Posts from startup

How Well Do You Take A Punch?

I was talking to a friend who has been displaced because of Sandy. They are struggling to get back to their daily routine and it is hard living out of a suitcase without access to the things they rely on from day to day.

I was talking to the CEO of a company whose business was negatively impacted by Sandy. They are struggling to get the business back to where it was before the hurricane.

One is a personal thing. The other is a work thing. But they are the same thing. Life punches you in the face and you might get knocked out. The question is can you get back up and keep going.

The best entrepreneurs do this well. They can take a hit and keep moving forward. And they can rally their teams to do the same thing. That latter point is so important. If the leader is down for the count, the team doesn't have a chance. But if the leader is up and moving forward, with passion and committment to the goal, then the team will follow.

Sometimes a crisis is a good thing for a company. Recovering from a knockout punch often requires heroic efforts from the team. I have seen engineers get things built in a week that might take a quarter under normal circumstances. I have seen sales teams bring in business that kept the company afloat at the last minute. These heroic efforts can energize an organization and give it new life.

Normal operating conditions can lead to an organization getting fat and happy. A crisis can shake things loose that need to be shaken loose. I would not suggest an entrepreneur manufacture a crisis when one does not exist. But when one comes along, I would suggest seeing it as an opportunity not a problem. Because the best entrepreneurs and the best companies can take a punch and keep going. It is a defining trait of winning teams.

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First Time vs Serial Entrepreneurs

I've been thinking a lot about the differences between first time and serial entrepreneurs. We invest in both and do not have a preference betweeen the two. But there are significant differences.

The best first time entrepreneurs have been stewing on their idea for quite a while. It is a personal passion of theirs and they bring to it a fresh take, a stubborn insistence on their approach, and they obsess about the idea 24/7. They often get the right product into the market at the right time and they capture the user's attention and usage with that product/market fit.

Where first time entrepreneurs often struggle is when the product works so well that they have to quickly build a company to support the product. Most of the time, the first time founder has not spent anytime thinking about what kind of company they want to build, what kind of people they want to surround themselves with, what kind of culture they want to create, etc. The first time founder often has no experience recruiting, managing teams, and building organizations.

Serial entrepreneurs, on the other hand, often struggle with the founding idea and getting to product/market fit. They start the second and third and fourth company because they love startups and they don't know any other way to work and be productive. But they often lack that passion around a singular idea that drives first time founders.

But when serial entrepreneurs do settle on the right idea and find product/market fit, they are usually terrific at building the company. They know when to step on the gas and where. They know how to recruit, manage, and structure organizations.

I was talking about this dichotomy with another venture capitalist the other day. I likened it to the first album/second album issue with rock bands. So many bands struggle with the second album and there are many reasons for it. The first album is something they have been working on for years. These are the songs they played night after night in the clubs working their way up. These are the songs that got them their fanbase and got them signed. The album hits, people love it, and then they spend the next year touring like crazy to build their fanbase. And then they have to go back into the studio and write and record a second record in a matter of months. It is no wonder that is is terribly hard to produce a second record as good as the first.

Likewise, it is often hard for the serial entrepreneur to produce a second startup that is good as their first. It takes a lot of patience and collaboration with others, two things they probably did not use much of in their first startup.

As I said at the start of this post, we work with both first time entrepreneurs and serial entrepreneurs with equal interest. We love the ability of great first time founders to nail the product and get significant user traction quickly. And we work closely with them to build the company once that happens. And we understand that is an area they are uncomfortable with and need our patience and support with. We also love the serial entrepreneur's gifts around building the company and taking control of a market once they have gotten product/market fit. We work closely with them in their efforts to find product market fit and we understand those challenges and are patient and supportive during that time.

These observations are generalizations and certainly do not speak to each and every situation we've been involved in. But they do reflect our experience broadly and we think it is important to understand what situation you are investing in, where the challenges will be, and how best to support the startup. Those things will most likely be very different when working with first time founders and serial entrepreneurs.

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Venture Hacks Daily Newsletter

I just subscribed (via email) to the Venture Hacks Daily Newsletter.

They read all the VC and startup blogs, they track Hacker News and Twitter, and they compile all of it in a daily newsletter. Here's a screen shot of what it looks like:


This should be a big time saver for me and for those of you who do the same thing Venture Hacks does every day. If you want to subscribe, here's how.

daily email, daily RSS, or real-time Twitter 

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Swinging For The Fences

There has been a lot of talk about young entrepreneurs creating all the great companies; Gates, Jobs, Yang/Filo, Bezos, Dell, Brin/Page, Zuckerberg, etc, etc.

I agree that visionary young people are worth backing and we do a lot of that at Union Square Ventures.

But there is another kind of entrepreneur I love backing even more. It's the serial entrepreneur who has had a number of successes under their belt and now wants to swing for the fences. We have a bunch of them in our portfolio and there is nothing more fun than watching someone who has a ton of experience get behind the wheel and really step on the gas.

When someone has two or three startups under their belt, they understand a bunch of things that a first time entrepreneur doesn't. They understand the value of setting a very clear vision and getting everyone on that page. They understand that they need to hire the very best people. They understand how to raise capital and pick their investors carefully. They understand how to make quick decisions and not let issues fester. They have a rolodex of talented people and potential business partners they can get on the phone or email quickly when they need them. Most of all, they ooze confidence and make everyone better around them.

These entrepreneurs usually have enough money in the bank that they are not looking for a payday. They don't build their companies to flip. They build their companies to go all the way. They are doing it for money, but they are also doing it for the thrill of the game, for ego, and to build a legacy. Those are very powerful motivators, much more powerful than money if you ask me.

If you look at our portfolio, you'll see quite a few startups created by young visionaries and quite a few startups created by serial entrepreneurs who are swinging for the fences. There isn't much else to be honest.

We are open to all kinds of entrepreneurs and we don't screen for age or track record. If you have built a web service that fits into our investment thesis, you'll get a hearing at our firm regardless of who you are and what you have done. But it is also true that we tend to back young visionary founders and successful serial entrepreneurs most of the time. That's because we've made a lot of money doing those two things and not so much doing anything else.

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Paying To Pitch

Jason Calacanis has taken on a new cause, outing angel groups that charge entrepreneurs to pitch. I agree with Jason that any angel group that charges an entrepreneur to pitch should be avoided. It suggests to me that the group is more about making money on pitch fees than investing.

I've also seen "startup fundraising agents" out there that charge entrepreneurs upfront cash to make intros to potential investors. They should also be avoided. A basic rule of thumb for fundraising agents is that they must work on a success fee basis or you should not use them. Otherwise, they have no incentive to see you actually get funded.

Both the agent groups and startup agents that want to charge upfront cash make the argument that it is a quality filter. But that is nonsense. Some of the best startups I've ever seen were totally broke and living and working in a friend's apartment. And some of the worst were well off and working in fancy offices. The ability of a startup to pay has absolutely nothing with the quality of the team and the idea.

Like any other sector, the startup sector has its share of scams and scam artists. I think it is great that Jason is outing them.

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