In my previous post, The VC Ice Age is Thawing (for now) I wrote about the reasons why the VC market came to a screeching halt in September 2008 and remained largely shut until at least April 2009. There are now signs the VC market has gathered pace meaning it’s a great time to be fund raising. This post highlights some of the reasons why the market is moving again and what entrepreneurs should do about this.
There’s no doubt (at least anecdotally) that the pace of VC investments in early-stage technology companies has picked up in the past few months. The real irony of the market thaw is that the biggest symbol of the freeze as I mentioned in my last post is when Sequoia released its famous “RIP Good Times” PowerPoint deck alerting companies to dark days ahead and Ron Conway famously wrote emails to portfolio companies encouraging people to slash and save and prepare for the impending doom in the market. This is one book-end of the cycle.
I hear from several sources that Sequoia is very active in the market aggressively chasing several deals and even driving up prices on some early-stage deals. And Ron Conway has proclaimed that he wants to do up to 40-50 rapid-fire deals in the next 18 months in what is becoming known as the “real time web” (e.g. Twitter, FriendFeed and other real-time “feeds”.
This post is part of my series “Startup Lessons“
Elephants, Deer and Rabbits – Some thoughts on start-up segmentation
Nearly all of the mistakes I made at my first company I fixed by the time of my second company. This is the only mistake I repeated twice and it is a mistake that I see many, many companies make.
I know that this advice won’t apply to every possible startup – but I think it applies to many.
When you start your company the very first question you need to ask yourself is which kind of customers do you want to serve. Many start-ups (and even growth firms) lack this discipline and they therefore serve customers off all sizes. This leads to suboptimal results for all.
Make sure you know what the size of customer you want to serve is, what the people in a company of that size do, the problems they have, the features that will resonate and the channels you’ll need to sell into and service that customer. Because it will vary dramatically by different segments I believe you need to pick an animal size and go for it.
This is part of my ongoing series “Start-up Lessons”.
Startups are hot again. I have family members asking if they can “get in on some deals,” every town is launching an incubator (or 3) and the papers are filled with stories of fund raisings, product launches & new innovation.
If you’re one of the anointed few who is getting the adoration of the press, investors and employees – enjoy the moment and capitalize on the momentum but stay grounded.
On Kool Aid:
I want to talk about Kool Aid. Yours. Don’t drink it. I know you’re thinking that you have your head on straight but I promise you the experience of finding yourself in this maelstrom will leave any first time entrepreneur spinning. Fame and adoration corrupts first timers. And if you’re not careful you might start to believe your own hype.
The public coming out for my first company, BuildOnline, was in early 2000. We had scrambled to get a product to market, built our first website, rapidly hired a technology team, raised our seed round of capital ($1.
This is part of my ongoing series “Start Up Advice” but I’d really like to call this post, “VC Advice.”
If a company has reached a level of success, has been around for a few years and you believe the company has potential to break out into a much bigger company then you should let the founders take money off of the table. It’s that simple. Only then are you truly aligned.
Not FU money, but “feed the family” money. And to be clear – I believe it is also in the VC’s interests. I’m not trying to open Pandora’s Box and suggest all founders should be able to cash out – far from it. But the handful who are building something of substance need to be able to take the pressure off in a way that creates a similar objective to the VC.
I think too many VCs simply don’t understand this.
This is part of my ongoing series “Startup Advice” If you want to subscribe to my RSS feed please click here or to get my blog by email click here.
In the Beginning …
This is a very important post to me because I find myself giving this advice all the time and if you don’t follow the basic advice here you can cause yourself much heartache down the line – even if your company ultimately becomes über successful.
I often talk with entrepreneurs who are kicking around their next idea. Sometimes they’re working full time at a company or sometimes they’ve already left their employer and they’re bouncing around ideas with friends. These periods of time can leave a founder very vulnerable in the future.
Here are some lessons to avoid common traps. Please remember to read my disclaimer (it’s not long) - I am not a lawyer and my advice should not substitute getting formal legal advice.