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- 08/01/14--16:42: _Here's How To Launc...
- 08/01/14--17:12: _10 Hoop Stars You N...
- 08/02/14--18:04: _Here's How To Make ...
- 08/03/14--05:23: _10 Brilliant Market...
- 08/03/14--11:26: _This $1 Billion Sta...
- 08/06/14--10:52: _Peter Thiel Says He...
- 08/07/14--08:37: _A Simple One-Questi...
- 08/07/14--16:43: _The 5 Things Nobody...
- 08/08/14--07:19: _How To Find The Rig...
- 08/08/14--07:28: _Spotify May Be Cons...
- 08/08/14--10:29: _What Tech Startups ...
- 08/11/14--07:05: _Q Raises $775,000 F...
- 08/11/14--14:04: _The Surprising Plac...
- 08/12/14--12:55: _'Sup,' A New App Fr...
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- 08/17/14--10:42: _ I Moved To San Fra...
- 08/17/14--10:56: _The Best Startup Ad...
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- 08/20/14--08:09: _A Local Services St...
- 08/20/14--10:54: _Big VCs Are Getting...
- 08/01/14--16:42: Here's How To Launch A Startup In 30 Days
- 08/01/14--17:12: 10 Hoop Stars You Need To Know In Tech
- 08/02/14--18:04: Here's How To Make Sleazy Tech Guys Respect You More
- 08/03/14--05:23: 10 Brilliant Marketing Stunts That Put Startups On The Map
- 08/06/14--10:52: Peter Thiel Says He Never Invests In A CEO Who Wears A Suit
- 08/07/14--16:43: The 5 Things Nobody Tells You About Being An Entrepreneur
- 08/08/14--07:19: How To Find The Right Cofounder For Your Tech Startup
- 08/08/14--10:29: What Tech Startups Actually Sell, According To Children
- 08/11/14--14:04: The Surprising Places Where 10 Top Tech Companies Were Launched
- 08/17/14--10:56: The Best Startup Advice No One Wants To Tell You
- Most startups pivot, so early press will set you up for embarrassment when your idea fails or changes a few months later.
- Press can put you on a competitor's radar.
- You don't actually have anything newsworthy to report.
- In extreme cases, you can become a "press darling," which means every little mistake you make will be heavily scrutinized by the media forever. That's what happened to companies like Fab, Foursquare and Path. Their struggles (which are inevitable at any startup) have been covered as thoroughly as their wins, making company morale ebb and flow.
- A startup goes to raise a new round of financing and talks to big firms like Sequoia Capital, Benchmark, Andreessen Horowitz or Khosla Ventures to lead their Series A or B round of financing.
- The big VC firms often have a minimum ownership percentage they'll accept, between 15 and 25%
- The founders, who want to work with the top firms but don't want to be insanely diluted, then feel pressured to leave their early supporters, the angels, out of the fundraising process to make room for the 15—25%.
- This leaves the early investors angry at the founders who aren't confident enough to go to bat for them against big-name investors, and angry at the big VCs for wanting such high percentages that the angels get pushed out of deals.
I was sweating, borderline panicked by the realization that we needed to ship our product to paying customers in a matter of days. Yet we were miles away from having product ready for shipment. For the zillionth time, I wondered how Casey and I had ever thought it would be fun to launch a new product and company in just 30 days.
We had persuaded a host of trusty people to pre-order our product, Bees Knees Spicy Honey, despite the fact that it didn't yet exist. Now, intent on sticking with our promise to deliver a kick-ass product within 30 days, I was feeling the pressure.
We had not yet scaled our recipe. We hadn't received our bottles. We had no labels for our bottles. We still hadn't managed to buy our main ingredient, raw honey.
Somehow, we made it work. We didn't know how we'd do it at the time, but we tried and tried, and figured it out. As Joel Gascoigne of Buffer recently said in his aptly titled article, I Admit it. I Have No Idea What I'm Doing. (And That's a Good Thing.), an entrepreneur's job is not to know all the answers; it's to figure them out.
Days later, the first orders were shipped, which meant that our company, MixedMade, had indeed launched in just 30 days. That initial challenge has given way to a new one: to scale and grow this into something real. We're going to share that journey with you--the good, the bad, and the ugly. And we promise plenty of ugly.
Looking back on that 30-day launch, I identified five principles that helped us reach our initial goal. If you want to launch your own startup, or need to move faster and more effectively at your current company, consider the following:
1. Measure Progress
In the startup world, we love to talk about success or failure. But life would be too easy if all our actions had a definitive, black-or-white outcome. Instead, we live in a world of gray, therefore we should measure progress, not success or failure. As an entrepreneur, you need to measure how much closer you're getting to your goal, and you need to understand how you're doing it.
