The Venture World

Starting Is Easy, Finishing Is Hard

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Starting a company has gotten much easier over the past decade.

The capital requirements to get started have come way down in both software and hardware businesses.

The supply of seed and venture capital has increased dramatically as well.

And there are all sorts of programs aimed at helping entrepreneurs get started.

All of this has caused a rapid expansion of entrepreneurship, startups, and innovation.

This is all great.

The one thing that has not gotten appreciably easier in the last decade is finishing.

Finishing can be anything that ends a startup project.

It can be an M&A exit, becoming a sustainable business, becoming a public company, or it could also be failing and shutting down.

None of those have gotten easier in the last decade.

There was a period where the “acquihire” was a thing and many companies that could not figure out how to become a business got bought for their talent.

But it feels like that wave has come and gone.

And so entrepreneurs and the investors who support them are back to grinding it out, trying to get to the finish line.

And, for many, that finish line feels like it is moving farther and farther away every step you take.

Startups are not for the faint of heart, both on the founder and investor side.

It takes great tenacity to see things through. And I think that may be truer today than ever.

Getting Your Head in the Game for Fund Raising

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When you run a startup you’re always on borrowed time. You have cash in the bank, a monthly burn rate and a “cash out” date that few in the company truly comprehend. I’ve never met a founder who wasn’t acutely aware of his or her ticking time bomb and the sense that failure and humiliation is a real possibility. It’s why so few can really start a business from scratch. It’s the ultimate in accountability and public judgment.

It’s why raising a round of capital often feels like a hollow victory because it almost feels like a temporary reprieve from the Grim Reaper and in a way every new round just sets the bar higher to clear for the next round of financing or the hope of reaching profitability.

If you have existing investors of course you feel a degree of comfort knowing that they would likely have your back in tough times — but of course you never really know. I remember my VCs telling me they would be supportive yet I knew the ultimate decision would only come if I were truly out of cash and needed more money.

As the end date nears and the cash-out date becomes more predictable the pressure mounts and every decisions becomes more consequential. There is no way to run a startup business without accepting at least a little bit of cognitive dissonance as you persuade yourself that one way or the other you’ll find a way to make it work while suppressing the very real possibility that you may not.

Fund raising is hard for everybody. Very, very few founders have an easy time despite what you read in the press. Knowing that now will help you greatly in your dark moments to know that you’re not the only one struggling.

The perverse nature of raising capital is that “no’s” almost always precede “yeses” because it’s very easy for a VC to tell you that you’re not a good fit without doing any real work to evaluate your company so you hear “no” far before others start doing more work.

I’ve seen many founders lose confidence in the earliest parts of the process rather than accept that it’s a numbers game where you’re just not a fit for everybody. Fund raising is like a funnel where you need a bunch of potential leads in the top end and only a few will reach the bottom.

Because I’ve observed this process dozens and dozens of times both as somebody who has had to raise capital for nearly 20 years himself and as an investor on the board of companies where we’re raising money — I thought I’d jot down some thoughts for those who will raise in the years ahead.

1. Start Early

The single biggest mistake founders make is waiting until they have too little cash in the bank before fund raising. If your back is against the wall you end up taking short-cuts in funding, you don’t meet enough potential investors, you don’t have time to change your approach based on feedback and you don’t have the time to properly work with your existing investors to come up with “plan b” if fund raising proves difficult.

This problem of a ticking time bomb is exacerbated by a high burn rate because the higher the burn, the more the cash you need to raise to fund 18 months and the harder it is for insiders to bridge you when you hit tough times.

MAKE SURE to talk with your existing investors about how they feel about your burn rate, discuss with them early what the back-up plan may be and whether they think they’d be able to get support in the unlikely event that fund raising proves difficult. Strangely, most founders I know don’t have this conversation with the inside investors early. Also, make sure you know several partners at the VC firms who have invested in you because in tough times it helps to have very broad support.

