What I look for in a pitch(news.greylock.com)
news.greylock.com
What I look for in a pitch
https://news.greylock.com/what-do-i-look-for-in-a-pitch-866355bddb3
22 comments
pretty sure they're making investments in startups over there
What they actually look for is momentum and all these conditions are 'bent' when that weird FOMO feeling takes over.
Yup, this exactly. MAYBE your team matters depending on who you are talking with, but if some VC gets a whiff that you have 2MM users, are growing 5x MOM for the past 6 months with 1% churn and high engagement they will literally hunt you down to throw their money at you.
Yup, this exactly. MAYBE your team matters depending on who you are talking with, but if some VC gets a whiff that you have 2MM users, are growing 5x MOM for the past 6 months with 1% churn and high engagement they will literally hunt you down to throw their money at you.
Can confirm. And they'll call you on your personal cell. VCs are tracking us just as much, if not more, as we are tracking them.
Gurley spoke again and again on not getting Google, being put off by its valuation as many were back then. “[We are] looking for positive black swans if you think you see one any price is kinda any price,” he said of the mounting valuation mania around unicorns. “The Google round-- because I was there went down-- $80 million-$90 million [pre-money valuation] with no revenue and it seemed crazy. You can only lose one time your money the real losses are the missed outcomes. You have to teach yourself to be more optimistic than maybe you were programmed to yourself because there’s way more cost to a false negative.”
Yup. VC's are in the game to money. I felt the article was promoting himself as different and unique...
The feeling I get reading this, is that there's lots of groupthink and a whole lot of luck among VC's...
> What’s the difference between a great idea, and a early-stage VC-fundable business?
I think we forget that a restaurant can be a great idea. It only makes sense for a restaurant to be an "early-stage VC-fundable business" if it's going to turn into a huuuuuuge chain.
But more importantly, the story of McDonald's rings true: McDonald's founder didn't do the work of expanding the chain.
In the VC world, a successful investment has a 10x return on the investment. A great idea may turn into a great small business with organic growth. It can provide for a career without needing VC investment! This can be a small group of consultants, or someone who builds an SAAS business.
(Edit) But, the thing about restaurant vs tech is that there's plenty of room for 1000's of small burger joints to co-exist with McDonald's. It's a lot harder for 1000s of "Joe's Git hosting" to co-exist with Github. Thus, it's often harder to see how a "great idea" in tech can turn into a small no-VC business.
I think we forget that a restaurant can be a great idea. It only makes sense for a restaurant to be an "early-stage VC-fundable business" if it's going to turn into a huuuuuuge chain.
But more importantly, the story of McDonald's rings true: McDonald's founder didn't do the work of expanding the chain.
In the VC world, a successful investment has a 10x return on the investment. A great idea may turn into a great small business with organic growth. It can provide for a career without needing VC investment! This can be a small group of consultants, or someone who builds an SAAS business.
(Edit) But, the thing about restaurant vs tech is that there's plenty of room for 1000's of small burger joints to co-exist with McDonald's. It's a lot harder for 1000s of "Joe's Git hosting" to co-exist with Github. Thus, it's often harder to see how a "great idea" in tech can turn into a small no-VC business.
The cynicism in this thread makes me feel a little more confident that even if there was a bubble, its going to deflate, rather than pop.
A theory of mine is that really what we're seeing is a change in attitude about corporate governance and business building as the VC money from outside the SV bubble becomes increasingly relevant.
Discussion of founder-friendliness recently seem to back that up in my mind. If FF attitude is going away, it is because of declining influence of the SV venture crowd controlling the narrative about their own special sauce and the right way™ to form a company.
Increasing diversity of LPs and VCs from outside SV are bound to have an effect on the attitudes toward companies being founded. Posts like this seem like justifications for existing behaviors, rather than a playbook based on any evidentiary burden.
A theory of mine is that really what we're seeing is a change in attitude about corporate governance and business building as the VC money from outside the SV bubble becomes increasingly relevant.