When we kicked off our launch effort, we made a calendar with milestone completion dates. We missed nearly every due date, but in each case we were moving closer to our target. Instead of registering failure, we measured our progress. We reframed the impending launch, made adjustments for greater progress, and moved forward.
2. The Business Experiment Is the New Business Plan
The most productive activities don't all stem from 9 a.m. Monday meetings, and the best-executed startups don't derive from perfect business plans. These days, when it is possible to test ideas overnight, the traditional business plan is a waste of time. Instead, get out of the building, stop planning, and try things in the real world. Learn, make adjustments, and keep moving.
Our entire business plan on one legal notepad page:
3. Inaction Leads to Failure More Often Than Wrong Action Does
The fear of being wrong is powerful. To overcome that fear, it's easy to plan and guess until you think you know all the right answers. Then you convince yourself that more planning will diminish more risk. Finally you work yourself into impotence, never actually taking action and making progress.
Realistically, when you're wrong, the mistake is rarely fatal. To try something and be wrong is faster, and produces greater learning, than delaying until you have a perfect plan.
We had no idea how to price our product, and with zero search volume we couldn't easily test it with Google ads. So, we picked a price that felt "good enough." We charged customers six different combinations of pricing and shipping over the first few months. We were wrong at times, but we made adjustments until we landed on a price and shipping combination that works.
4. Time Spent ≠ Value Added
There is a misconception that if you spend a lot of time talking about something, the outcome grows in value. This happens with senior managers in boardrooms and entrepreneurs in grimy apartments. I have personally been guilty of confusing time for value in both of those environments. Just because you spent a lot of time on something does not mean that thing has more value.
We named our product and company in two working hours. We could have spent weeks on this process to create the perfect names. But we didn't waste time, and I don't think we've yet lost a sale or opportunity because of our name. We finalized our branding and packaging in just three days (with the help of a great designer), yet we've received dozens of comments and sales because of our beautiful packaging.
5. Perceived Risk ≠ Actual Risk
When it comes to taking the leap and starting something, most people never take the first step for fear of the unknown.
"I don't know all the answers."
"What if I fail?"
Your startup venture doesn't have to mean life or death, especially not to start. It's part of an entrepreneur's job to understand how life would change in a worst-case scenario.
"Would I be homeless?"
"Could I get another job?"
In most cases, even with complete failure, the outcome isn't that bad, it's just scary.
Casey and I push each other to ignore perceived risk, which is probably why he sent me a casual email a few days ago saying he was quitting his job to focus on MixedMade full time! But that's another topic, for another time.
*A lot of these principles were realized through many conversations, beers, and ski trips with my friend Patrick Buckley, of DODOcase
Want more? Visit our startup journey blog at mixedmade.com
The average NBA player makes $4.5 million a year, which is higher than the average of any other sports league in the world.
And if you’re one of the best players in the game, your salary can easily top $20 million a year.
That's why if you're an entrepreneur seeking investment, it's a good idea to know which NBA players are investing in startups.
In fact, some of them have already made sizable investments in tech startups.
Carmelo Anthony (New York Knicks)
Shortly after signing a new $122 million contract with the New York Knicks, Carmelo Anthony launched his own venture capital firm called M7 Tech Partners last month.
Anthony partnered with Stuart Goldfarb, a longtime NBC and Bertelsmann executive, for his New York-based firm. He said he’s mostly interested in wearable technology and connected devices.
Baron Davis (Retired)
Former UCLA and Golden State Warriors star Baron Davis joined Ashton Kutcher and Joe Montana in seed funding BloomThat, an on-delivery flower startup, earlier this year.
SV Angel and Reddit cofounder Alexis Ohanian are also part of the $2 million investment.
David Robinson (Retired)
Ten-time NBA All-Star David Robinson recently invested in Thrive15, a Tulsa-based online video consulting firm, for a 2% ownership in the company.
The financial terms of his investment is unknown, but Robinson, whose nickname was “The Admiral” in the NBA, invested through his own private equity firm called Admiral Capital Group.
See the rest of the story at Business Insider
There are a lot of gross stories about tech men (and women) in positions of power — like investors — acting inappropriately.
The founder of Nasty Gal, for example, was left a disturbing voicemail during an early fundraise, then the investor blamed it on being drunk and high. Kathryn Minshew, cofounder of The Muse, described a situation where an investor leaned in so close, she had to put her arm up to block his advances.