2. Put Serious Effort Into Your Pre-Game

I find most entrepreneurs put all of their effort into creating a perfect deck and then asking existing investors which VCs to talk with but they put almost no effort into the real “pre-game” work.

Having a list of VCs to approach is of course is a good start. But then you need to research that firm and what other deals they’ve done over the past year. You need to know how many partners they have and which partners do which kinds of deals. Ideally you’d find out which partners are super active and which are less active and who has the power to get deals approved and who struggles.

It sounds like a lot to know — and it is. But if you work your entrepreneur network, talk with lawyers who do a ton of startup deals, ask existing investors, etc. you can usually get a sense of things. You should plan out who you want to meet at each firm and who is the best person to introduce you to that person.

It sounds like a lot of work, I know! But the secret to a successful fund-raising effort is exactly the spade work you put in early and preferable long before you even need to fund raise. Fund raising is a full-time job and the responsibility of the CEO and it’s not something you have the luxury of doing just 3 months every 2–3 years. People who do that are the ones who struggle.

3. Take a Test Drive

When you create the list of potential VCs to approach make sure you have a few “back up schools” in your mix and test some of those as your earliest pitches. You should also pitch your existing investors and ask them to react as though they’re outsiders.

Inevitably your first pitch or two you won’t be on your A-game, which is why you want to take a test drive. Pitch, iterate, update your deck and approach and get better before your most important meetings.

4. Show up. Be in Person. Follow Up. Get Back in Person.

Raising money is a sale and selling requires persistence and follow up. The best sales people never give up and they are politely persistent in finding new ways to get in front of target buyers. I see too many founders that are willing to do all of their meetings as phone calls or video-conference pitches. Sometimes this is a good way to qualify somebody early but it’s certainly less effective so I usually recommend getting your butt on the road.

The biggest surprise to meet in watching people fund raising is how few of them follow up. I know the founders believe once they pitch it’s the responsibility of the VC to follow up with you but the truth is that it is never the responsibility of a buyer to follow up with the seller. The best VCs follow up but then so, too, to the best entrepreneurs. I’m amazed by how few entrepreneurs are persistent post their first meeting.

And I tell founders all the time that when you’re in the room if you have a great meeting and feel the chemistry it probably was truly a great meeting. But three weeks later when you try to chase them down again they’ve likely worked on 25 other tasks and seen 10 other pitches and the memory of just how much they loved you begins to fade. It’s the exact same phenomenon in sales when you’re in a competitive RFP and 5 firms are pitching. By the end the buyer forgets why they loved your presentation.

So GET BACK IN FRONT OF THEM! Remind them why they loved you so much. It’s the MOST important thing you need to do in fund raising — create a million excuses of why you need a little bit more time and have more stuff to show them.

5. Learn What’s Not Working

VCs are the masters of the “soft no” just like Hollywood producers are. They will tell you every version of “it’s too early for us” or “I need to see a little bit more traction” or “we don’t yet have conviction” or any other nice version of “no” to avoid giving you real feedback.

If you get a “no” from a VC I would politely ask them for constructive feedback. Tell them you understand that they’re passing and you’re not going to try and debate it with them — you just want to learn so you can improve your pitch. Another great way to get feedback is to ask your existing investors to call and get feedback because VC to VC will often give more direct feedback — call it professional courtesy.

I recently took a call from a VC firm to get feedback for my team and she told me that the CFO kept interrupting the CEO and saying, “What he really meant was …” and they found it disconcerting. Knowing this is valuable.

6. Use Your Team

I mentioned earlier that your goal as a startup is to get in front of the investors multiple times to “remind them why they loved you.” One very effective way is to use your broader team. If in your first meeting you bring 3–4 people then there’s less reason for the VC to meet you again. If, on the other hand, you did the first meeting on your own you could ping that VC and tell them, “my CTO is going to be around next week and I’d love to get the chance for her to meet you because we’ve just launched this one big new innovation that I think is well worth your seeing — whether you end up investing in us our not.”

Face time = winning.

