thegoodfellas/blogset-br huggingface dataset:
supposed to do that before you've raised money.Try to raise angel money, or bootstrap off of initial customers or consulting contracts, or work on it after hours while keeping your current job, or quit your job and live off of credit cards for a while.Lots of entrepreneurs have done these things and succeeded -- and of course, many have failed.Nobody said this would be easy.The most valuable thing you can do is actually build your product. When in doubt, focus on that.The next most valuable thing you can do is get customers -- or, for a consumer Internet service, establish a pattern of page view growth.The whole theory of venture capital is that VCs are investing in risk -- another term for venture capital is "risk capital" -- but the reality is that VCs will only take on so much risk, and the best thing you can do to optimize your chances of raising money is to take out risk.Peel away at the onion.Then, once you've done that, recraft the pitch around the new facts. Go do the pitches again. And repeat as necessary.And to end on a happy note, remember that "yes" can turn into "no" at any point up until the cash hits your company's bank account.So keep your options open all the way to the end.The Pmarca Guide to Startups, part 3: "But I don't know any VCs!"In my last post in this series, When the VCs say "no", I discussed what to do once you have been turned down for venture funding for the first time.However, this presupposes you've been able to pitch VCs in the first place. What if you have a startup for which you'd like to raise venture funding, but you don't know any VCs?I can certainly sympathize with this problem -- when I was in college working on Mosaic at the University of Illinois, the term "venture capital" might as well have been "klaatu barada nikto" for all I knew. I had never met a venture capitalist, no venture capitalist had ever talked to me, and I wouldn't have recognized one if I'd stumbled over his checkbook on the sidewalk. Without Jim Clark, I'm not at all certain I would have been able to raise money to start a company like Netscape, had it even occured to me to start a company in the first place.The starting point for raising money from VCs when you don't know any VCs is to realize that VCs work mostly through referrals -- they hear about a promising startup or entrepreneur from someone they have worked with before, like another entrepreneur, an executive or engineer at one of the startups they have funded, or an angel investor with whom they have previously co-invested.The reason for this is simply the math: any individual VC can only fund a few companies per year, and for every one she funds, she probably meets with 15 or 20, and there are hundreds more that would like to meet with her that she doesn't possibly have time to meet with. She has to
rely on her network to help her screen the hundreds down to 15 or 20, so she can spend her time finding the right one out of the 15 or 20.Therefore, submitting a business plan "over the transom", or unsolicited, to a venture firm is likely to amount to just as much as submitting a screenplay "over the transom" to a Hollywood talent agency -- that is, precisely nothing.So the primary trick becomes getting yourself into a position where you're one of the 15 or 20 a particular venture capitalist is meeting with based on referrals from her network, not one of the hundreds of people who don't come recommended by anyone and whom she has no intention of meeting.But before you think about doing that, the first order of business is to (paraphrasing for a family audience) "have your stuff together" -- create and develop your plan, your presentation, and your supporting materials so that when you do meet with a VC, you impress her right out of the gate as bringing her a fundable startup founded by someone who knows what he -- that's you -- is doing.My recommendation is to read up on all the things you should do to put together a really effective business plan and presentation, and then pretend you have already been turned down once -- then go back to my last post and go through all the different things you should anticipate and fix before you actually do walk through the door.One of the reason VCs only meet with startups through their networks is because too many of the hundreds of other startups that they could meet with come across as amateurish and uninformed, and therefore not fundable, when they do take meetings with them. So you have a big opportunity to cut through the noise by making a great first impression -- which requires really thinking things through ahead of time and doing all the hard work up front to really make your pitch and plan a masterpiece.Working backwards from that, the best thing you can walk in with is a working product. Or, if you can't get to a working product without raising venture funding, then at least a beta or prototype of some form -- a web site that works but hasn't launched, or a software mockup with partial functionality, or something. And of course it's even better if you walk in with existing "traction" of some form -- customers, beta customers, some evidence of adoption by Internet users, whatever is appropriate for your particular startup.With a working product that could be the foundation of a fundable startup, you have a much better chance of getting funded once you do get in the door. Back to my rule of thumb from the last post: when in doubt, work on the product.Failing a working product and ideally customers or users, be sure to have as fleshed out a presentation as you possibly can -- including mockups, screenshots, market analyses, customer research such as interviews with real prospects, and the like.Don't bother with