Payal Kadakia, the founder of ClassPass, says she used to have awkward run-ins with investors. But that hasn't happened to her in a long time.
Kadakia thinks it's the fact that her startup has started to gain significant traction and now investors who once had an upper hand actually want a piece of her business. And they don't want to say or do something that could mess up their chances.
When Kadakia was first pitching investors, her business plan was faulty. Classtivity, the failed predecessor to ClassPass, was a way to book local fitness classes online. The entire first year only produced about 100 bookings. In May 2013 ClassPass relaunched as a $99 per month membership to hundreds of local fitness studios, and that business has worked much better.
In the past year, more than 350,000 classes have been booked through Kadakia's platform and in some cases, her company is writing partnering venues 6-figure monthly referral checks. Investors recently gave ClassPass $4 million and some are encouraging Kadakia to take more of their money now.
The traction Kadakia has found with ClassPass has given her confidence around investors. In turn, they've been showing her the respect she deserves.
"I've gone in to pitch them straight from a workout in Lululemon gear," she says. "It's funny, in [the accelerator program I was in] you learn all about how to pitch investors. It's nice once you have a working startup and the tables turn."
The marketing stunt can be a valuable tool for any company. Last week, Microsoft employees released a ridiculous "Sexy And I Know It" parody featuring the Surface tablet, and despite the horrible lyrics and dancing, it actually made the Surface look sort of cool.
But Microsoft — and even the Surface — already has a defined image. No matter how the video turned out, Microsoft would still be Microsoft.
A startup has more to potentially gain from a successful marketing stunt than any other kind of company. Without defined brand images in the minds of consumers, some clever PR can easily turn a fledgling startup into a superstar brand in a matter of weeks.
GoldieBlox created a viral video about getting young girls into technology. It got 3 million views in two days and caused a lawsuit.
GoldieBlox CEO Debbie Sterling is a Stanford-educated engineer who produced the popular video to the hit Beastie Boys song "Girls."
The lyrics spoke to an issue about too few women being interested in technology from a young age. Here are some of the versus:
Girls to build the spaceship,
Girls to code the new app,
Girls to grow up knowing they can engineer that.
That's all we really need is Girls.
To bring us up to speed it's Girls.
Our opportunity is Girls.
Don't underestimate Girls.
The video was watched more than 8 million times. All the attention attracted a lawsuit between the Beastie Boys and GoldieBlox over rights to the music. It kept GoldieBlox, an interactive game company few people had heard of, in headlines for weeks.
Here's the video.
Tinder visited sororities and their partnering fraternities on campus and devised a master plan to get tons of signups.
Tinder cofounder Whitney Wolfe ventured to college campuses with a clever plan to onboard thousands of users. According to Bloomberg Businessweek's Nick Summers, Wolfe scheduled meetings with sororities and then their corresponding fraternities on campus. Sororities typically have a favorite fraternity or two on campus that they plan social events with frequently, so Wolfe made sure to hit both chapters back to back.
“We sent her all over the country,” Munoz told me this week. “Her pitch was pretty genius. She would go to chapters of her sorority, do her presentation, and have all the girls at the meetings install the app. Then she’d go to the corresponding brother fraternity—they’d open the app and see all these cute girls they knew.” Tinder had fewer than 5,000 users before Wolfe made her trip, Munoz says; when she returned, there were some 15,000. “At that point, I thought the avalanche had started,” Munoz says.
Mailbox was one of the first apps to stir up demand by creating a wait list that grew to more than 260,000 people.
Mailbox, an email app that sold to Dropbox for ~ $100 million 37 days after launch, built hype for the product by creating a virtual wait list.
The demand grew to more than 260,000 pre-launch signups by first creating an intriguing teaser video that promised to help people reach a desirable inbox 0.
Then, blogs like TechCrunch went wild. That's when Mailbox announced a brilliant "reservation" scheme to keep the hype going and waited an unnecessarily long time to launch. Here's the video that was used to hype up the app.
See the rest of the story at Business Insider
CloudFlare, best known for its cloud cyber-security service, is growing at a mind-boggling pace.
Over the last three years, CloudFlare has grown 450% annually, and is currently adding about 5,000 new clients a day, Matthew Prince, its programmer/lawyer-turned-founder, tells us
It is now handling the equivalent of roughly 5% of the entire web's traffic through its servers and, just as we predicted in 2012, CloudFlare is indeed a monster company in the making.