Use your bench. Other investors may tell you this is the wrong move. They’re wrong. VCs suck as sales and raising money is a sale. Call your favorite VP of Sales — he’ll tell you what’s what.

7. Back Channel

I mentioned earlier back-channeling as a way to get feedback after a pass on how to improve. Back-channeling is also very effective in helping your process. You can have entrepreneurs put in a good word for you, you can have angels whisper that “you’ve been invited to a few partner meetings,” you can get existing investors to lobby on your behalf. Every effective sales campaigns uses external parties as champions to help the cause. If you’re not doing it you’re not using every resource you have. Your back-channels should be subtle and should be truthful but it helps you to avoid having to send 5 reminder emails to a VC yourself.

8. No’s Come Early / Don’t Lose Confidence

The hardest thing about fund raising is the “no’s” always come early. Simply put, a few VCs will pass early in the process — some even without taking a meeting and some right after the first meeting. Other VCs who are willing to do work will of course take time and many meetings to get to a “yes.” So by default the bad news piles up early and can erode your confidence. Don’t let it!

While you need to listen to feedback during your fund raise you also need to be careful not to let it get to your head. Some negative feedback is just wrong and some might be a VCs house style whereas another VC might be fine with it.

Keep your confidence high. You will only feel super defeated if you start fund raising too late in the process because you’ll have heart palpitations about the limitations of your bank account balance.

9. Funding is Hard for Everyone

An important part of not losing your confidence is to stop believing that everybody else has an easy time fund raising. I’ve been part of some very hard raises over the past 5 years and each time when we eventually get it done and announce it to the outside world it just looks like a win.

10. Funding is Binary — You Only Need One Yes

Don’t give up. If the big names turn you down and the second-tier turn you down and strategics turn you down — keep going. Broaden your list. Ask friends where they raised capital. Read the press and gather every named investor you’ve never heard of before and see if they’re increasingly active. You’re not done until you’re done. I’ve seen some fund raises where everybody thought it might end in a zero and then at the last minute they get a yes. Nobody is ever the wiser — it’s still a victory. A raise is a raise and a dollar is a dollar. Of course you want the best source possible. But if you get a raise done then it’s up to you to perform.

10. Nothing is Done Until It’s Done. Sprint to the Finish Line

Just as I recommend not giving up and showing grit until the end — I also caution people from assuming a round is done until it’s done. Never stop in the ink is dry on the contract and the money is in your bank account. Ask anybody who was raising in the midst of 9/11 or during the Lehman Brothers meltdown. Or ask anybody who has had a VC pull a term sheet for whatever reason. You’re not done until you’re done.


There is so much fund raising press these days that it’s easy to imagine founders strolling into pitch meetings and walking out a week later with a term sheet. That’s fantasy land. Fund raising is hard. And that’s true for everybody. Don’t put it off. Start early. Measure twice, cut once. Put in 2 hours of research for every 1 hour meeting. Take nothing for granted. Pull out all the stops. And keep your head in the game. You’re gonna need it.

Getting Your Head in the Game for Fund Raising was originally published in Both Sides of the Table on Medium, where people are continuing the conversation by highlighting and responding to this story.

How MakeSpace Recently Closed $30 million in New Funding

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Just over a year ago I wrote about how MakeSpace had raised $17.5 million in capital to build out its operations in 4 cities: New York City, Los Angeles, Chicago and Washington D.C. I pointed out that the storage market in the US alone is ~$30 billion / year and there is no dominant provider — the largest player has < 10% market share.

If you have a storage need in one of these cities please consider checking out MakeSpace.

Today I’m excited to announce we’ve recently raised $30 million in growth finance led by 8VC, with Kimmy Scotti joining our board. We’ve been delighted with 8VC as a co-investor.

So how did a company that provides storage grow so fast (we’ll exit 2017 with 10’s of millions in recurring revenue), why is it so defensible and is it really a tech startup? In short — how the hell did we raise $30 million?