a long detailed written business plan. Most VCs will either fund a startup based on a fleshed out Powerpoint presentation of about 20 slides, or they won't fund it at all. Corollary: any VC who requires a long detailed written business plan is probably not the right VC to be working with.Next: qualify, qualify, qualify. Do extensive research on venture capitalists and find the ones who focus on the sector relevant to your startup. It is completely counterproductive to everyone involved for you to pitch a health care VC on a consumer Internet startup, or vice versa. Individual VCs are usually quite focused in the kinds of companies they are looking for, and identifying those VCs and screening out all the others is absolutely key.Now, on to developing contacts:The best way to develop contacts with VCs, in my opinion, is to work at a venture-backed startup, kick butt, get promoted, and network the whole way.If you can't get hired by a venture-backed startup right now, work at a well-regarded large tech company that employs a lot of people like Google or Apple, gain experience, and then go to work at a venture-backed startup, kick butt, get promoted, and network the whole way.And if you can't get hired by a well-regarded large tech company, go get a bachelor's or master's degree at a major research university from which well-regarded large tech companies regularly recruit, then work at a well-regarded large tech company that employs a lot of people like Google or Apple, gain experience, and then go to work at a venture-backed startup, kick butt, get promoted, and network the whole way.I sound like I'm joking, but I'm completely serious -- this is the path taken by many venture-backed entrepreneurs I know.Some alternate techniques that don't take quite as long:If you're still in school, immediately transfer to, or plan on going to graduate school at, a large research university with well-known connections to the venture capital community, like Stanford or MIT.Graduate students at Stanford are directly responsible for such companies as Sun, Cisco, Yahoo, and Google, so needless to say, Silicon Valley VCs are continually on the prowl on the Stanford engineering campus for the next Jerry Yang or Larry Page.(In contrast, the University of Illinois, where I went to school, is mostly prowled by mutant cold-weather cows.)Alternately, jump all over Y Combinator. This program, created by entrepreneur Paul Graham and his partners, funds early-stage startups in an organized program in Silicon Valley and Boston and then makes sure the good ones get in front of venture capitalists for follow-on funding. It's a great idea and a huge opportunity for the people who participate in it.Read VC blogs -- read them all, and read them very very carefully. VCs who blog are doing entrepreneurs a huge service both in conveying highly useful information as well as frequently putting themselves out there to be contacted by entrepreneurs in various ways including email, comments, and even uploaded podcasts. Each VC is different in terms of how she wants to engage with people online, but by
all means read as many VC blogs as you can and interact with as many of them as you can in appropriate ways.See the list of VC bloggers on my home page, as well as on the home pages of various of those bloggers.At the very least you will start to get a really good sense of which VCs who blog are interested in which kinds of companies.At best, a VC blogger may encourage her readers to communicate with her in various ways, including soliciting email pitches in certain startup categories of interest to her.Fred Wilson of Union Square Ventures has even gone so far as to encourage entrepreneurs to record and upload audio pitches for new ventures so he can listen to them on his IPod. I don't know if he's still doing that, but it's worth reading his blog and finding out.Along those lines, some VCs are aggressive early adopters of new forms of communication and interaction -- current examples being Facebook and Twitter. Observationally, when a VC is exploring a new communiation medium like Facebook or Twitter, she can be more interested in interacting with various people over that new medium than she might otherwise be. So, when such a new thing comes out -- like, hint hint, Facebook or Twitter -- jump all over it, see which VCs are using it, and interact with them that way -- sensibly, of course.More generally, it's a good idea for entrepreneurs who are looking for funding to blog -- about their startup, about interesting things going on, about their point of view. This puts an entrepreneur in the flow of conversation, which can lead to interaction with VCs through the normal medium of blogging. And, when a VC does decide to take a look at you and your company, she can read your blog to get a sense of who you are and how you think. It's another great opportunity to put forward a fantastic first impression.Finally, if you are a programmer, I highly encourage you, if you have time, to create or contribute to a meaningful open source project. The open source movement is an amazing opportunity for programmers all over the world to not only build useful software that lots of people can use, but also build their own reputations completely apart from whatever day jobs they happen to have. Being able to email a VC and say, "I'm the creator of open source program X which has 50,000 users worldwide, and I want to tell you about my new startup" is a lot more effective than your normal pitch.If you engage in a set of these techniques over time, you should be able to interact with at least a few VCs in ways that they find useful and that might lead to further conversations about funding, or even introductions to other VCs.I'm personally hoping that the next Google comes out of a VC being sent an email pitch after the entrepreneur read that VC's blog. Then every VC on the planet will suddenly start blogging, overnight.If none of
