April 29, 2013

Entrepreneurs: Here’s what investors care about!

Richard Mordini of Javelin Venture Partners (checkered shirt) at Founders Space in San Francisco last Wednesday night (Photo by JD Lasica).

Show your plan to get to a million in revenue — and other tips from four seasoned venture capitalists

Target audience: Entrepreneurs, start-up teams, angel investors, venture capitalists, accelerators, incubators, digital agencies, businesses, educators, journalists, Web publishers.

JD LasicaOver the past year, I’ve been wading into the entrepreneurial waters once again. Last fall I joined the invitation-only Founder Dating, and I’ve been attending a slew of meetups — Silicon Valley NewTech, Startup Grind Silicon Valley, Hackers and Founders, Designers + Geeks — and other events geared to entrepreneurs and start-up teams. (I’m working on a cruise start-up in addition to running Socialmedia.biz. Contact me if you’d like to hear more.)

Last Wednesday night I found myself lured back to SomaCentral, the very cool co-working space at One Market in San Francisco, to hear four seasoned venture capitalists offer advice to start-ups on their pitches. About two dozen people attended the Founders Space event, Present Like an Investor: Tailor Your Approach to What Investors Care About, featured Joydeep Bhattacharyya of Shasta Ventures, Sean Jacobsohn of Emergence Capital Partners, Ali Wasti of Azure Capital and Richard Mordini of Javelin Venture Partners, along with Founders Space founder Steve Hoffman.

Here are a few highlights I jotted down on my iPad during the 90-minute event.

Launching a start-up or small business? Keep these tips in mind

• “What is your plan to get to a million in revenue?” Jacobsohn said. “Until you get to a million, it’s not really a business, it’s an experiment.”

• Several of the VCs said most start-up founders want to spend the entire pitch talking about their product, when the funders want to talk about the market, the growth rate, the competition, the financials.

• The “biggest turnoff” during a pitch session, Mordini said, is when the start-up presenters hold back the main idea “like it’s a rare diamond that they can’t reveal right away.” You need to catch the investors’ attention right away and let them know, “How can you accelerate growth ahead of your competitors? How is my money going to help you win?” If the VCs start checking their watches after five minutes, you’re dead.

• Another turnoff is when the head of business development leads the session. The CEO needs to take charge, while other team members can weave in their backgrounds and tell the story of how they came together, said Mordini (most of these observations came from him given that we assembled into break-out groups and Richard led ours).

LinkedIn doesn’t need its members to be active every day — it makes money off you even if you’re not logged in

• Generally speaking, showing traction and producing steady growth in daily, weekly and monthly active users are the most important metrics to show you have a consumer-facing startup, Bhattacharyya said. But there are exceptions. LinkedIn doesn’t need its members to be active every day — it makes money off you even if you’re not logged in.

• “Everyone has a social loco mobile startup,” Mordini said.

“Invest in lines, not dots.” Some VCs take a wait-and-see approach to gauge whether you’re gaining traction.

• Mobile-only Instagram was an aberration, though the same can be said for other break-out start-up wonders. “I would have passed on Instagram a thousand times over,” Mordini said. “What did they have that Hipstamatic didn’t?” By the time Instagram achieved crazy-viral growth and was seeking additional funding, “That’s not investing when you’re growing at a million users a week,” he added.

• “The Bay Area is the best place in the world to raise funds for your start-up,” Mordini said, with incubators and accelerators like YCombinator, AngelPad, 500 Startups, KickLabs, Runway and even Matter. If you can’t raise angel funding here, maybe it’s time to reconsider your assumptions.

• “The number one thing you’re trying to do as a startup is to outrun your burn rate.”

• “I’m loath to join a service that’s only out to monetize me.”JD Lasica, founder of Socialmedia.biz, is now co-founder of the cruise discovery engine Cruiseable. See his About page, contact JD or follow him on Twitter or Google Plus.

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