Prince is on a mission to ‘build a better Internet.’ To do so, CloudFlare’s technology serves as what many call the "digital bouncer" for its 2 million-plus client websites. That means it fights off malicious hacker attacks.
But CloudFlare is bigger than just a cyber-security firm. It also improves a website's performance by offering classic networking services like routing and switching (helping computers connect over the Internet), load balancing (making sure computer servers don't get overloaded), and performance acceleration (helping websites run faster) among other things. It is essentially creating a cloud service that parallels the features of many of Cisco’s hardware products.
Prince wrote his college thesis on "Why the Internet was a fad" (which he now calls "embarrassing") but his experience working on the Internet from its early days made him realize the "incredibly disruptive" potential of it. Now he wants to help the Internet live up to its promise - a place he calls, “where anyone, anywhere can publish information and get access to that information.”
We had a chance to catch up with Prince and ask more about his company's explosive growth. The below interview has been edited for clarity.
Business Insider: Why is your company growing so fast?
Matthew Prince: The honest answer is we don’t entirely know. We have done almost no marketing, we have a nascent sales team, but we have a large client base from Fortune 50 financial services to national governments across the world. Just this week, we added Reddit, the 17th largest site in the U.S. If we added up all the page views of our customers’ sites, then we would have over 400 billion page views a month.
BI: What's drawing people to your service?
MP: We made resources that were previously only used by big companies like Google available to everyone online. The initial interest in CloudFlare is for security, but that’s only for about 25% of our customers. Another 25% want to get more out of their infrastructure, and the rest of our users sign up because they want access to our analytics and other ancillary services.
BI: For those who don’t fully understand your service, what’s a good comparison?
MP: If you asked, “What company are you disrupting?” and if you made me just pick one, I think it would be Cisco. If you look at the entire Cisco line – routing and switching, load balancing, security, DDoS mitigation, performance acceleration, all of these functionalities – that’s what CloudFlare is doing. But instead of selling you a box to do that, we’re providing you a service, which is extremely easy to provision and deploy. It’s the same as Amazon Web Services taking, for example, what HP used to sell you as a box and deploying it as a cloud service.
BI: I’m still confused. So your service basically builds a cloud firewall in front of your clients’ websites and protects it from attacks?
MP: That’s actually only for security, which is a meaningful part of the business. But you first have to understand how the current Internet business is changing. There are three core tiers to any Internet infrastructure. The base at the bottom is the store and compute level. In the past, HP, Dell, EMC, IBM and thousands of different companies would sell you a box and you would store your data there. Now, we’ve got AWS and god willing someone else, but we’re not going to have thousands of different vendors anymore. It’s going to be a relatively limited number of vendors dealing with enormous amounts of data.
The next level above that is application. Once upon a time, there were really three companies that controlled most of the software application revenue in this space: SAP, Oracle, and Microsoft. Great fortunes were made for these companies. They had these bundles of applications that were used to perform a whole bunch of different functions. The enterprise would buy the Oracle suite and then use its database, CRM system, and accounting features in a single package. And it took forever to employ all of these applications, but you kind of got locked in to whatever bundle you bought.
What’s happening now is that these bundles are getting unbundled to smaller parts. So you got Salesforce, which is doing CRM, Box for collaboration, NetSuite for financial reporting, and a million others.
So instead of a really small universe of companies that control the applications, now it’s getting blown up to thousands and thousands of companies specializing in particular niche of all things.
Q: And what does that have to do with CloudFlare?
MP: On top of all of this, which I call the ‘edge,’ a whole bunch of [specialized computer] boxes used to exist. So think about what Cisco or Juniper makes, that has a firewall in it. There’s a whole bunch of companies that are making those boxes that sit on the top ‘edge.’ That’s what we’re building - but in the cloud.
We’re taking all of this functionality, and a big part of it is firewall and security, but it’s also performance and load balancing and switching and routing, doing all of that. You can take CloudFlare’s service and stick it in front of Salesforce or Workday or Box’s servers. CloudFlare can sit in front of it and do all the functionalities that you used to have with the hardware companies. We’ve built data centers all around the world that sit between users of websites and the actual services, so instead of you having to actually buy a box for this, you could just deploy our service.
BI: Tell me more about the security part. How effective is CloudFlare against hackers?
MP: About 1 out of every 20 web-requests pass through CloudFlare. So you probably have used our network hundreds of times in the last 24 hours, without even knowing it.
