Given that I’ve left a big company after a successful acquisition and that I’ve started a new company, I figured this was the perfect time to learn about VC.
I’ve worked at startups my whole life. My only forrays into working for big companies was always part of an acquisition. I’m a startup guy. I love to be employee #1. I love to sit in a room with founders who say, “okay. We have a great idea. We have seed money. Now you’re going to make it happen.” And then I go and build a team and do it. There’s nothing like changing directions with a 5 minute meeting. Nothing like doing your entire strategy for the year in a lunch meeting and then executing it.
In all of my years of startups, I’ve never dealt with any investor beyond Seed rounds. The exception to that is dealing with small Investment Banks when we were being acquired. I have, until recently, no experience in dealing with VCs. I was lucky enough to mostly work in the b2b/enterprise web-space where the workflow has been: Idea, useable minimum product generated by me/friends, find some initial early adopters, make adjustments based on that feedback (and based on what you’ve discovered about the customer and their business) and offer them a free product in return for being able to dig through their personal network for sales leads and introductions. By that point, since the company was usually about 4 people, we would generate enough money to grow… and then we’d grow to a point where we didn’t feel comfortable running the organization on our own and we’d either hire a CEO (disastrously at one company) or call an IB and ask them to find us someone who wants to acquire us.
For my new product, I ended up going to many talks and conferences to figure out what the industry was all about. I would meet VC partners and their associates and grew to like certain ones and dislike others. I would meet up with associates and angels on an informal basis. At the time, I didn’t know the difference between a partner or an associate or an angel. I would just get coffee/drinks with people and chat about things. Sometimes we’d chat about me and my product or they’d ask me tech questions about pitches that would come their way or we’d just talk about cooking and the Red Sox. Keep it informal. I was not necessarily looking for investment, just opinions and thoughts. The acquisitions had been kind to me and I wasn’t really sure where I was going with Eldersync, so I didn’t want to be aggressive yet. Occasionally I would meet partners, but I was really more interested in just meeting people who got to see new products all the time. I never knew who would need a dynamic CTO with cool shoes to help them make their product a reality.
So I picked up Jeff Bussgang’s book the other day. I am going to Egypt/Israel/Jordan and visiting my cousin’s dig in a few days. I figured it would be perfect airplane reading. I could relax, take notes and have time to think about the material. But I started reading it during Dice-k’s latest agonizing 5 innings and I plowed through the book. It spoke to me, as an entrepreneur. Jeff’s experiences sound like mine: the kitchen table MBA (my father is a dentist who ran a very large practice before acquisition a few years back), the itch to be an entrepreneur, working with one of the initials of BSH (he worked with B, I worked with H). It was an easy read as I felt personally connected to the author due to my own experiences.
As an established entrepreneur, I sort of knew much of what the book was talking about. Whether I knew it intrinsically or through experience. It was good to have my thoughts validated by case studies and Jeff’s own experiences. But there was a part that changed my thinking: The Pitch.
I’ve never given a VC pitch. I’ve had tons of informal conversations, but have always avoided a formal pitch. Why? For the reasons that Jeff reiterates: it has to be good. I just don’t have my pitch down yet and I know it. I know what I’m missing. I know what I need to change. I know I need to run down all of the expected questions. I need to practice my “improv”. I need to ask my MBA pals what questions they have. I need to talk to my VC/Angel friends informally and run a few thoughts by them. I was a child actor. Even at age 8, I knew I had to memorize my script for the audition, make sure my clothes were right and my energy was where it needed to be. I knew when I was ready and when I wasn’t ready. Jeff’s advice on dealing with the pitch rang true: I’m not ready. I really haven’t put in any effort yet, but the book made it clear on how ready you need to be. That’s sound advice. I’ve been pitched by plenty of HBS/Babson students who need a lead engineer. I ask only SOME of the questions a VC would ask and they don’t have answers. That was, by far, my favorite part of the book. It really was sound advice for a guy who has been through the startup/acquisition process many times but has never actually had to talk to VCs.
Despite my lack of experience with VCs, I’ve had much experience with employees pitching me, vendors pitching me, investment banks, due-dilligence to acquire/be acquired. I think many of the questions and scrutiny is the same. The book confirms that it is all very similar, which is comforting to me if I need to start engaging VCs. And the book confirms my instincts were right: I need to work on my pitch if I’m going to go down that road.
The rest of the book had tidbits that I already feel I knew, but the case studies re-affirmed thoughts and it was nice to have everything organized in one place. I think it’s a great book to give to every one of the HBS/Babson grads who have approached me about joining their startups. It fills those little gaps of knowledge. There were a bunch of small “oh yeah, I totally forgot that…” moments in the book that would help someone who has never gone down this road. At the very least, the book is a good checklist to make sure you’ve done all your homework at every stage of entrepreneurship.
As an aside, I admit that a phrase in the book that made me really keep reading it was comic book oriented. Who wants to be Robin instead of Batman? The context of the phrase implies “who wants to be a VC instead of an entrepreneur?” Who wants to ride backseat to greatness? But I like Robin and always have. Being Robin is great (other than the green chainmail/Kevlar underwear and yellow cape). Being Robin is really important. Robin is Batman’s balance. Robin is a hero in his own right: leader of the Teen Titans, JLA and more. Robin is heir to Batman (literally and figuratively) and is necessary to Batman’s sanity. Robin is viewed, by Batman as his partner, not his sidekick. The current Robin, Tim Drake, is a computer hacker who uses cunning more than raw physical skill. Robin is cool. I would be happy to be Robin. When I read this phrase, my comic book mind says: who WOULDN’T want to be the support system for something amazing and game-changing? Who doesn’t want to be a .280/20/20 hitter on the 2004 Red Sox? Sure, it’s great to be the absolute best, but there’s nothing wrong with making sure the best has what it needs to be the best. The best don’t happen without support systems. They best don’t happen without good advice. Batman didn’t make himself: he trained from those who were better than him. He combined it all, but without his training and without Robin, he’d have been shot in an alley long ago. Who wants to be Robin to Batman? Sometimes I do. Not to say I don’t love being the hacker who swoops in and solves it all and then directs the business in a profitable direction… but being part of a great team is better, to me, than being the lonely Dark Knight.
But hey, I’ve always liked Spider-Man more…
Bottom line: If you’re thinking about trying to go the VC route (or even the angel route, because the rules apply), read it. It’ll provide a good checklist on what to expect.