Both Sides of the Table


Amazon. It’s the company that evokes fear into more startups and venture capitalists looking to fund eCommerce businesses than any other potential competitor. Every pitch I’ve ever seen has led to the, “Would Amazon eventually do this? And could we then compete?” type questions.

But what if you could do the reverse of Amazon?

Amazon was early in spotting a macro trend – that physical, local retail had a few key disadvantages. The first is that it could carry limited inventory in stock because it had limited physical shelf space. The second is that the retailers were constrained by their high costs of local real estate and service staff relative to the costs of centralized warehouses where goods could be stacked high, sorted by robots, managed by RFIDs and then shipped via overnight to eager, cost-conscious customers across the US.

Today’s $24 billion storage market in the US has these same key disadvantages and that was the genesis of Sam Rosen’s initial idea for MakeSpace, which I initially funded 15 months ago. We always had the added advantage that I have never met a single person in my life who ever said anything positive about their storage provider or experience. It always went something like this, “We had to buy boxes and pack them to the hilt and we had to run 4 separate runs to a facility 30 minutes from my house in a dodgy neighborhood and schlep up to the third floor where we stored our goods under a lock and key. 9 months later I didn’t have a blooming clue what was in there or whether I should still be paying for it.”

This laughable customer experience is practically parodied in real life by the popular reality TV show, “Storage Wars.

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I was having dinner with a friend last night and we were chatting about venture capital and a bit about what I’ve learned. I started in 2007 with a thesis that my primary investment decision would be about the team (70%) and only afterward about the market opportunity (30%).

I was telling him that it was much easier when I started because there were fewer deals, life was less public and somehow the world seemed to be spinning more slowly. A year into my tenure the world went into economic collapse and that seemed to dominate the consciousness more than which deals one was chasing.

Today we’re in a world where 10 accelerators are bombarding you with emails to meet their 10-15 companies. Seed investors are aplenty and of course they need downstream money to fuel their early-stage bets. Angels have been prolific for years now and they, too, rely on downstream money to cover their bets.

And we live in public so many people are able just to reach out.

And there’s conferences. Oh, the conferences. Disrupt. Recode. Web Summit. Collision. Fortune Brainstorm. Lobby.

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One of the interesting things about being a VC is that you often see companies in transition. If you’re an early investor like I am that often means writing the first $2-3 million check into a business that previously had either survived on fumes or on a $500,000 angel round.

I also see companies as they move from having taken $1-5 million from me to their next round where they raise $8-15 million from Series B investors and sometimes I lead at this round (we’re stage agnostic but 80% of our deals are seed & A).

Moving from a company that had less resources (and presumably by the time they’re raising depleted resources) to a company with newfound resources can be telling.

I have seen many companies raise their first $3 million and still act like a company that has no resources at all. And while this might sound to the inexperienced person like a sensible idea – it is not. In a VC business when you raise additional capital you need to “level up” and act the round you are.

Of course I’m not preaching crazy, irrational spend or having Kid Rock at your next company party. But you do need to find a way to do activities that are more scalable.

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Reference calls. We all have to make them. Whether you’re considering hiring a new employee or as an investor whether you’re looking to do a background check on the founders of a company.

My friend Jason Hirschhorn Tweeted about this today

References on hires are often useless.

— Jason Hirschhorn (@JasonHirschhorn) April 6, 2014

1. Ask for at least 5 references
As your candidate for at least 5 references. You specifically want to ask for people who have directly worked with the person before. I like to get a mix of people who have reported to the candidate, whom the candidate has reported to (2x) and peers.

Don’t worry about the fact that these are the references that the candidate has hand-picked – that’s part of the process. I would start by asking the candidate, “How did you decide on these five people” as part of your review process.

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Most technology startups seem to be funded by product people or business people.  Specifically what is often not in the DNA of founders are sales skills. Nor do they exist in the investors of early-stage companies.

The result is a lack of knowledge of the process and of sales people themselves.

My first startup was no different.  I had never had any sales training so everything we did for the first couple of years was instinctual.  While we did fine learning on the fly, it turned out that a lot of what we did was wrong.

As we grew into several millions of dollars of sales per year it was no longer acceptable to “wing it.”

So I did want any rational person who wants to improve does – I hired a coach.  We focused together on improving our sales methodology, our training and our comp plans through a larger than life ex country manager from PTC named Kai Krickel.  He taught me much – most of it unconventional.  Most of it worked and his philosophies have proved enduring to me.

His business was called TEDIC – The Excuse Department is Closed. That mindset always stayed with me and even rung true at the time. Excuses.

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