The answer is yes; What was the question?

As a start up you need customers. You never know where the next one will come from or what new business segment they will represent. At one of my start up companies we had a brash CTO who was constantly on the road teaming with either marketing or sales to make us known, to demonstrate our product concept, and to reel in the next customer candidates. I knew from attending several that these customer meeting trips were quite grueling and the customers always had ideas for how our product concept could better satisfy their specific needs. Our CTO had a philosophy that regardless of what they ask, it is already built into the product. If their question is, “Does the product have a certain feature?”, the answer was always yes. If they want that feature, it is there. This may be dishonest on the surface, but his thinking was that by the time the business agreement was likely to be in completed, the engineering team will have enough time to implement the feature.

Needless to say, as the VP of Engineering, this practice used to drive me nuts. We had fast paced two or three week product update cycles. These cycles were overcommitted and understaffed. There was a feature list a mile long already in place. I felt that the work kept backing up and having a couple new features added following each customer visit did not help. I came from a development environment where we wrote a requirements document, a functional spec, a design document, a Gantt charted development plan, a test plan document and then we performed rigorous testing cycles to drive the defect count down to an acceptable threshold. In other words, it was a waterfall world. I learned that developing for the web can’t work that way. For one thing, 18 month release cycles are unacceptable. In many cases even an 18 day release cycle is considered too long.

I learned how to pare back on the planning and preparation and adjust the plan as we went. In effect, to create an agile environment, before the term agile was in general usage. I insisted that the developers test their features before they check them in and then provide their test tools and results to the QA team as part of the code check in process. It became possible to hand pick features from anywhere in the pipeline and move them up in delivery timeframe depending on their stated dependencies, something that ultimately allowed us to adapt the features coming in “over the transom” from sales and CTO customer meetings.

These were early days of learning how to be flexible and timely. Those are two traits you cannot live without in a start up and they are generally useful in life as well. If the customer wants it, yes it is there. Then go off and make it so!

The search for VC funding requires more heart than than brain

In the past decade I have visited dozens of venture capital firms in California and elsewhere in search of funding with varying degrees of success. I have represented both early stage start ups and late round “survivor” private companies. I have learned that different VC firms have different cultures and personalities, for certain. I have also learned that the outcome of these meetings hinges as much if not more on the people, their attitude and the confidence they convey, than it does on the business plan. The rule in the VC world is to believe in the technology, but invest in the people. The VC goal is to identify individuals who are bright, agile and can adapt their budding company’s strategy in anticipation of barriers to success and as an immediate reaction to the unexpected. They hunt for people who are sharp witted, can think on their feet and can articulate a vision as effectively as they can a technical insight. They don’t have to be the most creative or the best engineers, but they need to be able to find that type of talent. They need to have drive and enthusiasm and good common sense. In these meetings much of the questioning and dialog may superficially address some obscure technical or business model issue, but, make no mistake, the team’s answer must come from the heart as much as from the brain. Unbridled confidence goes a very long way in this world.

Just like technologists, individual venture capitalists tend to specialize in a particular business or technical domain. Many of the meetings I have attended are led by the domain expert at the VC firm whose interest area matches your company and who becomes the internal advocate for your investment. This is often the individual who discovered your company and is now, perhaps for the first time, drawing the attention of the full VC firm staff to your company. Often that person has as much at stake in the success of the meeting as your company does. The fact that the attention of several firm members and partners is focused on your company reflects as much on the judgment of your VC advocate as it does on yourself. Often that individual drives the meeting by establishing a rapport with the lead company presenter and assessing the level of personal commitment and drive based on a common understanding of the business direction, the technology or the model. It is important to remember that this individual is likely to be your board member once the funding is completed. You want to have their trust and their full support. Anything less will be a festering problem to your company in the quarters ahead. You need to be thinking about their appropriateness to you as well, although this often gets lost in the excitement of the moment.

I have observed that the VCs I have met engage best with earlier stage companies that have not discovered all their barriers to success or tested the business feasibility of many of their models. These are the ones that don’t know that it “can’t be done”, they simply have a drive and a passion to do it, and often they will find a way to get it done despite all the naysayers. This passion is a difficult thing to quantify, but it is an obvious personality trait becoming apparent when addressing the members of the VC firm. Most VCs connect best with the glimmer in the eye and the contagious enthusiasm in the voice of a budding entrepreneur. Then next thing they look for is the availability of either a prototype or a working product. Having captured eyeballs and an established revenue stream are very strong pluses. Often the discussion will turn to an investigation of uniqueness of concept or time to market lead over any known competition.

