Go East Young Man (or Woman)

Here’s a fun post by Henry Ward, founder and CEO of our portfolio company eShares, about raising money last year.

From Henry’s post:

We were 0 for 21 with Silicon Valley VCs. I never got close. Most of the big firms wouldn’t even meet. A few had an associate do a Skype call even though we were 20 minutes away.

After 21 meetings in SV, I took a Hail Mary trip to the east coast and met with 3 funds. All 3 invested.

Thank god Henry came east. We are hugely excited about the company he’s building.

Henry also makes some great observations about the fundraising process. I like this one a lot:

1. Fundraising is a filtering exercise, not a popularity contest.

I could tell within 5 minutes of meeting an investor whether they would invest. Investors who invested were excited about eShares before we met. They either saw the vision and liked it. Or they didn’t.

Most didn’t but met me anyway. They spent the entire meeting hoping I would convince them eShares was a good idea. I never did.

Excited investors (and the ones who invested) were different. They didn’t let me pitch. Instead, they asked questions to assess risk. They tried to find reasons not to invest. That is the pitch-paradox. The investors who won’tinvest will ask you why they should . The investors who will invest ask you why they shouldn’t. Your job is to make sure you don’t have reasons that they shouldn’t.

Fundraising is simple: find investors that get excited about your company. It is a filtering exercise. Too many founders believe they have the wrong pitch instead of realizing they have the wrong audience. On that note…

You’ve now read half the post here at AVC. To read the rest, go here.

#entrepreneurship#VC & Technology

Comments (Archived):

  1. awaldstein

    #truth”Unless you have business that fits in a spreadsheet, avoid investors who think you should.”

    1. Jess Bachman

      That sounds great, but im not sure what it means, even reading the full post. Who are these series A investors who don’t want spreadsheets?

      1. awaldstein

        Here’s the truth.We all make plans and should. But the plans are less to me about a business model and more about a way to detail out your understanding and thoughts about a sector.You damn well know your sector cold. You should have a plan. But the number invariably are not the model you end up with.

        1. Vasudev Ram

          As JLM (IIRC) said earlier on this blog, no battle plan survives first contact with the enemy. And by analogy, neither do business plans survive first contact with the real world – at least not in their entirety.

  2. JimHirshfield

    Great insight. And… It’s happening in NYC.

  3. Jordan Thaeler

    Think any of this was because of stage/size? West Coast VCs have so much money they’re writing > $20M checks to put their funds to work.

  4. Twain Twain

    Here are the two different investor mazes:(1.) No.(2.) Why not?Make sure you go into the right maze in the first place (clue: it’s the virtuous circle one).

    1. Erin

      Nooo! That why not picture looks like horrifying. Got anything with a little more gratification in it?

      1. Twain Twain

        There’s more gratification in the ??? than initial appearance.The most valuable thing to startups can be feedback from investors and all their “Why will people use this / not use this?”It can help the founding team figure out a lot of things.

  5. Cindy

    Great sharing thank u! As i have always learned in sales, there’s always a buyer for the product./svc. It’s a matter of who and the price 😉

  6. William Mougayar

    “The investors who won’t invest will ask you why they should. The investors who will invest ask you why they shouldn’t.”No truer words were ever said.And it ties back to filtering being the key thing, as Henry points out, and you even wrote a whole blog post on filtering,- Reverse engineering VC investment strategies http://avc.com/2015/04/prod….Trick is to find those investors where there is a Meeting of the minds, prior to the Meeting of the bodies.The good VCs know what they want to invest in, and when they see you, they know it, because they were dreaming about you.

    1. Twain Twain

      “They were dreaming about you.”Perceptual predisposition = tipping point.

      1. Chimpwithcans

        alternatively: Psychic VC = freaky

    2. Richard

      I used to try explaining that $20 stock certificates were an entry point into something bigger. It never worked. In hindsight I should have just said, “We’re really too early to think about those things yet and we are probably too early for you. But I’d be happy to talk again when we’re further along.”

  7. Nidhi Mevada

    Same for co-founders and employees….Entrepreneurship is like a dating, we date ideas, co-founders, hackers, investors…etcIf vision or idea excite them, there will be organic interactions!

  8. kirklove

    Was waiting for him to say they spent 29 minutes of a 30 minute meeting talking about themselves.

    1. LIAD

      “let me give you a little background on me”

      1. karen_e


      2. William Mougayar

        “I googled you prior to this meeting, and you are amazing. Can we talk about my product?”

