BC STARTUPS
Saved by @Jacobtldr

Saturday thoughts on funding: Where it helps. Where it doesn't. And how it affects team, success, and PM fit.

This is just my $0.02 after looking reviewing 30k+ early stage startups personally and having led 350+ investments across 2 VC firms & as an angel.

Let's begin! >>

 1) Money is great to have in building a startup (for the least dilution and pain possible) That's true and always will be true. 😆

But just like how money can't buy you happiness, it also can't buy you PM fit.
2) PM fit is the holy grail for software startups. (we're not talking biotech - if you have a cure to cancer, I guarantee you everyone wants it).

But for software startups, it's unclear if ppl want your product at your price pt.
3) If you don't find PM fit, in this day and age, you will be able to get some sales. Maybe even say $1m in sales (or more!) per year, and you can still make a living.

But having sales does not mean that you have a repeatable customer acquisition process that can be sustainable
4) As an aside, that is why we invest at pre-seed & don't care about startup traction, because I don't believe traction at the earliest stages suggest PM fit. Traction only shows that a founder can execute (& that's impt too) but there are other ways to assess execution earlier.
5) So going back to the crux of software startups.

Frankly speaking, finding PM fit is a LOT of luck. This explains why a lot of serial entrepreneurs who were successful on 1 venture have a hard time repeating that.

It's not a lack of capabilities.
6) That being said, experience from seeing a lot and doing a lot in startups helps you take a better guess at where there may be opportunities to find PM fit. And, serial founders can often execute more quickly on certain things they've done before.
7) But at the end of the day, there's still a lot of LUCK.

This is why SV VCs will often back "failed founders" again, because that failure isn't (always) an indicator of the founder -- there's also that big LUCK component of finding (or not finding) PM fit.
8) So then the q is how do you increase your luck?

I mentioned 1 way -- experience in seeing and doing a lot. (and learning)

Another way: focusing on only things that matter (mostly derisking sales) & ignoring all else to utilize time and resources efficiently and quickly
9) This speed and focus should not be taken likely. Every time you say no to something, you get time back A) by not spending time + mental capacity time on what you said no to and B) by also using that time to pour more focus into advancing PM fit experiments.
10) E.g. If I say "no" to doing a talk. 1 hr of talk time + 30 min of prep call / slides time + mental capacity time = ~10 cust calls to gather insights into their day-in-a-life to work towards PM fit.

But doing just 1 talk feels like nothing but it adds up.
11) So relentless focus and time is impt that most entrepreneurs disregard. Focus and limited are also things that ALL entrepreneurs have limited supply of. We all get 24 hours in a day. So making the most of this is impt.

Now where does money come into this?
12) The obvious one - everyone has a livelihood that requires money. Everyone has a diff cost on this.

And that affects runway. Runway affects # of PM fit experiments.
13) I have seen well-networked teams (both in my own portfolio & friends' cos) clearly not have PM fit after burning through lots of $$ and still be able to raise a LOT more $$ to keep trying.

Then, by extension of their runway, they find strong PM fit and the rest is history.
14) I would argue in both (near) unicorn cases that I'm thinking about, both teams are exceptionally strong. And these particular cos are not examples of VCs throwing $$ down the toilet.

However, I'm very aware that MOST founders don't get 2nd or 3rd chances like this.
15) This also happens in cases where the founders are well-networked AND also not strong and they are able to raise large amounts of money and end up fizzling out because they never get to PM fit and it's a disaster.
16) Money doesn't guarantee PM fit by any means. It does give ppl more shots on goal.

Should ppl get more shots on goal? That's a philosophical q above my paygrade. But the way we operate @HustleFundVC is that we just assume that each of our cos will only get 1 shot on goal.
17) As another aside, what ppl also don't talk about is how much you get diluted down as an early inv even if a co finds PM fit after raising so much more $$.

3 addl rounds -> your ROI is cut in half & that may not even return the fund even if the co "wins".
18) Raising $$ can help in other ways -- recruiting. Many would-be employees like to see some semblance of security & the big rounds help w/ that.

The flip side is if you don't have PM fit, having more ppl on the team makes getting to PM fit HARDER not easier in many cases.
19) So the tl;dr is

a) Money is great to extend your PM fit experiment runway. But only if you use it efficiently and stay lean until you find it.

b) Often ppl who raise big $$ w/ out PM fit end up blowing it / spending it unwisely & hiring too many ppl and never find it.
20) (cont)

c) PM fit is hard to find w/ or without money. This is why the IDEA matters so much. and market pull >> founders.