What to expect and how to prepare:

1. Communicate concisely
Because of the inevitable emphasis on passion and drive, it is extremely important to be able to summarize your vision concisely and your company’s direction should be something that rolls off your tongue with no effort. The shorter and more concise the better. This is sometimes referred to as your elevator pitch. Think of your chance to get funding as limited to what you can convey to the person standing next to you in an elevator in the time you have from when you step in until when you exit, maybe five or ten floors later. You must be able to capture their attention and convey the message extremely efficiently. This is something you will want to practice until it is effortless. You will probably have an hour or more in your VC meetings, but you need to lay the groundwork and get the message out effectively up front.

2. Provide backup materials
Your detailed slides or reports carry the details you need to defend your points later in the meeting. Don’t expect to be able to walk through your presentation in its intended order. You may make your first point, but within moments a question comes and the answer requires you to jump around in your pitch or story. Don’t let this fluster you. Expect it. Politely answer the question or suggest that it be tabled for later. You can do this. Losing control of the story early in a meeting can really throw you off and cost you an important opportunity. In short, be ready to swing at the fast balls, but expect to receive your share of curve balls.

3. Defend your uniqueness
Expect a question about your ability to beat any competition and how you are prepared to keep moving forward. On the web or in your marketplace anyone can copy you and sometimes your sole differentiator might be your confidence and ability to get the product out the door faster than anyone else, giving your team perhaps a six month lead over the competition. A six month lead is an eternity on the web. Think about evolving your concept iteratively and continuously following your first product. Think about how that first product will help formulate your second product concept. Your company must deliver on your first product and then continue scrambling to maintain that lead. Any company can be lapped or leapfrogged. Many times the followers are the ones that succeed simply because they have more staying power, more consistency of direction, more long term focus, and they are less bound by the need to invent the concept and more driven by the lure of a competitive race.

4. Know your needs
Usually an early stage company finds itself presenting to VCs before much of the team is in place, with only the core team and founders. Know the skillsets of the people you need. Be prepared to explain how the funding will enable you to get them. If you have candidates you intend to pursue, be prepared to name them and to accurately describe their background and appropriateness for the project. Know why their skills are right for the job, or if they are just known to be all around super stars, explain that. You also will want to have a good handle on what tangible assets you need to acquire and have a sense of the costs involved. If you need space, have an idea how much, where you would like it to be and how long you expect it to suffice. If you need equipment, the same thought processes apply.

5. Ask for suggestions and advice
Don’t overlook this last step. Often there will be a tremendous experienced resource pool in the room. Pump them for information on talent, companies doing anything similar, larger companies with an interest in this type of technology, etc. Asking for advice is an important step. It shows you are constantly thinking, are open to suggestions, and that you respect and appreciate their opinions. You are not obligated to follow the advice. Remember, at this point advice is free and free advice is sometimes only worth the price you paid for it.

The Great Idea…

Ideas are a dime dozen. Great Ideas even. But progress toward making that idea a reality- moving it toward actually solving a customer’s real-world problem- rarely happens.

More often than not you forget that Great Idea until someone else comes up with it, stops talking about it ,and does something with it. You say to yourself: “I had that exact same idea!” I know-I’ve done it a lot of times.

Unfortunately it’s probably too late to do something about it by then. Someone else has first-mover advantage, paying customers, a company foundation to support the on-going evolution and expansion of the Great Idea, and you’re left doing what you were doing before: not changing the world.

Brainstorming with your buddies, talking with your classmates, thinking deeply; all great ways to come up with a Great Idea. But you can’t stop there. You’ve got to take the next step and actually do something.

° see if there’s competition
° see how your idea stacks up against it
° talk to potential customers- e.g. “If my product does this, would you use it? Buy it?”
° start prototyping or getting someone else to prototype it for you
° get some advice about how to move it forward from there

But do something. Recognize that progress doesn’t happen if you stop with the first step (coming up with the idea) rather its an “idea-evaluation-execution” process. By quickly taking Great Ideas to the prototype stage after actively engaging in customer inquiry and assessment you can learn a TON about whether your idea will fly in the marketplace- or even if there is a marketplace.

Your ideas don’t have to be unique. Facebook was far from unique. So was Google. But they both did something better that the competition and won more customers. The key phrase in the previous sentence is: they both did something.

So do something. About your idea. Or it just doesn’t matter.


4 Steps the Epiphany by Steve Blank