        1. awaldstein

          7 times out of ten for every meeting from coffee shop to board room i have with accounts starts with a question about wine.what’s the connection between bitcoin and wine? people and lucky me, an expert who can inspire peoples thirst for information they can use;)(btw i will not get your response as disqus has simply stopped working for me from an alert perspective. so frustrating.)

          1. William Mougayar

            I did notice it was wobbly yesterday, and the Inbox/notifications disappeared, but it’s back now.

    2. pointsnfigures

      Uff Da

    3. LE

      Otoh if someone doesn’t give a shit about you they probably wouldn’t take the time or trouble to even try to impress you or care to talk about themselves. [1][1] In high school is it better to be totally ignored and invisible or made fun of and talked about?

      1. Twain Twain

        Made fun of and talked about. Happened to me as a kid and happens to me now as an adult. At Stanford Venture Lab in 2012 I pushed through a mad idea for space-mining robots which everyone on my team didn’t think we could do.Results?I left high school with highest exam grades in my year. A year later, that got me work experience with GlaxoSmithkline. A year after that, my manager at a big chemco trusted me to run pan-European drinks projects while he was on vacation playing golf in Miami.A few weeks after SVL, this happened:* http://www.space.com/15395-…And last week, TC said it’s a $100 TRILLION market:* http://techcrunch.com/2015/…I’m constantly told I’m “thought-provoking” / “think outside the box” / “an outlier” etc.That’s not what matters. What matters is that I can INVENT & MAKE SYSTEMS HAPPEN.

        1. LE

          From the TC Article:There are some unbelievably valuable rocks flying around in our solar system. The website Asterank uses information about asteroid sizes and composition, along with current market prices to calculate the most valuable known asteroids. Some are estimated to be worth more 100 trillion dollars. It’s a number large enough to turn any potential investor’s head.Media always goes with large numbers even if they question large numbers (like Trump’s self reported net worth).Other than the obvious fact that TC (of al places) wrote that hyperbole [1] wouldn’t an over supply of whatever the mineral is, almost certainly cause an immediate collapse in the actual value?Plus what is time time period for that value? If it’s enough to last “100,000 years” who really cares?[1] Seriously 100 trillion is a ridiculous number, right?

          1. Twain Twain

            Ah well…my solution didn’t involve building spaceships like Musk, Branson and Bezos.It’s VR software.

    4. Vasudev Ram

      “DO YOU KNOW WHO I AM???”

  9. pointsnfigures

    I would push back a little on Henry’s Medium post. I think that a question about “unit economics” is appropriate depending on the business. Of course, as the business learns, pivots and grows, unit economics can most certainly change and often do. He is correct about FinTech companies. They should go to places like Chicago and New York. Often times, their immediate customers are there and the investors there came out of those industries and can grasp what they are doing. They understand the pain points.Yesterday a report was released. http://blog.startupcompass…. NYC jumped to the 2nd best startup community in the world. To me, that’s #1 since no one will unseat Silicon Valley anymore. By the way, Chicago jumped to #7 and 30% of the startups are lead by women. Chicago is #1 in the women category.

    1. William Mougayar

      I saw that report, and it seemed biased towards “exits” as the measure for the ranking.

      1. pointsnfigures

        I saw the headline stats, and received the email today so I can look harder at it. Still, the fact Chicago is very welcoming and supportive of female entrepreneurs has nothing to do with exits. I like being in a community like that. Chicago had some exits last year, but not a boatload of them. There are some great companies being built here but they are early. Yesterday I saw Hunter Walk blog about actual ideas they would like to see built and I have seen a bunch of them here.

        1. William Mougayar

          I’m waiting for the full report so I can dive into it.

          1. pointsnfigures

            “The centerpiece of the 2015 Startup Ecosystem Ranking is ourupdated and revamped Global Ecosystem Index, which ranksthe top 20 startup ecosystems around the world. The Index isproduced by ranking ecosystems along 5 major components:Performance, Funding, Talent, Market Reach, and StartupExperience.The primary basis of each component: • Performance on the funding and exit valuations of startupsheadquartered in an ecosystem • Funding on VC investment in the ecosystem and the time ittakes to raise capital • Talent on the quality of technical talent, its availability andcost • Market reach on the size of the local ecosystem’s GDP andthe ease of reaching customers in international markets • Startup Experience on first-party survey data that is linked tosuccess of startups, such as having veteran startup mentorsor founders with previous startup experience”

      2. Jess Bachman

        Yeah that report is weird. Austin is #2 in “startup experience” .. what does that even mean? And Moscow is #2 for talent? There are lots of attempts to quant this this whole startups thing.. I think a hefty grain of salt is required.

