Nicholas Brusson, co-founder of BlaBlaCar:
First, do as much as you can to gather evidence that your concept has potential. Even if you are not able to offer the full vision of your product, because you have limited resources, whittle the idea down to its bare bones so you can test it in the market. Get your first customers as soon as possible, find out how much they need what you offer them. This will be proof for investors. It will validate what’s called market need.
Second, and especially if this is your first business, try to get as far into this process as you can without raising too much money. Think “capital efficiency” rather than “raising capital”. The more you have been able to prove your concept the higher your chances of raising money from the right people.
Of course, you will probably need capital at some point down the line, so, build relationship with angels and VCs early on. Discussions are always easier when you are not (yet) negotiating.
Great advice – validate market need, bootstrap, and cultivate relationship with VCs and angels early.
Read the full interview here.
We recommend that entrepreneurs keep the funding amounts small in the early rounds when the valuations are lower and then scale up the amounts in the later rounds when it is a lot more clear how money can create value and when the valuations will be higher. This model has worked out pretty well. David Karp raised $600k, then $4mm, then 5mm, then $25mm, then $80mm (or something like that). And at the time of the sale to Yahoo!, he owned a very nice stake in the business even though he had raised well north of $100mm. He did that by keeping his rounds small in the early days and only scaling them when he had to and the valuations offered were much higher.
The point of all this is, raising a boatload of money too early at an artificially high valuation puts the entrepreneur under a lot of pressure to up the valuation even higher to raise the next round. Doing small rounds at smaller valuations is not a bad thing, especially since raising less money forces entrepreneurs to become more disciplined about how they spend the money.
‘The industry is dying, except for the top 2%’
The industry isn’t dying. It is changing. And reinventing itself. And some firms will go under. And others will emerge. That’s normal. It’s a market, after all.
‘The best VCs don’t try to help entrepreneurs’
Great VCs create the fabric of their success by backing the best entrepreneurs they have access to and then helping them to lean on the scales.
‘VCs Spend Too Much Time Deciding’
Some of the most bizarre sounding deals end up being huge winners. Some of the most obvious companies and talented entrepreneurs end up not working or burning through too much capital.
VCs are wise to go slowly
‘VCs shouldn’t call their entrepreneurs once they invest’
So the VC’s job is to challenge. Cajole. Debate. Offer contrasting views. Play Devil’s Advocate.
And then step back.
‘VCs often don’t use the products of the companies in which they invest’
It’s hard for me to imagine investing in companies in which you don’t use and understand the products and markets.
‘VCs should never be late’
In a perfect world everybody would be on time. In reality, that is seldom the case.
‘You suck if you don’t have 2+ $1 billion exits’
And as John Doerr has noted, “your lemons ripen early” so I like to say that if I had a ton of exits it would be because I haven’t done my job as well as I would have liked.
The only thing that matters is getting to product/market fit.
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 — whatever is required.
When you get right down to it, you can ignore almost everything else.
Thanks Chintaka for sharing this.
Ev Williams on startup advice
When you’re reading stories from and about people who do work you admire, keep in mind—while there is wisdom to be gleaned, for sure—the value may be more in seeing a model for dedication, creativity, and hard work than applying any of their techniques.
Silicon Valley Goes Hollywood: Top Coders Can Now Get Agents – Bloomberg Businessweek
Sign of how desperate tech companies are to find great coders?