Good founders + great idea >> Great founders + good idea

Combined with money goes far.

More from Elizabeth Yin

Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Last week, I wrote a thread about generating momentum for startups.

Today's thread is on how emerging fund managers can generate momentum for their fund.

Whatever you do, momentum is so impt to get ppl onboard -- for hiring, for sales, for fundraising.

Read on >>

1) First, why does momentum matter?

Think about it from the "buyer's perspective" -- it is almost ALWAYS better to wait and get more information if you can get the same deal. Right?

More info on a potential investment. More info on a new product. Etc.

2) There are few situations where it's impt to be a first mover.

If you're a product buyer, it could be you have a dire situation at your company that alternatives can't handle.

But if you have a decent alternative (alternative product or alt investment), it's better to wait.

3) That means it's YOUR JOB to create momentum. Whether for fundraising, sales, or hiring.

So with that in mind, how do you generate momentum for fund fundraising?

4) In a prior tweet about generating momentum for startup fundraising, essentially I said to limit your supply (the amnt you are raising) in tranches AND to increase demand by packing in mtgs.

Unfort this doesn't quite work well for funds.
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Today I want to talk about the legal aspects of startups. How to set up? How to think about legal costs?

Fun!

Read on >>

1) Lawyers are expensive -- oof! A startup lawyer can cost you $300-$1k per HOUR! An associate paralegal may be slightly cheaper. But still pricey.

What do you need from a lawyer?

-company setup costs
-doc creation and review for financing rounds
-exit negotiation

2) For the purpose of this thread, we're just going to focus on setup costs, because this is where I see the most mistakes.

Once you get going, you may quickly realize you need a better lawyer - hah - and that generally helps w/ solving for financing rounds and exits

3) If you want to potentially raise money from VCs, you'll want to set up as a Delaware C Corp. If you don't ever want to raise from VCs, an LLC is fine.

Lots of ppl start out as an LLC because you can get tax benefits if you are not profitable.

4) But to me, if you know you want to raise VC money, it feels a bit penny wise / pound foolish, because you will need to spend $$ to convert your LLC to a Delaware C corp.
STARTUPS
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Today's thread is a continuation on *how* you generate momentum in fundraising.

Here's a rough conversation I had with a founder (called 'C') over the course of days a few months back.

Read on >>

1) C: I'm having trouble raising. VC A and VC B are taking so long to get back to me.

Me: Oh, when did you meet w/ them?

C: 3 weeks ago.

2) Me: Oh, are you mtg w/ anyone else?

C: No, I got busy working. I had all these sales calls to make.

Me: That's the problem - there isn't a reason for them to move quickly. There's no investor at the table.

3) C: But I have all these sales calls to make!

Me: I really don't have a great answer for you here. This is probably the hardest part about fundraising - juggling your actual job w/ your fundraising job, which is full-time too.

4) Me: You need to hand off your sales calls to your co-founder. And then you can do mtgs back to back.

C: Ok...

[some time passes]

C: Ok - I'm ready.

Me: How much do you want to raise and what are you using the money for?
ALL , FUNDRAISING
Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Some wed night thoughts on investor “value add”:

1) At the end of the day, money is a commodity. That mere fact should make every vc shudder.

It is amazing how many ppl (incl myself) clamor to get into a commodity business!

2) As such, to differentiate, different investors provide other things beyond money. Sometimes it’s community. Sometimes hiring help. Sometimes expertise or sector-focused networks. Etc

3) And some VCs are truly value add! For example, if I had an edtech co, I would hands down raise from @jwdanner - he has been there as an entrepreneur, built schools, and invested in so many hit edtech companies.

4) But at the end of the day, regardless of who invested in you, it’s the founders + team who are doing all the work.

5) when I think about what I’ve done for my own founders, it’s ranged from doing intros (mostly to other investors) to cust acq advice to feedback etc

But the reality is - all of my founders would’ve figured out how to get that intro or that piece of advice w out me
STARTUPS , INVESTORS
Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Some gems from @MacConwell of @RarebreedVC in Clubhouse right now:

1) VCs are looking for startups that can get to $100m / yr in rev by yr 7-10.

VCs need this kind of return in order to produce great funds.

2) And so many companies won't get to this level - and that's not a bad thing - but then it means you should be thinking about trying to get going w company revenue since you can't count on VC backing.

3) someone asked about age and fundraising & do accelerators help?