        1. William Mougayar

          yup. i agree.

        2. Vasudev Ram

          >lots of attempts to quant this this whole startups thing..Right. Like “best startup city in Europe”, ditto in this place, in that place, etc. By the tech press. They do it to sell their wares. Known, of course.

        3. JLM

          .It means, Jess, that the ATX is very, very, very cool.I live here and I endorse this statement.What it really means is that hipsters and nerds had a great time at SXSW and 4 of them got laid.That is a crass comment and I apologize.JLMwww.themusingsofthebigredca…

          1. Jess Bachman

            I can confirm, Austin is cool. Or at least it seemed that way whenever I’d get there from College Station.

          2. JLM

            .The College Station bit — voluntarily or a prison sentence?JK — it is also a cool town but not on the scale of the ATX.Aggie?JLMwww.themusingsofthebigredca…

    2. LE

      To me, that’s #1 since no one will unseat Silicon Valley anymore. By the way, Chicago jumped to #7By my “rule of the Ivy League” anyone in the top 8 counts, however the top 3 typically are in a class of their own. Harvard, Yale, Princeton. In this case, by what you are saying, NYC is Yale. We could perhaps expand the top 3 to include Stanford (non Ivy) but it remains to be seen if that will be hot if startups ever become less appealing.[1] Or Wharton (Penn) with business of course.

      1. pointsnfigures

        Or University of Chicago, which rules all! : )

        1. LE

          I am on some mailing list where I get these big postal mailers for courses at Booth. Really large and in your face. “BOOTH” runs down the side of the catalog envelope, in perhaps 120pt type. I just thought “hmm when did it get renamed Booth” and found out that was in 2008 with a 300 million gift from David Booth. Booth only has a graduate program, not an Undergraduate program. To me, entrepreneurship is more Undergrad than Grad.https://en.wikipedia.org/wi

          1. pointsnfigures

            Entrepreneurship has replaced Finance as the #1 concentration at Chicago Booth. The Polsky Center New Venture Challenge is one of the top 10 startup accelerators in the US. Lots of companies, and exits. There is a new Chicago Innovation Exchange (CIE) co-work space on campus where students incubate companies. The organization I started, Hyde Park Angels (HPA), is the only angel org that has an arms length agreement with a top school. Entrepreneurship is there for undergrads, grads, or even old people (Ray Kroc was over 50, The Colonel over 60).

          2. LE

            If someone is taking entrepreneurship courses as an undergrad (which are taught by the grad school?) then what is typically their major in undergrad school at U Chicago? Or are you saying entrepreneurship in the grad school? I see entrepreneurship as something that an undergrad would take (doesn’t have to be a major either, the major could be marketing) rather than having 4 years of undergrad and then another 2 years for an MBA (right after graduating) when you essentially still have no business world experience.Even though my major was entrepreneurship at Wharton (way way back in time) I am not a fan of that as a major.

          3. pointsnfigures

            You can take entrepreneurship classes as both an undergrad, and grad at Chicago. You can only have a concentration in it as a grad student.

          4. Vasudev Ram

            What’s an arms length agreement? Stay away in some sense? or other?

          5. pointsnfigures

            “A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm’s length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other part” http://www.investopedia.com

  10. awaldstein

    Raising capital is sales.And sales has never been about finding customers, only about finding the right one.

    1. LE

      Raising capital perhaps is more like dating. In sales you have to constantly find new customers having 1 or 3 is not enough. So if your sales technique is not working, either you need to change your pitch or you need to change your product or service.In dating, or raising capital, you are just looking for 1 special person. Sure in raising capital it’s more than one, but the point still stands it’s not “1 per day or 10 per week”.In the first business that I tried to start after college, [1] I went door to door for about a week and could tell that I was fighting a losing battle (so I decided it would have to be by mail order, not direct sales like that). Not that people weren’t interested I could just tell getting actual orders would simply take to long.If I was raising capital I would have stuck it out longer no question about it.[1] When I did things in college (photography, car waxing and so on) I had no problem using the same “door to door” strategy and picking up customers.