If you buy that Amazon is a tech startup then essentially you’ve already answered the question. Amazon took a consumer value proposition (buying books, then all retail products) and made the consumer experience significantly better, faster & cheaper. They didn’t do this by selling better books or electronics, they did it by building a logistics & warehouse powerhouse.

  1. Amazon didn’t need physical retail so it didn’t have an expensive cost structure
  2. Amazon put its distribution centers centrally located in cheap locations and can store significantly more inventory due to cheaper square footage and they can stack products high because you don’t visit the Amazon warehouse
  3. Amazon delivers the product to your house, which costs them money but due to large volumes of delivery, route density and large purchase volumes they make more than enough margin to cover their additional logistics costs

Essentially Amazon invested in being the world’s best logistics, warehouse and inventory management company. In the early days this is expensive because the logistics & warehouses are amortized over a small customer base but with scale this infrastructure and the technology that drives it becomes a powerful moat and hard for new entrants to compete.

MakeSpace is building the exact same systems but in reverse.

  1. MakeSpace doesn’t need large numbers of local storage facilities near your house, so it has a greatly reduced cost structure for its facilities. Today our physical costs are less than 50% of traditional storage providers and that’s trending towards 20% with volume.
  2. MakeSpace puts its distribution centers outside of expensive commercial zones near where customers live and given our warehouses don’t need to visited by humans we can stack our customers storage much more efficiently, driving higher yields
  3. MakeSpace will pick up your goods and bring them back to you so it is a vastly improved service for end consumers. Plus, we photograph your inventory and provide a beautiful app so you can know what’s in your storage at any time.

We have no doubt that the storage market is being disrupted and that each city is lined with what will look like ex Blockbuster Video locations one day or frankly be converted to more productive / high value use since many of them are urban.

Our defensible infrastructure comes from the fact that we now have huge volumes of customer storage earning the equivalent of SaaS revenue and any new entrant would have to invest in the fleet of cars, bins, drivers and warehouses that we now have not to mention 4.5 years of software development.

We now have enough density in each city to drive productive routes where we can do enough pick-ups & drop-offs per truck to operate profitably in our markets and density is something that most local businesses overlook.

We have built route management software so that drivers have productive routes and can cluster pick-ups and drop-offs. We’ve built warehouse software that helps us massively reduce the time it takes to unload inventory and pick, pack & ship back to you when you’re ready. We’ve invested heavily in inventory management software so we can track every bin and every item of your stuff and know where it is at all times.

And we’re investing in computer vision technology to better image your storage items and soon we’ll be able to predict what you have in storage based on artificial intelligence algorithms that can probabilistically determine which things are pictures, lamps, dressers, skis and so forth.

Building logistics businesses are never easy and it’s not always as sexy as building a consumer application that goes viral. But finding a market which is large, out-dated, has zero tech and is ripe for disruption can lead to very large outcomes. That’s some of what I suspect that team at 8VC saw in MakeSpace.

When we look at customer surveys we realize that the number one reason our customers are looking for storage is to de-clutter their lives and we believe that today’s young urban professionals are nearly universally looking to get rid of clutter.

I can’t wait until we can bring the service to your geography. Contrary to many people’s perceptions the storage market isn’t only in dense, urban environments like NYC or SF. In fact, is a national market where all of the 25 largest cities have more than 25 million rentable square feet each of storage space and many of the top 10 markets are in semi-suburban cities.

With our increases in capital we hope to be able to serve you in the near-term future.

How MakeSpace Recently Closed $30 million in New Funding was originally published in Both Sides of the Table on Medium, where people are continuing the conversation by highlighting and responding to this story.

From The Archives: General Georges Doriot

AVC - Musings of a VC in NYC -

I am flying up to Boston today to give the inaugural Georges Doriot lecture at MIT. It’s a great honor to kick off this annual lecture and remember General Doriot, who was the founder of modern venture capital. Here is a blog post I did back in 2008 about General Doriot and a book about him by Spencer Ante. At the time of this post, I had not read Creative Capital, but I did read it and I strongly recommend it to anyone who is interested in the early days of the modern venture capital business.

