working with the big brands is that many of them have internal practices that focus on startups.  I already mentioned DLA Piper.  I’ve met several people from Cooley Godward who have stellar reputations in this category.  I know Mike Lincoln in Washington DC does.  I worked with Sam Angus at Fenwick & West.  He’s totally tapped into the startup communities in Silicon Valley and a bit in LA.  So it doesn’t have to be a small firm.

But as with consulting, PR, web design and even VC – it’s not just the firm it’s also the individual.  In every firm there are A, B and C players.  Good people and evil people.  Focus on the partner you would be working with.

5. How to manage costs - One of the biggest frustrations that people have with lawyers are unexpected costs.  You have this perception that they’re billing you for the lunch meeting they invited you to and the friendly banter emails flying back and forth.  I know the industry as a whole has been plagued with criticism over over billing and personally I think much of this criticism is deserved.  I saw the same bad behavior in consulting.

But it doesn’t have to be that way and the responsibility lies with you.  For company registration, angel deals, Series A & B funding, Employee Stock Option Plans (ESOP), IP filings and even litigation it doesn’t need to be that way.  I always try operate on the “Fixed Fee +” arrangement.  If you’re doing a “vanilla” funding, the lawyer pretty much knows how much effort will be required.  So I ask them for a “fixed” budget.  That’s the amount that at the end of the project I expect to see.  The “+” is what I’ll allow them to bill me for in an “exception” if (and only if) something totally whacky pops out.  And I ask them to tell me in advance if it bubbles up.

The key to being happy with your bill at the end is simple: no surprises.  Be fair, let your lawyers earn.  But make it competitive.  I also am a very loyal person.  I always tell the lawyers that I work with that if they’re fair on pricing and do great work I promise to make it up to them in intros for future work.  I think most people would say I’ve held that bargain.

Also, don’t send shite to your lawyers that you can do yourself.  I’ve seen startup CEO’s send requests like, “can you please update our Cap Table with the latest stock option allocations approved at the board meeting?”  My email response (in my head, not sent), “can you please waste more money having expensive lawyers do something that you could / should easily do for free?”  Be practical about what you ask your lawyers to do.

6. Traps to look out for – Bram Cohen, the investor of BitTorrent, covered the topic on VentureHacks here.  One issue he talked about was working with partners.  I also like to work with partners.  It’s true that you get a higher billing rate but as Bram points out they can often get the work done in way less hours.  If they’ll agree to do your work directly – go for it.

But I also know it’s not realistic for the partners to do all of the work.  So make sure when you do your analysis on which firms to work with that you also meet the associates you’ll actually be doing work with.  I work a lot with Dave Young (david.young@dlapiper.com) at DLA Piper.  He works a lot with Nick Hobson, an associate who’s a star.  Associates matter.  Get to know them. [does that qualify for the discount on my last engagement with you guys ]  I like the WYSIWYG approach to working with lawyers – I don’t want the partners pitching the work and it gets completed behind the scenese by somebody I’ve never met.

Another big “gotcha” for me is that you expect lawyers to help you negotiate good deals.  What I found is that most lawyers will tell you what all the terms mean and sometimes will tell you what is commercially normal but they NEVER explain to you just how certain terms can be used to screw you in the future.  You cannot just say these clauses are “legalese” and I’ll let my lawyer figure them out.  You need to own your legal agreements.  You need to know how liquidations preferences work.  You need to know how “tag along” rights could potentially screw you.  You can’t just understand “redemption rights” in theory.  That’s why I love VentureHacks.  And Brad Feld.  He was the first guy that I saw demystify the legal terms in his term sheet series.  This is a must read for all entrepreneurs.

When you’re doing biz dev deals or customer deals you need to start with a list of the things that you think could go wrong or that you want to protect against.  Write them in English (or your native language) and then ask your lawyer to think about how to protect for them.  Not the other way around.  One CEO I work with was working on a agreement with a major company.  The agreement they sent said, “we may offer your services to our customers.”  This went unnoticed by the CEO and the lawyer.  I asked a simple question.  WTF is the definition of “may?”  In human speak that sounds like they also have the other option, “may not.”  What a waste to sign an agreement that someone “may” offer your service.  That kind of shite doesn’t always get picked up by lawyers.

Be detail oriented.  Own your outcomes.  Lawyers are your support staff not your brain.

7. The good guys – There are many.  Giff Constable has started a great national list here.  It’s an awesome service to entrepreneurs, thank you.  TrueVentures goes one step further with a broader recommendation list here (I hope to add this tab to our website in our next rev.  True is always one step ahead of the curve)  My additions below:

• I’ve already covered David Young at DLA Piper.  He mostly covers Southern California.
• I really had a great experience with Sam Angus at Fenwick & West when I lived in Silicon Valley.
• I have worked extensively with Scott Alderton (yes, he was having a bad hair day in the picture on the link!) of Stubbs Alderton, a firm that focused exclusively on early-stage tech, media and game companies in Southern California.  They have a stellar reputation and know how to work with the earliest of starts with entrepreneurs.
• If you’re doing litigation work and want one of the best national firms who will work on a contingency arrangement (e.g. much of their fees are paid only if they win) then check out Steven Sklaver over at Sussman Godfrey.  Disclosure: he’s my cousin.  And he’s also a Cowboys fan.  But if you can stomach that he’s a star and contingency work / risk sharing on IP claims is key!
• Don Lee at Buchalter Nemer was referred to me by Todd Gitlin and came on very high recommendations as an early-stage, true entrepreneur’s perfect lawyer because he understands how to work with startups.
• On later stage LA Tech M&A deals I’ve heard there’s none better than David Hernand of Gibson Dunn
• In Silicon Valley the name I hear mentioned most often for very early stage deals is Joey Tran from Fortis.  He represented us at one firm I invested in and did a great job.
• We’ve had great experiences with Michael Pfau in Santa Barbara.
• I never met a person who didn’t talk about Mike Lincoln of Cooley Godward in DC.
• Anyone who does IP law in Southern California seems to use Knobbe Martens

Feel free to add any of the good guys in the comments and/or make sure to them over on Giff’s list.  Feel free to also add your best tips (or traps) on working lawyers.