      1. awaldstein

        dating can be funraising capital is not

        1. Matt Zagaja

          dating is definitely not fun, at least not the beginning part.

          1. pointsnfigures

            all depends on who you date!

          2. awaldstein

            been awhile.

          3. LE

            I’d have to agree with Arnold that dating, when I was single, was fun.

        2. JamesHRH

          The only reason dating is more fun is because it is easier to get first meetings.

        3. Drew Meyers

          both are crazy crazy time consuming

      2. lksugarman

        There are all kinds of sales. Raising capital, dating, enterprise sales, SaaS subscription sales, retails sales. If we’re really honest about it, most everything in life involves some kind of sales process. Raising capital and finding and landing a mate falls into the enterprise sales category. They are relationships for the long haul.And, actually, for that matter, every kind of sale engagement can have a long-lasting impact on your long-range success rate.

    2. Aaron Klein

      +1 million.

  11. Eric Satz

    It’s not just fintech. The crowds are larger and the leaders fewer out West. More investors in the East are comfortable doing their own diligence and drawing their own conclusions about an opportunity.

    1. Vasudev Ram

      >The crowds are larger and the leaders fewer out West. More investors in the East are comfortable doing their own diligence and drawing their own conclusions about an opportunity.Any thoughts on what’s the reason?

      1. Eric Satz

        may be as simple as east coast v west coast mentality. may be more market dynamics, supply v demand.

  12. ZekeV

    eShares is one of those things that appeals to different people for different reasons. Founders like having instant cap tables. Investors and employees like being able to “look at” their stock certs and option awards online. I have started using eShares in my law practice, it makes me look good and also sleep easier at night b/c it reduces some of the risks caused by fat-fingered mistakes. I would like to see more powerful tools for service providers like me, and would gladly pay a subscription for that functionality and enterprise support. Not sure it makes sense within the context of eShares’ revenue plans. I mean, there are a lot of lawyers, but are there enough to make venture returns by charging monthly subs? But the free tools for now are pretty good, so I’m not complaining!

    1. pointsnfigures

      Yup. I recommend that every company I invest in use eShares. Some do, some don’t but it eliminates a lot of headaches on both sides. Wish he would have stopped in Chicago when he did his seed round!

  13. Jan Schultink

    One more quote: “East Coast investors seem more comfortable with FinTech” I think we will see more specialisation among investors.This is important for startups to understand, but also relevant for institutional investors looking for a place to park their money. The red hot unicorn deals go to a select number of high profile VCs, the big PE deals go to huge PE funds. This leaves a space for a more focused investor. I design many institutional investor pitches for VC/PE funds, and more and more of the stories are about this focus.

    1. pointsnfigures

      I have spoken with LP’s that tell me, “We are sending all our money to the Valley”. I think a lot of that is “cover your ass” with their own LPs. The other is herd mentality. The other is just not being informed as to where the puck is going. LPs would be smart to diversify a small percentage into other startup communities since VC is a hits business. There are “hits” being made in other places.

  14. JamesHRH

    Fit happens.

  15. DJL

    Great post! The few meetings I have had fit this profile perfectly. I guess I am heading East after pitching through Texas.There was a move afoot by investors and various groups to make Texas the investing hub between the two Coasts. There are a lot of reasons to try to do this. But for the most part if you are not in energy or medical-tech you are still pushing the ball up a steep hill. I hope I am proven wrong. The good news is that you can strike out in Texas a lot quicker.

  16. Jake Baker

    It’s funny – you can hear the same advice in different formats over and over again, and it’s not until it’s phrased a certain way that it really sticks in. This rings with wisdom. Filtering and the pitch-paradox both resonate more clearly in this version of them than I have seen elsewhere. Thank you for sharing, Fred.

  17. LE

    Henry:We were 0 for 21 with Silicon Valley VCs. I never got close. Most of the big firms wouldn’t even meet.Fred:Thank god Henry came east. We are hugely excited about the company he’s building.That would seem to indicate that an East Coast VC should open up an office on the West Coast. To get some of that low hanging fruit that the locals might be passing on. Deals that never make it to the East Coast. I wouldn’t think that getting rejected by 21 VC’s and not deciding to pitch other VC’s would mean that the entrepreneur doesn’t have the resolve to bring the idea to fruition.

    1. Vasudev Ram

      >That would seem to indicate that an East Coast VC should open up an office on the West Coast.Good business thinking 🙂

  18. Matt A. Myers

    They linked to their Series A pitchdeck if anyone missed it – https://esharesinc.app.box…. – and it’s quite lovely.