Age doesn't matter. But just make sure no one is taking advantage of you. And as such, accelerators can help sometimes w that guidance.

4) Someone got a rejection because he had a teddy bear in his room (side note: what investor says that?!?)

Mac says he's been there and has heard that saltiness. But you're going to get a lot of nos. And you gain more leverage w more progress and traction. So just keeping going.
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Sergio Mattei
Sergio Mattei
@matteing
Makers, we need to talk.

We have a culture problem, and it's starting to bite back.

Our launch-and-dump culture on @ProductHunt is harmful, and it's hurting our goals as a community.

👇

Let's get started with a bit of backstory...

I was told today about an event that shed light on a recent change to the PH ranking algorithm

A maker on Ramadan Makers launched a product, reached a decent amount of upvotes. They never made it to the homepage.

Quite frankly, this is fine. We really don't expect ALL maker products to reach the homepage, considering PH should probably have a quality bar.

However, looking at the homepage just showed a different picture: products from bigger companies with only 12 upvotes, featured.

This is a problem: it is probably now a little harder for indie or products from creators to get featured on the homepage, which sadly is a huge problem for most rising and new makers on the scene right now.

But there's a bigger problem, and it's a culture one.

Makers nowadays have a very harmful culture when it comes to launching on Product Hunt.

This is the usual product lifecycle nowadays:

1. Launch on PH, Twitter
2. Gain attention and "internet points"

This causes issues.
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Corey Haines \U0001f4a1
Corey Haines 💡...
@coreyhainesco
There are some amazing founders and indie hackers that have made 🤯-worthy progress this last year.

The stuff you can do in a year is seriously astounding 👇

👉 @TransistorFM reaching $22k MRR in one year: https://t.co/BuKmXEeEtH

I was one of their first customers and the progress @mijustin and @jonbuda have made working mostly part-time has been crazy.

Now both are full-time. Follow them on @buildyoursaas

👉 @talk2oneup reaching $10k MRR in one year: https://t.co/SOoGkKA19r

@daviswbaer joined as a co-founder and through many different marketing tactics, pricing changes, and product updates, they've managed to carve out a niche market in a really competitive industry.

👉 @hostifi_net $9k MRR in one year: https://t.co/TknroGZWoK

After getting fired from his full-time job, @_rchase_ embarked on a year focused on building products to replace his salary in a year.

The dude seriously SHIPS and even took investment from @earnestcapital


👉 @ClosetTools $11k MRR WHILE WORKING FULL-TIME AND WITH A FAMILY: https://t.co/pKQ7pFvpZY

With a strong product, continuous improvement, and SEO, @unindie has really been inspirational.

There are no excuses.
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Naval
Naval
@naval
How to Get Rich (without getting lucky):

Seek wealth, not money or status. Wealth is having assets that earn while you sleep. Money is how we transfer time and wealth. Status is your place in the social hierarchy.

Understand that ethical wealth creation is possible. If you secretly despise wealth, it will elude you.

Ignore people playing status games. They gain status by attacking people playing wealth creation games.

You’re not going to get rich renting out your time. You must own equity - a piece of a business - to gain your financial freedom.
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Shahed Khan
Shahed Khan
@_shahedk
8 things startups can do early on to optimize for focus & productivity:

1. Synchronous meetings only for p0 and p1 items

All meetings should be 25 minutes by default with the ability to extend by 15 minutes if necessary.

Each meeting should have a clear agenda that outlines its context, asks, action items, etc.

Meetings should be brief & impactful

2. Asynchronous for everything else

- Stand ups
- Project demos / updates
- Design / Eng handoffs
- Documentation walkthrough

A simple flowchart for meetings:


3. Strive for 90% focused work / 10% meeting & sync time

- No meetings on Tues & Thurs
- Encourage turning off Slack & distracting notifications
- Track your time to better understand your distractions
- Buy your team a copy of Deep Work & Getting Things Done

4. No recurring meetings

Recurring meetings are a productivity killer. Try to avoid them when possible.

Instead, assess whether a follow-up meeting is needed at the end of each meeting.
STARTUPS
Paul Graham
Paul Graham
@paulg
A potential danger to America I didn't consider till now. The Bay Area seems to be less attractive to founders. What if this makes America as a country less attractive to immigrant founders? What if instead of going to another US city, they don't go to the US at all?

I know founders don't feel the same need to move to the US that they used to. The question is how much of this is due to the change in their opinion of the Bay Area specifically, rather than e.g. greater optimism about remote work, or decreased interest in the US overall.
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