Who is the father of modern venture capital? Surely someone from Silicon Valley in the late 60s and early 70s, right? Wrong.

The father of modern venture capital is General Georges Doriot who helped to form and run American Research and Development, the first modern venture capital firm in Boston right after World War II. Doriot also taught at Harvard Business School and was a mentor and teacher to the first generation of Boston VCs who operated in the 60s and 70s.

With all the focus on the bay area and its history as the center of innovation in information technology, Doriot’s contributions are often overlooked. But now we have a new book and a blog, courtesy of Spencer Ante of Business Week.

Ante’s Creative Capital is about Doriot and the start of the venture capital business here in america post world war II. I haven’t read it yet, but I just ordered it on Amazon. Here’s a short excerpt from the Harvard Business School blog. I suspect the readers of this blog are the perfect audience for this book so you should all go check it out.

Why Great Executives Avoid Shiny Objects

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The modern world is filled with constant distractions. Only those with maniacal focus on results and a willingness not to engage in every activity achieve extraordinary results.

As executives we’re all seemingly accessible at any moment to anybody via email, Twitter, Facebook, LinkedIn or Text. We are over-intro’d and at the same time under-resourced in terms of staff to handle the barrage of in-bound requests.

And every leader also has teams with constant priorities where they need: Input, feedback, decisions or meetings. We’re expected to be at conferences, events, sales meetings and be publicly visible. People expect blog posts, Tweets, panels, speeches. And then there are investors who want updates, calls, reports, check-ins.

The modern world is daunting. Many leaders fall into the trap of doing too many things but not accomplishing enough.

I have written about this before and often recommend to executives that they do less, but complete more by avoiding the shiny objects and distractions stop us from living up to our true potential.

I think of activities as a funnel. Every new opportunity and every door opened is at the “top end of your funnel” meaning that may or may not come to fruition: A business development conversation, a first customer meeting, the first candidate in a recruiting process, the first time you talk with a journalist or the first meeting to consider your business strategy.

Having interesting and frequent opportunities at the top of your funnel is important, of course, but the ultimate score is only measured on the bottom end of the funnel.

Meeting with 12 biz dev targets makes for great conversations with your board but doesn’t matter for shit if none of them close in the end or if you don’t get the right deals done.

Meeting a lot of candidates to find your head of marketing is all well and good but if 3 months later you still have no one in the role you’re still down a person. Taking tons of VC meetings is relatively easy but getting 1 or 2 to truly engage is much harder and takes total focus.

The amount of time it takes to move along a few things forward in the bottom of your funnel is disproportionate long and hard relative to the time and ease of each new top-of-funnel activity, which is why many executives allocate their time on the wrong things.

We all know executives who constantly talk a good game about vision and the things they’re going to do but actually never seem to deliver results. Eventually the bullshitting wears thin. We all know people who love to talk up their game but never deliver. People chase shiny objects precisely because opening is orders-of-magnitude easier than closing.

My greatest personal successes in business have come from this one trait of being tenacious to the point of obsession on the most critical things and a willingness to totally disengage on less important activities until my plate is cleared. I am willing to disengage at times from the flurry of “activity” because when I have something that needs to be finished the only way I know how is maniacally focus on the bottom end of my funnel. It’s why sometimes I respond to emails in 5 minutes at other times I go dark for a week at a time.

I learned this from Steven Covey so many years ago in the 7 Habits of Highly Effective People

Step one: Be proactive
Step two: Begin with the end in mind
Step three: Put first things first.

Put first things first. Get non-core things out of your way. Move stuff down the funnel and be careful about widening your funnel if you’re not closing enough of your tasks.

Recruiting, business development, shipping product, writing blog posts, networking … it’s all the same. Lots of people start, very few finish.

Opening is a skill in its own right, but coffee is for closers.

Why Great Executives Avoid Shiny Objects was originally published in Both Sides of the Table on Medium, where people are continuing the conversation by highlighting and responding to this story.

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