  19. Winkieboy

    Thanks Fred! This is one of the best posts I had ever read about raising money. Congrats to Henry! One page. Keep it simple. Non-patronizing. Raising money from VCs today as it is.

  20. nberardo

    Henry’s point on unit economics may be fair for eShares, but it certainly doesn’t fit for all businesses (i.e. consumer). Even as seed investors, unit economics in those types of businesses are important and I take it as a warning sign if a CEO doesn’t have good answers to questions around them. If you can’t build a business model with long-term profitable unit economics, it won’t work.

  21. Lucas Dailey

    “You’ve now read half the post here at AVC. To read the rest, go here.”Nice hook fake-feature, Fred. Read estimates/expectation-setting-promise are rightly becoming an essential part of all UX.The post itself was great too of course. Threads it left in my head: “Investor Development”; Tinder for Startups.

  22. sigmaalgebra

    From this post and its data and more, it looks like LP investment and VC project evaluation are medieval, out of the days of boiled tail of rat and eye of bat.”Warm introduction”? What a crock: The VCs don’t know the right people, and a warm introduction from the people the VCs know should be a disqualification — “Why are you running around with such trash?”.In simple terms, the reliability looks about like that of dart throwing, at a pub, at 11 PM, after everyone is on their eighth pint.Why would any serious, informed entrepreneur want to report to a BoD with such people?One wonders how the LPs and VCs make money. Oops, then we rememberhttp://www.avc.com/a_vc/201…with data showing that on average the returns are not good.Would anyone want to ride on an elevator, car, train, ship, airplane designed with such project evaluation methodology?For most things in life, we can get some evaluations and/or reviews that apparently have some significant reliability and validity. So, we can get evaluations and reviews of cars, books, movies, restaurants, winter boots, outboard motors, airline service, submitted research papers, published research papers, projects funded by NSF, NIH, DARPA, new pharmaceuticals, laser printers, color printers, computer motherboards, etc. Research universities can evaluate dissertation research projects before, during, and after the work.In strong contrast, either a Yes or No from a VC looks nothing like a reasonably accurate evaluation of anything and, instead, looks like something close to work from people smoking funny stuff — it makes even less sense than a lottery.A serious captain of a ship going into rough seas and harm’s way wants no such nonsense on the bridge or even anywhere on the ship.Medieval. Demented. Destructive. Delusional.

    1. JLM

      .Sigma –I’m having a tough figuring out what you’re saying. Can you come out of your shell just a little?JLMwww.themusingsofthebigredca…