Discussion of founder-friendliness recently seem to back that up in my mind. If FF attitude is going away, it is because of declining influence of the SV venture crowd controlling the narrative about their own special sauce and the right way™ to form a company.
Increasing diversity of LPs and VCs from outside SV are bound to have an effect on the attitudes toward companies being founded. Posts like this seem like justifications for existing behaviors, rather than a playbook based on any evidentiary burden.
The average person in SV is a cynic but the average dollar is metered by VCs.
The link to the Blitzscaling[1] article interviewing Reid Hoffman is a nice read. Good comparisons how Microsoft / Amazon / Google scaled up in terms of company org and even more insight with PayPal's customer service growth outside of Silicon Valley.
[1] https://hbr.org/2016/04/blitzscaling
[1] https://hbr.org/2016/04/blitzscaling
I read that page as "Here are a bunch of reasons why our answer might be no. Don't do this stuff. Don't talk to us if you haven't figured out these basic issues." It's not about how to get to yes. It's about how to get past no.
You get to yes by already being pretty successful, or for complicated subjective reasons that add up to apparent promise.
You get to yes by already being pretty successful, or for complicated subjective reasons that add up to apparent promise.
The 'no market need is key'. I am remembering when I started my first business after graduating college. It was a retail business. The day before we even opened people were knocking on the door wanting to come in. Everything else that happened afterwords just flowed from that. It was really just simplistically executing and making it happen.
I don't understand.
> What’s the difference between a great idea, and a early-stage VC-fundable business?
Well, an early-stage business in my mind is a business that has some kind of product or service already built or at least a prototype.
But hopefully they already have customers.
> If the customer base grows, then you suddenly need to build a company that can support that growth — an executive team of leaders and an organization that can operate and adapt effectively without the founder driving every decision.
In my mind I want to build a company with as little employees as possible with as much profits as possible. Is the way to do that really by employing an "executive team of leaders"? Isn't it just better to hire people that are productive and don't really need supervision in order to get things done?
Later on the author writes about an IPO, which is something that feels so far from the initial founding stage that it is useless to think about?
I wouldn't want to build a company if the only goal is to complete an IPO as soon as possible but maybe that's just me.
> What’s the difference between a great idea, and a early-stage VC-fundable business?
Well, an early-stage business in my mind is a business that has some kind of product or service already built or at least a prototype.
But hopefully they already have customers.
> If the customer base grows, then you suddenly need to build a company that can support that growth — an executive team of leaders and an organization that can operate and adapt effectively without the founder driving every decision.
In my mind I want to build a company with as little employees as possible with as much profits as possible. Is the way to do that really by employing an "executive team of leaders"? Isn't it just better to hire people that are productive and don't really need supervision in order to get things done?
Later on the author writes about an IPO, which is something that feels so far from the initial founding stage that it is useless to think about?
I wouldn't want to build a company if the only goal is to complete an IPO as soon as possible but maybe that's just me.
VCs aren't trying to build companies. They are trying to use companies as tools to get themselves big exits. There is a big difference.
The author is a VC and the article is written from the lens of how to pitch a VC.
There's nothing wrong with building a company the way you're describing. In fact, it's the one most founders should take.
Raising even a Series A basically sets a company on the path of IPO or bust. Just don't raise VC and you can do exactly what you want.
There's nothing wrong with building a company the way you're describing. In fact, it's the one most founders should take.
Raising even a Series A basically sets a company on the path of IPO or bust. Just don't raise VC and you can do exactly what you want.
As others already mentioned, it sounds like your preference is building a bootstrapped company from day one without need for any VC funding. You're not the intended audience for the author's blog post.
But to respond to your other questions...
>Is the way to do that really by employing an "executive team of leaders"?
Yes. Many founders can't delegate and end up obsessively micromanaging others which puts a ceiling on growth.[1]
>he author writes about an IPO, which is something that feels so far from the initial founding stage that it is useless to think about?