those ideas work for you:Your alternatives in reverse (declining) order of preference for funding are, in my view: angel funding, bootstrapping via consulting contracts or early customers, keeping your day job and working on your startup in your spare time, and credit card debt.Angel funding -- funding from individuals who like to invest small amounts of money in early-stage startups, often before VCs come in -- can be a great way to go since good angels know good VCs and will be eager to introduce you to them so that your company goes on to be successful for the angel as well as for you.This of course begs the question of how to raise angel money, which is another topic altogether!I am not encouraging the other three alternatives -- bootstrapping, working on it part time, or credit card debt. Each has serious problems. But, it is easy to name highly successful entrepreneurs who have followed each of those paths, so they are worth noting.Closing link:Finally, be sure to read this page on Sequoia Capital's web site.Sequoia is one of the very best venture firms in the world, and has funded many companies that you have heard of including Oracle, Apple, Yahoo, and Google.On that page, Sequoia does entrepreneurs everywhere a huge service by first listing the criteria that they look for in a startup, then the recommended structure for your pitch presentation, and then finally actually asks for pitches "over the transom".I have not done a thorough review of other VC web sites to see who else is being this open, but for Sequoia to be offering this to the world at large is a huge opportunity for the right startup. Don't let it pass by.[Editorial note: This will be the last VC-related post in this series for a while. From now on I plan to focus much more on how to make a startup successful.]The Pmarca Guide to Startups, part 4: The only thing that mattersThis post is all about the only thing that matters for a new startup.But first, some theory:If you look at a broad cross-section of startups -- say, 30 or 40 or more; enough to screen out the pure flukes and look for patterns -- two obvious facts will jump out at you.First obvious fact: there is an incredibly wide divergence of success -- some of those startups are insanely successful, some highly successful, many somewhat successful, and quite a few of course outright fail.Second obvious fact: there is an incredibly wide divergence of caliber and quality for the three core elements of each startup -- team, product, and market.At any given startup, the team will range from outstanding to remarkably flawed; the product will range from a masterpiece of engineering to barely functional; and the market will range from booming to comatose.And so you start to wonder -- what correlates the most to success -- team, product, or market? Or, more bluntly, what causes success? And, for those of us who are students of startup failure -- what's most dangerous: a bad team, a weak product,
or a poor market?Let's start by defining terms.The caliber of a startup team can be defined as the suitability of the CEO, senior staff, engineers, and other key staff relative to the opportunity in front of them.You look at a startup and ask, will this team be able to optimally execute against their opportunity? I focus on effectiveness as opposed to experience, since the history of the tech industry is full of highly successful startups that were staffed primarily by people who had never "done it before".The quality of a startup's product can be defined as how impressive the product is to one customer or user who actually uses it: How easy is the product to use? How feature rich is it? How fast is it? How extensible is it? How polished is it? How many (or rather, how few) bugs does it have?The size of a startup's market is the the number, and growth rate, of those customers or users for that product.(Let's assume for this discussion that you can make money at scale -- that the cost of acquiring a customer isn't higher than the revenue that customer will generate.)Some people have been objecting to my classification as follows: "How great can a product be if nobody wants it?" In other words, isn't the quality of a product defined by how appealing it is to lots of customers? No. Product quality and market size are completely different.Here's the classic scenario: the world's best software application for an operating system nobody runs. Just ask any software developer targeting the market for BeOS, Amiga, OS/2, or NeXT applications what the difference is between great product and big market.So:If you ask entrepreneurs or VCs which of team, product, or market is most important, many will say team. This is the obvious answer, in part because in the beginning of a startup, you know a lot more about the team than you do the product, which hasn't been built yet, or the market, which hasn't been explored yet.Plus, we've all been raised on slogans like "people are our most important asset" -- at least in the US, pro-people sentiments permeate our culture, ranging from high school self-esteem programs to the Declaration of Independence's inalienable rights to life, liberty, and the pursuit of happiness -- so the answer that team is the most important feels right.And who wants to take the position that people don't matter?On the other hand, if you ask engineers, many will say product. This is a product business, startups invent products, customers buy and use the products. Apple and Google are the best companies in the industry today because they build the best products. Without the product there is no company. Just try having a great team and no product, or a great market and no product. What's wrong with you? Now let me get back to work on the product.Personally, I'll take the third position -- I'll assert that market is the most important factor in a startup's success or failure.Why?In a great market -- a market with lots of