      1. sigmaalgebra

        ClaimEvaluation of projects in investment and business is a serious issue for LPs, VCs, startup entrepreneurs, our economy, and our civilization. We need the evaluation work to be quite good; instead it is quite bad.In my post, appropriately enough, I used in part the old ideas of reliability and validity from, e.g., questionnaire construction.ScenariosA venture capitalist (VC) goes to a limited partner (LP) and describes an investment or, perhaps more accurately, an investment thesis. Then the LP responds with an evaluation of the investment, in simple terms, either Yes or No.A startup entrepreneur goes to a VC and describes a project for an investment. Then the VC responds with an evaluation of the investment, in simple terms, either Yes or No.QuestionSo, is the evaluation at all good?We need to clarify what we mean by good.ExampleConsider evaluating, i.e., measuring, a person’s weight and want to know if the measurements are at all good. Well, to look ahead, they will likely be quite good:The person can go to 20 doctors and from each get a measurement of their weight in pounds, say, after not eating for 24 hours.Right away we know two things:First, reliability: The 20 measurements will all be quite close to each other.In what sense close?If we plot the 20 numbers as a histogram, then they will all or nearly all be very close, say, within two pounds. If we take the standard deviation of the 20 numbers, then we might get less than 1 pound. So, this means that the measurement of weight in doctors’ offices has high reliability.Second, we know that the measurements will be highly valid which means that on average they are an accurate estimate of the actual weight. That is, not only are the 20 measurements close to each other, they are all close to the actual weight.Of course, measurement reliability is close to measurement standard deviation, and measurement validity is close to measurement bias — bias is the difference between the expectation (long run average) of the measurements and the true value being approximated.Lots of Good MeasuringJust above we saw that, for measuring body weight in doctors’ offices, we can get good measurements, that is, low standard deviation and low bias, that is, high reliability and validity.We can do the same, that is, get good measurements, of length, tensile strength, speed, RPM, torque, volts, amps, watts, etc.These examples are for measurements of physical or engineering quantities. Okay, let’s consider measuring some things that are more complicated:Where is the center of a dart board? To measure that, let’s have some people in a bar throw some darts. Then, in a pub, at 11 PM, after each person has had six pints of beer, the measurements of the center of the dart board will be low in reliability.Suppose we are given a research paper on a topic in computer science. Is it publishable in a good peer-reviewed journal of original research that is interested in such topics?So, having the paper reviewed by a journal would be an evaluation of the paper and result in Yes or No. So, that evaluation is a measurement where we would like a good measurement, good on reliability and validity.Well, we could evaluate reliability and validity of journal evaluations by submitting the paper to several appropriate journals.My experience is that the measurements are good.Similarly for submitting a research proposal to NSF, NIH, or DARPA. The review work I saw done for the NSF was very nicely done.Similarly for a Ph.D. dissertation: Is it really “an original contribution to knowledge worthy of publication?” To get a better measurement, the university that approved my dissertation had a Graduate Board of university professors with the rules that the Chair of the Board and also a majority of the Board be from outside the student’s department. So, the university was trying to reduce bias, raise validity. For reliability, I have some data indicating that the university did well on that, also.So, we can get good evaluations of body weight, tensile strength, research papers, research proposals, dissertation research, summer popcorn movies, and much more. E.g., Amazon tries to have user contributed content give evaluations of darned near every one of the many, whatever, tens of thousands of the products they sell. To me, the more highly ranked evaluations look good; they have influenced my buying.Evaluations by LPs and VCsSo, as just above, in many cases we can get good evaluations.But can we get good evaluations of what an entrepreneur presents to a VC?From Fred’s post and the experience reported there, no: The evaluations are at least highly biased, that is, poor on validity if only from Fred’s title “Go East”, that is, on average, the evaluations in the US East were very different from those in the US West.Actually there are some statistical tests, called two sample tests, including some distribution-free (make no assumptions about probability distributions, e.g., don’t assume Gaussian) tests that no doubt would reject that East and West were doing the same things. E.g., seeE. L. Lehmann, Nonparametrics: Statistical Methods Based on Ranks, ISBN 0-8162-4994-6.Sidney Siegel, Nonparametric Statistics for the Behavioral Sciences.So, East and West are different and, therefore, high on bias and low on validity. Same pitch deck; very different evaluations on average in the East and West.Reliability? Low. Just look, 20 or so times No and a few times Yes. Standard deviation high. Reliability low.Would this difference have been true for body weight, NSF research applications, or research paper peer-reviews? My experience says, No. E.g., I’d be glad to have research evaluated by profs at Stanford, Berkeley, University of Chicago, MIT, Harvard, Princeton, Yale, Cornell, Duke, Georgia Tech, etc.LP evaluations? There have been enough descriptions of LP evaluations to indicate that they are much like VC evaluations.Other Complicated EvaluationsYes, what LPs and VCs are trying to evaluate can be complicated. But, academic performance is also complicated and, thus, we have to guess, difficult to predict.Are SAT scores good measurements of college academic performance? This question was long studied carefully with the conclusion that the scores were good. No doubt the people who constructed the SATs were very familiar with reliability and validity.The high school I went to tried to do well on college preparation. MIT seemed to think that the high school was doing well — they came recruiting.Doing well in that high school was a good measurement of doing well on the SAT and doing well in college, and doing well on the SAT was also a good measurement of doing well in college. Doing well in college was a fairly good measurement of doing well in grad school. Etc.Lesson: Quite broadly, we can get good measurements in complicated situations. But apparently, if only from Fred’s post, VCs can’t do good measuring.Specialization?Sure, each LP or VC is free to specialize and invest only in their specialty. So, sure, maybe there should have been a VC who specialized in Internet search — they got to make one good investment, Google. Maybe Peter Thiel was specializing in social networks on college campuses and that’s why he invested in Facebook. Nope: Those two examples would be too much specialization.Indeed, commonly VC Web sites do describe the interests of the VCs. Commonly now the interests are much of everything that can be done with Moore’s law, software, the Internet, and mobile for large markets.So, given a project that is close to all of Moore’s law, software, the Internet, and mobile and for a large market, what are the reliability and validity of evaluations of that project by VCs? Apparently, if only from Fred’s post, but there is no shortage of other evidence, in a word, awful, really bad on both reliability and validity.The situation is awful. As in the movie Moneyball describing traditional baseball player evaluations, the situation is medieval. We should all be torqued, pissed. For all concerned, it’s a “barbed wire enema”. Sick-o. It’s dysfunctional, destructive. Time and money are being wasted by entrepreneurs, VCs, and LPs. And no doubt the opportunity costs, that is, investment returns that we should be getting but are not, stand to be in the, what, at least one missing Google a year, hundreds of billions of dollars a year?We’re talking an unanesthetized upper molar root canal procedure with the barbed wire enema at the same time. Wasteful. Ugly. Did I mention, pissed?SummaryQuite broadly across our society, we can get good evaluations of even quite complicated situations, say, chances of success in college, but we can’t get good evaluations, that is, high on reliability and validity, of startup entrepreneur pitch decks. Bummer.

