FUNDRAISING IN SILICON VALLEY – PLUS A FEW RANDOM THOUGHTS. ARIEL POLER
Ariel’s Background Founder: IPRO, Topica, Textmarks & Best of Angel. Board Member: Kana, LinkExchange, Freedom Financial, Odeo, StumbleUpon, LOLapps, Strava. Investor: AdMob, Flixster, Slideshare, Xobni, RockYou, Outright, BrightRoll, Instructables, Causes, VivaReal, Optimizely, Rally, Scan, Thumbtack, Viki, Pantheon, Groupspaces, Mashery, StumbleUpon, Kongregate and NexTag. Personal: MIT (math), Stanford (mba), San Francisco (home).
Silicon Valley is Another PlanetIt is not the US. It is not California. It does include San Francisco.Company formation, financing, growth and sale have been “systematized”.Tons of talent and resources – but even more demand for it - so you have to fight and pay up for it (salaries, rents, lawyers, parking…)
Recent Trends LOTS of new angels & seed investors in general. It is a LOT cheaper to start a company today – particularly consumer Internet. Entrepreneurs have a lot more leverage than 5+ years ago… But Series A & B are harder Marketplaces (uber, airbnb, Kickstarter, TaskRabbit) and social/specialized ecommerce (Fab, Warby Parker) are hot areas. And of course everything mobile/tablet. Platforms such as AngelList, Founders Club and Gust are changing the seed landscape
International Companies have betterchances of fundraising elsewhere • Silicon Valley is the only region with too many good deals. Investors elsewhere HAVE TO invest outside their region, but we dont. So the bar is much higher... • So non Silicon Valley companies might be better of fundraising in places such as London, New York or Boston. • Of course, a few Silicon Valley investors are investing in Brazil…
It is not a Black and White distinctionbetween Angels, VCs, Private Equity There are many shades of Grey... -Full time professional angels. -Angels with funds. -VCs that focus on seed investments. -VCs that participate in seed rounds. -VCs with Private Equity growth funds What matters most is the individual, not the firm! Do your homework to identify the best possible people.
Don’t believe what you ReadMost success stories are made with 20/20 revisionist hindsightIt often takes time, e.g. StumbleUpon and Twitter were not overnight successes as some people think…20/20 Hindsight gives great strategic vision. Realistically, successes are built incrementally. So, don’t obsess over your world domination vision. Just make sure you have a vision for a small success – from which you will be able to build a larger one.
"You are too early” and other excusesMost investors do deals when they get excited by them. Butthey dont like to say “I am not excited", so instead they use aneasy excuses, such as: - You are too early - The deal is too small - I want to see more customers/revenues/technologyBe careful about trying to solve address their excuses, becauseonce you do they are likely to find others. Instead, figure outhow to get them excited.Investors like to keep their options open.
On "average", It takes 6 Months...But averages are often meaningless"Hot deals" are done in a few weeks, sometimes a fewdaysMany deals never get done.And somehow the average is 6 months...The best thing you can do to increase the odds of asuccessful financing is to move your business forward. Becareful about spending tons of time fundraising.
Speed is overrated!What good is going fast in the wrong direction?The better you understand where you need to go, the faster you can moveBut, never stand still!If you have money you will spend it… Get it when you know how to use it
You can’t literally follow all the advise that you getThere are many ways of building companiesYou must find the approach that works for youAdvise should help you gain insights and to experimentIt is the same for competitive athletes…
Focus on your most important market from the startBe careful about starting with the “local” market as a stepping stone to a larger market... You might get stuck there and never quite make it to the larger marketsIf you want to be a global player, focus on a large market from the start
Hire Slow & Fire FastThe moment you start thinking someone might not be working out, he/she most likely isn’t But letting someone go is difficult and painful for everyone, so…, take your time hiring. Same goes for co-founders, service providers, and others.
Moving to Silicon Valley? PLUSES: The “center of the universe” Money Experts Partners Customers in some cases A “must do” in some spaces MINUSES: Much harder to hire talent More expensive? MIDDLE GROUND: Come for a while - or come frequently Send some of your team
Help me Help YouDo your homework The right people to talk to The topics you want to discussBe SpecificAdd value