real potential customers -- the market pulls product out of the startup.The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along.The product doesn't need to be great; it just has to basically work. And, the market doesn't care how good the team is, as long as the team can produce that viable product.In short, customers are knocking down your door to get the product; the main goal is to actually answer the phone and respond to all the emails from people who want to buy.And when you have a great market, the team is remarkably easy to upgrade on the fly.This is the story of search keyword advertising, and Internet auctions, and TCP/IP routers.Conversely, in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn't matter -- you're going to fail.You'll break your pick for years trying to find customers who don't exist for your marvelous product, and your wonderful team will eventually get demoralized and quit, and your startup will die.This is the story of videoconferencing, and workflow software, and micropayments.In honor of Andy Rachleff, formerly of Benchmark Capital, who crystallized this formulation for me, let me present Rachleff's Law of Startup Success:The #1 company-killer is lack of market.Andy puts it this way:When a great team meets a lousy market, market wins.When a lousy team meets a great market, market wins.When a great team meets a great market, something special happens.You can obviously screw up a great market -- and that has been done, and not infrequently -- but assuming the team is baseline competent and the product is fundamentally acceptable, a great market will tend to equal success and a poor market will tend to equal failure. Market matters most.And neither a stellar team nor a fantastic product will redeem a bad market.OK, so what?Well, first question: Since team is the thing you have the most control over at the start, and everyone wants to have a great team, what does a great team actually get you?Hopefully a great team gets you at least an OK product, and ideally a great product.However, I can name you a bunch of examples of great teams that totally screwed up their products. Great products are really, really hard to build.Hopefully a great team also gets you a great market -- but I can also name you lots of examples of great teams that executed brilliantly against terrible markets and failed. Markets that don't exist don't care how smart you are.In my experience, the most frequent case of great team paired with bad product and/or terrible market is the second- or third-time entrepreneur whose first company was a huge success. People get cocky, and slip up. There is one high-profile, highly successful software entrepreneur right now who is burning through something like $80 million in venture funding in his latest startup and has practically nothing to show for it except for some great press clippings and a couple of beta customers -- because there
is virtually no market for what he is building.Conversely, I can name you any number of weak teams whose startups were highly successful due to explosively large markets for what they were doing.Finally, to quote Tim Shephard: "A great team is a team that will always beat a mediocre team, given the same market and product."Second question: Can't great products sometimes create huge new markets?Absolutely.This is a best case scenario, though.VMWare is the most recent company to have done it -- VMWare's product was so profoundly transformative out of the gate that it catalyzed a whole new movement toward operating system virtualization, which turns out to be a monster market.And of course, in this scenario, it also doesn't really matter how good your team is, as long as the team is good enough to develop the product to the baseline level of quality the market requires and get it fundamentally to market.Understand I'm not saying that you should shoot low in terms of quality of team, or that VMWare's team was not incredibly strong -- it was, and is. I'm saying, bring a product as transformative as VMWare's to market and you're going to succeed, full stop.Short of that, I wouldn't count on your product creating a new market from scratch.Third question: as a startup founder, what should I do about all this?Let's introduce Rachleff's Corollary of Startup Success:The only thing that matters is getting to product/market fit.Product/market fit means being in a good market with a product that can satisfy that market.You can always feel when product/market fit isn't happening. The customers aren't quite getting value out of the product, word of mouth isn't spreading, usage isn't growing that fast, press reviews are kind of "blah", the sales cycle takes too long, and lots of deals never close.And you can always feel product/market fit when it's happening. The customers are buying the product just as fast as you can make it -- or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can. Reporters are calling because they've heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck's.Lots of startups fail before product/market fit ever happens.My contention, in fact, is that they fail because they never get to product/market fit.Carried a step further, I believe that the life of any startup can be divided into two parts: before product/market fit (call this "BPMF") and after product/market fit ("APMF").When you are BPMF, focus obsessively on getting to product/market fit.Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don't want to, telling customers yes when you don't want to, raising that fourth round of highly dilutive venture capital