  23. Sam

    Nice. Hindsight is always clearer, but this makes a lot of sense that the pitch would resonate in NYC. eShares fundamentally is about automating financial services and legal services. That’s in the water in NYC. And it doesn’t hurt that your CTO has JP Morgan and Goldman on his resume.Loved in the pitch deck that they named their chief competitor and followed it up with “Their product is weak and their customers hate them.” Bold. Gotta respect that.

  24. Marissa_NYx

    Thankyou for sharing this. I love the line, those who were excited “they didn’t let me pitch”. Often the excited investor (particularly the angels ) want to share their story , the entrepreneur has ignited a flame and its visceral. They are excited and passionate, the entrrpreneurs job is to shut up and listen.

  25. Marissa_NYx

    One more thing – it’s ok to say “go east young girl” rather than “go east young woman”. And banish the thought of calling us “ma’am” . Regardless of age, we like being girls. Girls are young, smart and sassy. That’s us.

    1. JLM

      .My Perfect Daughter is on her second/third startup and I can tell you that “girls” are, indeed, young, smart, sassy, clever, hardworking, and expensive.Anyone who doesn’t see or understand the advantages of hiring young women needs a good physical and a vision check.JLMwww.themusingsofthebigredca…

  26. JLM

    .I am just amazed at the continual fog that surrounds raising money for a startup by an entrepreneur. It is not anywhere as difficult as this discussion would suggest it is. It is actually easy if you organize your efforts.If you are doing it for the first time, it can be a little daunting but the font of information and experience out there is more than enough to get any reasonably intelligent and motivated founder to the money window.First, you have to get the product right — Vision, Mission, Strategy, Tactics, Objectives, Values and Culture. You have to be able to describe the “what” with a crispness bordering on perfection. This is just a few nights of work. It will also align your entire organization.Today, I had a seance/coffee with a brilliant young entrepreneur who had raised a bit of money. TechStars quality deal. He had not done this work and acted like he had never heard it before. My two last semester TS companies both raised $1.5MM — I did almost nothing. They did all the work.This requires a little bit of writing and a bit of memorization. This is simple work.Then you have to produce a business engine canvas, a business process graphic, a dollar weighted org chart (present, mid-term, future), a pitch deck and elevator/taxi/boardroom pitches.You have to memorize your pitches.The pitch deck is the chapter headings — you fill in the words in person. You have to define the product, the size of the addressable market, the use of proceeds, the team, the growth dynamic and future projections.While you are pitching, you have your business engine canvas and business process graphic on the table — 11 x 17 laminated.Pitching is a 7-touch process in which the first call to action is to get the funder to ask questions. That’s all. Then you follow up like Ebola.You have to be in the right pew of the church — bootstrapping, friends & family, angels, syndicated angels, seed funders, VC A/B/C/D. Throw in a bit of crowdfunding for depth.Know where you should be and ignore the rest of the world.Know that bootstrapping, F & F, angels and half of syndicated angels invest with EMOTION!The rest of them invest RATIONALLY! They want numbers.Emotion v rational is still jockey, horse, course. Founders, business engine, marketplace.Once you know how much and who is in that industry, you have to develop a DB of 200 likely targets. If you want to skip right to failure and victimhood, don’t do this critical step. it is not hard to do — research the logical places and then get the Biz Journal in every city you intend to visit and see who has been doing what kind of deals. It is all out there.You find 200, you pitch 200 — you get 20 who are interested.Of those 20, 10 will tinker with a term sheet.Of that 10, 5 will write you a check.These proportions are a little different if you in the weeds with $10K angels. Longer cycle and more people in the deal.It is all about casting a wide net and Fred is right — different ball games in SV, NYC, Boston, Austin, Dallas, Houston, Chicago. You go see everyone.You bathe in kerosene until you have a thick skin. This is about finding the right ones, not doing missionary work or proselytizing. I once struck out for 18 months before I raised a shit pot of money. I got better at my pitch.I’ve raised more than a billion dollars — debt and equity — from institutions, high net worth individuals, banks, etc. They all have their idiosyncrasies but in the end — THEY INVENTORY MONEY.If they don’t invest, they get fired.Last thing — know from the beginning that you will get more rejections than you will acceptances. Ninety percent — 90% — will tell you to take a hike. But they aren’t entrepreneurs, they are money changers. You are something special. You are good and you will change the world. Don’t ever forget that.Real last — there is a bubble out there in valuations and sources of money. Know this and get as much runway as you can. VCs want to dribble the money out so they can control their downside and you. You want as much flexibility as you can find. GET MORE MONEY and know that 15-20% contingency is REAL.If you get stuck, call me. I’ll help you. In the last three years, I bet I’ve helped more than 50 entrepreneurs get their heads right about how to raise money.The answer is already inside you. You have to induce and experience a little friction to break it out. Just like character.You CAN do this. I’ve seen it done hundreds of time. I’v done it a lot myself. The only person who can beat you is you!JLMwww.themusingsofthebigredca…