If you’re an attacker, we’re an incredibly frustrating thing because we help stop those attacks from ever hitting our clients’ infrastructure. We actually see hackers who advertise services to launch DDoS attacks on behalf of others say they’ll charge 20 to 30 times more or not even do it if it’s against CloudFlare.
BI: What attack or client do you remember the most?
MP: We work a lot with an organization called the Committee to Protect Journalists. This is an organization that protects journalists from being kidnapped or something, or helps those at risk when publishing controversial stories.
So the director came in to our office with three African bloggers. One was from Ethiopia, the other was from Angola, but they wouldn’t tell us the third one’s name or where he came from because death squads were hunting him down in his home country. All three of them came up to me and hugged me, saying, “We couldn’t be doing what we’re doing without you, because the government’s trying to silence us. They’re trying to shut us down and launch attacks, hack our servers. CloudFlare stands in front of it and is able to make sure we stay online.”
That’s a pretty powerful thing.
BI: What are some the trends you see in the cyber attack space?
MP: There’s definitely an uptick in the number of attacks targeting the DNS infrastructure. DNS is what takes Amazon.com or Businessinsider.com and turns it into an IP address. If you can shut that down, then it can shut down the effective ability for anyone to get to a website. And I think we’re very good at dealing with it.
There’s also a lot of creativity on how hackers use other people’s resources to help launch an attack. We’re seeing old Internet protocols, like NTP, which stands for Network Time Protocol, exploited to launch these very high-scale attacks. The attacks we see have gotten over 400 gigs/second, and those are some of the biggest attacks that we’ve seen.
BI: In 2012, rumor was some VCs were offering to invest in CloudFlare at a $1 billion+ valuation but you accepted a $50 million investment at a lower valuation. What can you tell us about that?
MP: We’ve actually never maximized our valuation. Our last valuation, if it wasn’t the lowest valuation, it was close to it. But we really wanted to have Brad Burnham from Union Square Ventures, because he’s just a really deep thinker on the future of the Internet and how things work. Just maximizing valuation has never really been the primary driver for us than making sure we could find the right people. It’s better to be long-term greedy than short-term greedy.
BI: What’s next? An IPO?
MP: We’re cash flow positive now. So we get to choose our own destiny and figure out what it is that we want to do next.
But if you want to see what our roadmap product line is, just kind of look at the entire Cisco catalogue. And say how could this become a service? And if we don’t have it already, then that is probably something that we are working on. We still admire Cisco, and we think they are making great hardware. But we just want to become the service version of that. We think that’s a really attractive business.
Superstar venture capitalist Peter Thiel has strong opinions about the tech business and fashion. In Thiel's new book, "Zero To One," he reveals his venture fund's policy on suits, to never invest in a tech CEO who wears one, The Economist reports.
Thiel, an early investor in many successful startups, including Facebook, Yelp, and LinkedIn, says his trick about suits saved him from making bad gambles on clever businessmen trying to compensate for weak products.
"Maybe we still would have avoided these bad investments if we had taken the time to evaluate each company’s technology in detail," Thiel says in his book. "But the team insight —never invest in a tech CEO that wears a suit — got us to the truth a lot faster."
Thanks to startup culture, the "kid in the hoodie" is becoming the gold standard for startup leadership, especially when searching for funding. Last week, Wired reported on several women who found trouble when seeking funding for their startups. One was told to "hire a young guy in a hoodie."
When you're an entrepreneur deciding what type of business to start, it's commonly advised to "do something you love."
But what if you don't know what you're passionate about?
Noah Kagan, the founder of a product marketing platform SumoMe, has a good one-question test that works almost every time:
Ask a loved one what you're good at.
"One of the easiest ways I’ve found [to learn what you enjoy] is to ask the people who know you well," Kagan told James Altucher in a recent podcast.
"Guarantee, if you ask your wife, or you ask your parents, 'Hey what things have I done that you’ve really liked?' or, ‘What kind of business can you see me starting?’ they’ll find it really obvious."
Kagan has used two other tools to help him get to know himself and his interests better: journaling and therapy.
"I think writing things down or journaling is a really powerful thing," Kagan told Altucher. "Self-awareness is a powerful tool I think is under-utilized. I do a lot of writing personally ... I also go to therapy. I say that out loud and it sounds like weakness, like 'Oh, he needs help.' But I’ve found it to be one of the most powerful tools I’ve used to invest in myself. Going to therapy, it's all about me. It helps me in my business and in my relationships and in my personal life."
