Posts

The most important principle of start up fund raising is:

Raise enough money to achieve a set of milestones that will attract a subsequent round of investment from new investors.

Last week, a founder of a seed stage company came to pitch. When I told him the opportunity wasn’t a fit for us, he asked me what milestones he would need to achieve to raise a Series A - as he was raising a seed round! He was calibrating how much he needed to raise for in his seed to make sure he could raise a Series A.

Brokers serve two key roles within ecosystems. First, they introduce buyers and sellers. Second, they lend their expertise to help buyers and sellers make the right decisions in the market.

The internet neutralizes the first value proposition of brokers by leveling the information asymmetry between buyers and sellers at a far greater scale with much better data than any broker ever could. And for products and services with relatively small price points, commodity goods or where the cost of failure is low, market places often nullify the value (and cost) of an advisor.

Once each month I met Peter at Café Habana in Nolita for huevos rancheros drenched in tomato sauce and a glass of fresh orange juice. Mopping up yolks with tortillas, Peter and I chatted about his business: the techniques of scalable customer acquisition, the priorities of the product and engineering team, the structure of sales quotas and the ebbing and flowing dynamics of the market place he and his team were building.

Each time I open Salesforce in my browser, I think of Stephen Hawking. It’s because of an aphorism an entrepreneur shared with me a few weeks ago. He said:

The cost to fix a data error at the time of entry is $1. The cost to fix it an hour after it’s been entered is $10. And the cost to fix it several months later is $100+.

Take for example a venture capitalist’s CRM tool. If I mistype an email address or the details of the last fund raise, it might cost me a minute or two to fix it at that very moment. A minute of time is worth about $1.

The valley and startup-land does not fetishize failure despite the increasing reports to the contrary. FailCon is not the Darwin Awards for startups. Founders do not start businesses with the express interest to fail.

Instead, the valley is infatuated with the post-mortem of failures and successes alike because within every venture are pearls of wisdom - a subtle but important difference. Extracting and applying these insights can be the difference between success and failure. This is why founders pursue knowledge relentlessly. Ultimately, iteration and learning speed is the hallmark of great startup teams

To be truly successful, I believe startups should determine which of the four core disciplines is their strength: product, engineering, marketing and sales - and focus, focus, focus on leveraging that advantage in the market.

Product driven startups - At their outset Twitter, Pinterest and Instagram were exploratory products driven by their respective creators, Jack Dorsey Ben Silbermann, and Kevin Systrom, who were each product managers building a product of their own vision. The key innovations were the creation of new social environments.

Four and a half years ago, I left my role at Google as a product manager to join the team at Redpoint. The transition became the biggest professional challenge of my career up to that point. Suddenly, I was working with a smaller team, managing massive ambiguity in job definition, time allocation and decision-making, and giving up the adrenaline of launch day.

But far and away my biggest challenge was effective communication. I simply couldn’t articulate my points in convincing ways. During the first few weeks, I felt like an ineffective babbling mess. What had worked at Google was failing at Redpoint.

Products aren’t sold in isolation - they exist within ecosystems. Great product market fit and sales pitches hinge on understanding and serving all the members of an ecosystem. Should a product fail to meet the needs of any one member, company success and sales velocity will falter.

One tool I use with portfolio companies is the Value Proposition Diagram (VPD) which shows why a product is compelling to every customer - and most products are sold to more than one customer at the same time.

![image](https://res.cloudinary.com/dzawgnnlr/image/upload/q_auto/f_auto/w_auto/image_167_901497663" width="500px">

If you’re like me, you switch task managers every six months at the point that you have added a bunch of items in your list that you’ll never get around to and can’t bear to be reminded of them again. At which point, you conclude that the app has failed you. It must have because you haven’t completed any of these tasks!

Task management tools fail users because they operate without context. How many times have you been to the grocery store and forgotten the dill pickles you were asked to buy? Or met someone and tens minutes later realized you forgot to ask an important question?

Many of the SaaS companies I work with are buzzing about a new concept: product qualified leads (PQL). It’s typical to see outbound sales teams create new leads by cold-calling - think Glengarry. And marketing also qualifies leads (MQL) using online advertising, branding, content, email and other channels. But the PQL concept is novel.

PQLs are potential customers who have used a product and reached pre-defined triggers that signify a strong likelihood to become a paying customer. A hypothetical example at Expensify might be if a user uploads 10 receipts and invites one friend, this user is a PQL and should be sent to the sales team.