    1. DJL

      Hey JLM,Are you open for a quick call? I am raising money (starting in Texas) and am open to learning anything about the process.Dave

      1. JLM

        .Ping me at jminch at gmail.com or 512-656-1383.JLMwww.themusingsofthebigredca…

  27. Terry J Leach

    I’ve been reading VC blogs and generally following investment trends for at least 5 years. The best VC and Angel investors have a thesis. They are actively hunting startups that match their filters. Money is a commodity good investors are not. We will choose based on our filters.

  28. awaldstein

    I agree.Back when I was preparing to defend my grad school thesis, my advisor told me if the committee does all the talking, you’ve won.Been a guiding principal for sales since then.

  29. LE

    Questions from prospects alert you to a buyers hot buttons and deliver on a silver platter the points that you should be stressing and reinforcing. Nobody should have to take a sales course or read a book to know that type of stuff either.I remember way back when I was buying a machine and point blank told the salesman that what I cared about was the service program. “If I call for service how long will it take someone to get out to fix the problem?”. The company had a great service program (so the salesman wasn’t avoiding it because he needed to) but the salesman, despite my attempt, proceeded to continue to pitch me on some other facet of the equipment that I already had said didn’t concern me.Just yesterday I inquired about a car at a dealer that was over 3 hours away. The sales manager, after giving me the price, kept repeating me the standard pitch about “how we take care of our customers”. Why would that matter to me I thought? It’s obvious I am not going to use them for service and the salesman knows that because he knows where I live and work.Even better, after I told him that I wasn’t buying strictly on price, [1] and when I said I just needed to decided if I really wanted the car or not, he then told me “if there is any way we can get this order done or if there is a price that you are thinking of that works and you can buy before the end of the month let me know! Is there any way we can close this today?”. And I hadn’t even rejected the price that he gave me yet.My point is obvious. Listen to buyers.[1] That’s a ploy by the way.

  30. Vasudev Ram

    > I told him that I wasn’t buying strictly on price,Interesting. How is it a ploy?

  31. LE

    Hard to explain the nuance but it’s almost like teasing salesman by giving him info to evaluate that he is not expecting to hear. So he lets his guard down thinking you are an easy mark (and perhaps rich and nobody wants to lose a rich customer) and he will make a killing on you now or in the future. Later, after you have wasted his time a bit, he is not likely to want to loose such an easy, and what he has convinced himself is a profitable, deal when you demand, at the last minute, a price concession.As a general rule you want to have the salesman spend as much time as possible chasing you and one of the ways to do that (have him chase you vs. you chase him) is if he thinks he will make a great deal of profit on the deal. If he feels you are a cheapskate he won’t chase you and that will deprecate your bargaining position. The more time he has invested the less likely he will want to lose the deal.

  32. Vasudev Ram

    Okay, heard of that kind of stuff being done.