There are plenty of rags to riches stories woven into our cultural consciousness, and many times we tend to idolize those who have succeeded at making their own dreams a reality. While success stories like that of Bill Gates are somewhat of an anomaly, there are many aspects of the entrepreneurial lifestyle that often get left out of the rags to riches, glitz and glam narrative. The following are just a few of the things you're not likely to be told about what it's like to be an entrepreneur.
You Have to Know How to Swim or Else You're Going to Sink
You're all alone when you start your own business. There's nobody else there to help or support you, other than perhaps a co-founder. When you work for another business, you have employees that are there to back you up and give you a sense of community, as well as to gauge the quality of your work against. However, working for yourself takes that away, and you have to learn how to be the best judge of things for yourself.
It's Going to Take Time to See Returns
You will have to be patient when it comes to making money. There will be a period of time, usually between six months and a year, where you will not see any returns coming in to you (at least not significant ones) while you continue to put money into your business. This is because you need time to drive customers in to your business, but regardless, it is a bit of a grueling process.
You Need to Hire Good Employees
The caliber of your employees, especially when your business is in its fledgling state, can make or break your success. Your employees need to not only know their stuff, but really be team players, because everybody is going to be counting on one another to keep the ship afloat for quite some time.
You Are Probably Not Going to Strike it Rich
Even though the rich entrepreneur is romanticized in our society, most entrepreneurs are the furthest thing from rich. If you have not gotten the picture already, there is a lot of out of pocket expenditure that comes with starting a business, and while you are still building a customer base, you are not likely to see any income coming back to you. Even when income does flow your way, it is not likely to be in large denominations, and this is something that you are going to have to embrace as a part of your lifestyle.
Everything Takes a Longer Time to Complete Than You Would Think
And the implications of this are far reaching. Putting in 12 to 15 hours a day to make your dreams a reality will obviously take away from other areas of your life, which can be difficult for your friends and family to understand at first. It also might be hard for you to understand, even if you accept the fact of long days; they are grueling when they stack up, but they are worth it when you see the fruits of your labor ripen!
But I did manage to build an awesome team of three tech-savvy co-founders, and I hope my advice helps you have similar success in much less time.
Finding a tech person
Good tech nerds can be found anywhere, but you won’t be able to tease them out if you are scared that they’ll steal your idea.
People steal ideas much less than you might think. Everybody already has their own ideas, and there’s a good chance that your idea is still immature.
If your idea is so simple that any developer could build it in a short time, wait until you find developers you trust, then share your idea only if they understand that you are indispensable for its success.
If your idea is complex and clearly relies on your expertise, people will probably understand that. If the idea is cool, they’ll want you to help make it happen.
Shout it out
And making the idea public will reduce the chances of people stealing it.
But you have to make the idea public in the right way. Make a video in which you clearly explain it. Explain what kind of collaborators you’re looking for, and clearly describe what you’re willing to give in return for their time and expertise.
The cooler your video is, the better it will work. Like this one, for example:
Even if your video sucks, like this one I made, it might still work:
That video helped me find my first co-founder.
Not just any tech person
You don’t need just any tech person; you need a tech person who wants to do startups. And this species of tech person can be hard to find.
Not every geek wants to leave his or her job and follow somebody else’s idea full-time. This might mean committing to one or two years of stress, worry, and very little money.
My advice: Look for startup-savvy tech people in their natural habitats: hackathons, startup weekends, and startup schools (like www.Innovactionlab.org). Start roaming all the techie events you can find. This is how I found and selected my second co-founder.
Such events not only allow you to meet face to face with the people you might work with, but they help you build a network that can be a source for references about prospective co-founders in the future.
Also, look for Facebook groups on startups. You might get lucky.
Plant seeds for later
You might try to persuade your friend with a full time job to join your startup. Software engineers eventually freak out and leave their jobs.
One day that person might freak out after the last quarrel with his Project Manager, quit, and call you to ask you if you’re still working on that weird idea.
This is how I found my third co-founder.
The part-timer problem
If your tech person is part time, then you need two tech people.
Simple, right? Just find another person who’s willing to work for free!
But no matter how hard it is, it must be done. When one person is busy the other might not be.
Startups solve problems. As a non-techie principle, you have to know the problem your product addresses better than anybody else.
Unless you have a one in a billion idea, your chances grow considerably if you have a strong area of expertise. This will give your company a strong competitive advantage, and it’ll make you more valuable as a co-founder.
Most startups are founded by college-educated twenty- to thirty-year-old male developers (or economists). But this can create a room full of people all with the same ideas.
Extraordinary ideas are often born out of extra-ordinary experiences, diverse backgrounds, and weird personal interests. Staff up accordingly.