The IPO thinking at the very early stage isn't necessarily premature because the founders may make early decision to offer equity (stock options) to employee #2 instead of a higher market salary. (Because they have no money to pay high salaries.) If so, they've basically chosen the fork in the road towards an IPO. If the employee can't eventually sell the stock (liquidity provided by IPO), there isn't much point to offering equity.
[1] https://en.wikipedia.org/wiki/Founder%27s_syndrome
But to respond to your other questions...
>Is the way to do that really by employing an "executive team of leaders"?
Yes. Many founders can't delegate and end up obsessively micromanaging others which puts a ceiling on growth.[1]
>he author writes about an IPO, which is something that feels so far from the initial founding stage that it is useless to think about?
The IPO thinking at the very early stage isn't necessarily premature because the founders may make early decision to offer equity (stock options) to employee #2 instead of a higher market salary. (Because they have no money to pay high salaries.) If so, they've basically chosen the fork in the road towards an IPO. If the employee can't eventually sell the stock (liquidity provided by IPO), there isn't much point to offering equity.
[1] https://en.wikipedia.org/wiki/Founder%27s_syndrome
Offering equity is nothing more than giving a stake in the company. An IPO is only one way that can pay off, and these days probably not even the most likely.
Of course VCs want you to believe that an IPO is the only successful exit, because they want moonshots. But as a founder you need to keep your own council as to the wisdom of pursuing growth at all costs.
Of course VCs want you to believe that an IPO is the only successful exit, because they want moonshots. But as a founder you need to keep your own council as to the wisdom of pursuing growth at all costs.
>Of course VCs want you to believe that an IPO is the only successful exit,
Yes IPO is not the only way. VCs will also consider an acquisition by Google/Facebook/Microsoft/Amazon at a good price to be a "successful exit" and will explicitly go over those possible scenarios with the founder.
But there are other motives behind exploring the acquisition scenarios:
1) VC is actually asking in a more roundabout way if the founder has an answer for the above giants cloning the feature and rendering his startup obsolete
2) VC wants to gauge founders' openness to sell to earliest buyer or has plans to stick it out and stay independent until the end
I don't think Sequoia VC is complaining too much that WhatsApp never went to IPO. They still got a good return when Facebook bought it.
Also, I don't think VCs are actually that single-minded about IPO-or-else... especially for SaaS/enterprise type of startups. They will tell the founder that the more likely exit scenario is a bigger company acquiring them. This is not a big secret.
Yes IPO is not the only way. VCs will also consider an acquisition by Google/Facebook/Microsoft/Amazon at a good price to be a "successful exit" and will explicitly go over those possible scenarios with the founder.
But there are other motives behind exploring the acquisition scenarios:
1) VC is actually asking in a more roundabout way if the founder has an answer for the above giants cloning the feature and rendering his startup obsolete
2) VC wants to gauge founders' openness to sell to earliest buyer or has plans to stick it out and stay independent until the end
I don't think Sequoia VC is complaining too much that WhatsApp never went to IPO. They still got a good return when Facebook bought it.
Also, I don't think VCs are actually that single-minded about IPO-or-else... especially for SaaS/enterprise type of startups. They will tell the founder that the more likely exit scenario is a bigger company acquiring them. This is not a big secret.
You can also grant equity in a bootstrapped or angel-funded company where the goal is not an exit, but to build a profitable business. The main thrust of my point is that granting equity to employees is not only for VC-funded companies in the typical moonshot case study.
Thats exactly what I told an investor who approached me. It looks like these people look only for money/IPO and demanding from us not only a product but also to make an executive team.
I give up the big profit, I only care about "not caring for employees"
I give up the big profit, I only care about "not caring for employees"
VCs exist to find the small subset of companies that need cash for hypergrowth. It's not for everyone.
For many other businesses, a loan or swear equity is more appropriate.
For many other businesses, a loan or swear equity is more appropriate.
Anyone who thinks that all this data is pertinent to make the investment decision will most likely never say yes to any startup.