This is going to be an action packed summer for entrepreneurs and investors. As entrepreneurs start figuring out how to get ahead of the mobile game before the new iPhone arrives and others cook up ways to set themselves apart from generation Web 3.0 applications, investors have their ears to the tracks hoping to hear about the next big thing. As the next chapter of the Washington, DC startup community reveals itself there are a few things that everyone should keep in mind.
The first is that amateur aspirations are not the same thing as well researched plans. I hear from a lot of startup founders who have great ideas, teams, and even working prototypes of what they think investors will pour money into. Not long after the pitch I hear humbled thoughts and even complaints about this, that or something else. As an entrepreneur it is really important to humble yourself early on. You think you know what you need to know until you talk to someone who knows more. Rather than act all offended when someone knows more than you do about a particular thing you sometimes need to open your ears and close your mouth. I say this from personal experience. If you don’t know something then say you don’t know it. Don’t be afraid to admit that you don’t know something. The reality is that preparing to launch a startup is a lot like training to compete in a Triathalon. If you are a really smart software engineer you have to learn marketing, if you are a really good sales person you have to learn project management, if you are a really good finance person you have to learn to be a really good sales person. It isn’t quite that bad, but I think you get the picture. You have to become fairly well versed in a lot of different areas that you know little or nothing about. All of this usually has to happen while you are preparing, but don’t worry too much because your learning curve will only get steeper after you get funded.
My favorite example founder to founder wisdom that I hear over and over again, but really don’t like to hear, is that “everything will take at least twice as long as you think it will.” Truth be told, if you have an idea and social skills you can probably find someone in your network or extended network to put money into whatever startup idea you can come up with. How someone handles this harsh reality really reveals their true entrepreneurial character. I know a couple of liberal arts guys who started learning programming after their developers took longer than the project plan called for. I know a lot of developers who learned how to use Photoshop and studied up on CSS and HTML after their designers and UI folks didn’t live up to their expectations. Many people will tell you to focus on getting something simple and ugly out there, then to iterate from there.
A highly relevant Rolodex will definitely increase your odds of finding the investor who will bring something more than their checkbook to the table. But if everything revolved around contacts then you could sign up for a service like LinkedIn, spend a few hours searching and messaging, and have a check accompanied by an amazing advisory board member within a short while. Much like finding your ideal life partner, finding your ideal investor(s) is more involved than using an online dating board.
Personally, I have never raised a seed round much less a Series A. But with that in mind I would also like to point out that I talk to a ton of people who have and who are in the process of doing so. Trust me – if you are looking to raise money the first thing that you should be doing is talking to as many people who have done it as possible. There are plenty of books and websites out there offering advice but not none of them will convey what the experience is about as much as a health series of coffee and lunch conversations with people who have done deals themselves. You will be amazed at how much you can learn by simply surrounding yourself with people who know the rules of the game.
Another consideration is the pitch. Pitching to investors is thought of as a one time event. I hear from people who pitched an idea to an investor and then thought their idea was dead to the investors. I often wonder whether their idea lacked merit or if they just lacked chemistry with the investor. In talking to both entrepreneurs and investors I hear a lot of stories about how people got their pitch right or wrong on the second round. It is a much better idea to get it right the first time though.
The thing that everyone who is making progress against their goals will tell you is that being a startup founder is hard work that usually involves long term rewards so you have to make doing it fun. That means that you have to find people who are not only interested in what you are doing, capable of doing it, and interested in some of the same things that you are. In the case of many of the teams I know well, there is a common video game that they all play (usually more than one). For others it is a common interest in beer. The Foosball table usually enters the picture much later.
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