The experiences you gain from volunteering, traveling, working part-time jobs, or chasing some obsession/passion you have, might end up contributing to great ideas that bubble up later.
Damiano Ramazzotti is the COO of Talent Garden, one of the leading co-working space networks in the digital sector in Europe. He’s also CEO of WeTipp, an online platform aimed at helping non-profits, grassroots organizations, and co-working spaces engage their members.
STOCKHOLM (Reuters) - Online music streaming service Spotify has re-advertised a job for a regulatory filings expert this week, half a year after the position was originally posted in February when it sparked speculation the firm could be preparing to go public.
The advertisement for an external reporting specialist in February was seen as part of preparations for a U.S. listing by the Swedish company, probably next year.
"This is the same role that was advertised back in February," Marni Greenberg, Spotify's director of communications told Reuters in an email. She declined to say why the position was being re-advertised or to give any further comment.
The August job ad said the company was looking for an "External Reporting Specialist", preparing it for international financial standards.
Both this and the previous ad said part of the job was participating in the company's Sarbanes-Oxley compliance. The Sarbanes-Oxley Act is the 2002 Wall Street reform law that sets standards for all U.S. publicly traded company boards, management and public accounting firms.
The company's global paid subscriber base had surpassed 10 million, it said in May. It is also offering a free music service and competition has become fiercer as tech giants Apple, Google and Amazon.com have all entered the music streaming business.
Spotify's competitor Pandora's shares, which almost tripled in 2013 and peaked at close to $40 in March this year, have since fallen back to $25 in a tough race to lead the music streaming industry.
The latest corporate filings, for 2012 in Luxembourg, where Spotify is registered, show the Swedish company more than doubled revenue that year to 435 million euros ($583 million), but had a net loss of 58.7 million euros.
(1 US dollar = 0.7463 euro)
(Reporting by Daniel Dickson and Mia Shanley; Editing by Mark Potter)
The list of absurd, non-descriptive startup names is a long one, and Fortune got a few second-graders to dissect what they think these silly company names might actually represent.
Let's be clear: While a lot of companies give themselves perfectly ridiculous names, it actually serves a legal purpose. The more novel a piece of intellectual property is, the easier it is to protect under the law.
Consider companies like Google and Yahoo. Their names provide no clues as to what the company actually does, but because they are so unique and singular, they become easy IP to protect.
Let's get right to the good stuff. Below are our favorite quotes from Fortune's entertaining Q&A with elementary schoolers providing their take on the startup name landscape. But it's only a sample. Be sure to read the rest on Fortune.
What do you think Jawbone sells?
"Bones for your jaw."
When you hear the company name Zoosk, what do you think of?
"Lightning bolts because Zeus is the god of the skies."
What do you think Zoosk sells?
"Air products, like an air conditioner."
Who uses Zoosk?
"Someone who is really hot at night."
What about the word “Uber” suggested [that the company sells burritos]?
"Not that much, but there are lots of types of burritos and that was the first thing that came to my mind that worked with Uber."
When your day at the office is ending, it's just beginning for another set of workers: the cleaning staff.
Cleaning staffs are often hired by buildings or companies through legacy agreements. There isn't some sort of app to help speed up the scheduling, management, or payment process between the cleaners and the offices who book them.
Often, companies have to hire employees dedicated to office management to oversee the process; they also handle day-to-day issues such as changing lights, fixing Internet problems, and stocking fridges.
Q (named after the Star Trek character and James Bond's Q Branch) is a software and management startup that wants to make it easier for companies to work with cleaning services and other service providers on a routine basis. Its mobile platform allows office managers to book cleanings, leave notes for the cleaning staff, assign tasks to be completed, and pay for the service all in one place. Q buys hours in bulk from cleaning services in the NYC area, then turns around and sells them to offices at a slightly higher price, for $25 an hour.
When a cleaning is booked through Q, the workers clock in on a Q-provided iPad in the office. They can check off what they've done (vacuumed floors, cleaned desks, etc) so the office manager can see. Offices are required to book at least 4 hours worth of cleanings per week on the platform. Q also has a network of local service providers (electricians, exterminators, etc) that can be booked and payed for through its mobile app.
Founded by Daniel Teran and Saman Rahmanian, Q launched this past April with 15 customers. The technology is used by companies like Uber, Elite Daily, and Flatiron Health, and Q estimates it will be used by over 100 offices by the end of this summer.
