Mike Collett

How to Not Raise Capital (Ridiculous But True Founder Statements)

How to Not Raise Capital (Ridiculous But True Founder Statements)

I’ve riffed on silly vc comments before, but here are some actual founder statements in various emails/decks I’ve recently received (oh come on lets have some fun).

Numerous founders could write a similar list of ridiculous statements that have come out of my mouth (not casting stones!). Listen, I’m all about the hustle, but, well, you be the judge on the effectiveness of the following:

1.“We are Uber for [insert].” (I lost you at “We are…”)

2.“We achieved 1100% revenue growth month over month” (off $750 base)

3. “Let’s change the world together.” (Or maybe not)

4. “Hello nice to meet you. Let us know if you want to invest in our round by the end of this week.” (what’s your name again?)

5. “This is going to be big!” (Yessiree!)

6. “Hello nice to meet you. I’ve included closing instructions with our deck.” (thanks for putting everything, and I mean everything, in one email)

7. “Are you interested in speaking today to see if you can get into the round?” (Absolutely! Hope I get in!)

8. “We’ve been tripling the DAUs every week for last month” (yes but you launched last month)

9. “Then we will own the market.” (and rule the world)

10. “Thank you for the update. Let’s stay close in the future and maybe we can work together when the opportunity presents itself.” (Yes lets)

And while we’re at it, here are my current favorite startup words/phrases I still see in pitches:

1. “killing it”

2. “rock star”

3. “100x engineer”

4. “blowing up”

5. “hot”

6. “crushing it”

7. “exploding”

8. “poised”

9. “on the planet”

10. “world class”

You may now return to conquering whatever massive industry you were born to disrupt.

Stop Complaining About “High” Seed Valuations (No One Said You Had to Invest)

Every six months around a certain prestigious accelerator’s demo day event, my Twitter feed lights up about how high seed valuations are in today’s market.

The conversation goes like something like this:

“Seed valuations are out of control.

I remember when they were $3M pre.

A lot of people are going to get hurt.

I can’t wait for the market to correct.”

My response:

“Then don’t invest in these companies.”

Valuation is the last thing on our due diligence checklist. How much is a startup worth? It’s worth what the market will pay. The valuation for an experienced team with a history of product success that has proven it can attract exceptional talent will garner a higher price from the market. You either believe that they can build a larger company well north of that valuation or you don’t.

There are plenty of examples of investing in early-stage teams at higher valuations than AngelList’s terrific startup data that go onto achieve phenomenal success. If you opine that you just won’t invest more than $10M pre in a seed company, then you have every right not to invest. I respect that, no foul. Just understand that your model may be different than other investing models in the market.

Even in the worst of markets, the best teams are expensive. Whether you choose to pay for this or not is your prerogative. Garry Tan (of earlier said prestigious accelerator) said it well the other day:

“There’s no such thing as value investing in early stage tech.”

Think about this imperfect example: pretend that you had an ability to invest in the 2014/15 Kentucky basketball team at the beginning of this season. They were widely regarded preseason as the team to beat with the best overall talent bar none. This team would have commanded the highest price available. If you didn’t want to pay the premium price, you would have missed the first college team to start a season 36–0. If they win it all, they will end up 40–0. Their price may now be seen as cheap given what they have achieved to date.

Just as the sun will rise every day in the east, look for this chatter to make its way back to Speaker’s Corner shortly. The valuation conversation has been around as long as I can remember, and will never rest well into the future.

There Is No Formula (You Can’t Build Someone Else’s Startup)

Screenshot 2015-03-19 06.14.42

At Promus Ventures, one of our favorite questions we ask founders is not “What are you building?” but “Why are you building?”

As the saying goes, it all starts at the beginning. If your eyes don’t light up and your body leans in when asked why you are building what you are building, then it will be a tough road to success. Personally, I have seen this prove true throughout my life.

We have had the privilege of backing now more than 40 starting teams. Our data shows that the best founders build out of a passion deep inside that trumps any formulaic set of today’s investing variables (traction, MRR, margins, insert 20 others).

Ask yourself (right now!) this question:  Why are you doing what you are doing?

Here are some other questions that help answer this “why”:

  • How did you spend your time as a kid?
  • What makes you angry?
  • Where do you lose all perspective of time in your life today?
  • How was your relationship with your family growing up?
  • Describe the hardest season of your life — what did you learn?

Sometimes (many times) these are not easy questions to answer. We’re not psychologists but if we’re going to get on a long bus ride with a team, we care deeply about knowing what motivates and drives founders to get up each and every morning to build something from nothing. The sexiness of startupland loses its luster quickly once things go south and get very hard (and trust me they do go south…all the time…).

Working at a startup isn’t about owning the shallow title of Founder, Entrepreneur or Owner. Building a company should be based on the cornerstone of who you are, and if so, your odds of succeeding will be high.

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