"Right now, no [office manager] really knows what they’re paying for," Teran says of hiring a cleaning service. "There's a paper list of things people say they’re going to do...We're creating an operating system for offices, providing the products, services and technology to make it easy to run an office."
Already, Q's looking at an annual run rate of more than $1 million. It recently raised a $775,000 seed round from notable angel investors including Behance co-founder Scott Belsky, College Humor founders Ricky Van Veen and Josh Abramson, Barkbox co-founder Henrik Werdelin, Max Burger and Jay Livingston. Path founder Dave Morin and early Facebooker Kevin Colleran also invested through their fund, Slow Ventures, as well as Panarea Captial's Len Blavatink and Alex Zubillaga.
Teran was the first employee at another New York City-based startup, Artsicle. He and Rahmanian first met at Prehype, a design and incubation shop that builds innovative new ideas for businesses. The pair got the idea for Q when they noticed how terrible communication was between service providers and their apartment buildings.
"I moved into a condo and we had really terrible service in the building," says Teran. "I started thinking about what building things in maintenance looks like. So we came up with the idea for an iOS dashboard."
"We start talking about what the problems were and communication problems with maintenance workers,"Rahmanian agrees. "We started off with an iPad in the hallway of the condo, that was our initial product. Then we had interest from office managers. So we set up a bunch of meetings switched from a residential product to office buildings."
MyClean is a similar mobile platform for booking residential cleanings in New York, but there didn't seem to be similar widely-used product for local businesses. So Teran and Rahmanian met with 30 local cleaning services to gauge interest and onboarded some of them to Q.
Q currently has 14 employees including a former Apple employee who leads its tech operations. The team is split between New York and Buenos Aires.
Eventually, Q wants to expand beyond cleanings to run more like one of its customers — Uber — with on-demand services for anything offices need.
Scott Belsky, an early investor in Uber, sees that promise in Q. "I love businesses that replace the pipes and upgrade the user experience for some aspect of everyday living — I call these 'interface layer' businesses," Belsky told Business Insider via email. "Uber did this for transportation. Shyp [another investment] is doing it for shipping. And Q is doing it for office/space management."
Belsky says that Q might look like just a cleaning service platform right now, but it has the potential to become a lot more than that.
"I was impressed by the potential for customers to rely on Q for other services such as ordering more office/cleaning supplies, handymen, etc.," he says. "The interface of Q has the potential to revolutionize many industries that operate underneath."
Ever since Hewlett-Packard began out of a garage in Palo Alto in 1935, it seems like the humble origin story is a fundamental part of Silicon Valley mythology.
Washington State University's Carlson College of Business compiled the below infographic on some of the most modest starts of tech power players now worth billions of dollars.
Check out how the founders of companies like Google and LinkedIn met, where they started their companies, and how far the companies have come:
When Bart Stein and Keith Rabois first met, Rabois was trying to buy Stein's startup, Stamped.
Rabois was COO at payment startup Square, but Stein and his co-founders decided to sell their company to their former Google boss, Marissa Mayer, instead.
"They were crazy enough to turn me down for Yahoo," Rabois says.
Stein says, "Square and Stamped were both in the local space, and Stamped had built a core technical competency in that area. We loved Keith and the team at Square but Marissa gave us an opportunity to build an office for Yahoo in New York City, which was too exciting an opportunity to pass up (and it let us stay in NYC!)"
Stamped was the first of more than a dozen startups Mayer acquired, including Tumblr and another Rabois-backed company, Qwiki. After two years, Stein left Yahoo to start his next venture and Rabois, now a VC at Khosla Ventures, was one of the first people he called.
Stein's new company is called, "Sup." It's a short video messaging app. You can "Sup" a friend. If a friend accepts your request, it turns on the video camera on their phone and you can see what they're up to for 10 seconds. The current product looks like a game, where you can control friends and tell them to take selfies, move left, right or forward with their cameras to see their view points.
At first glance, it seems like a trivial collection of all the hottest fads in tech startup land. It has a short name like Yo. It does short, ephemeral video messaging like Snapchat. It's social, like everything else. But the long term vision is to let users see what's going on anywhere in the world in real-time by utilizing millions of cameras that aren't in use. Instead of reading tweets about what it's like in Gaza, for example, you could 'Sup' someone who's there to see what's going on, like virtual teleportation.
That long-term vision is what convinced Rabois to invest. It didn't hurt that Stein's pitch also made him "giggle."
During his pitch at Khosla Ventures, Stein says he had a friend strategically planted near the Bryant Park skating rink in Manhattan, ready to dive onto the ice and do something ridiculous the moment Stein sent a "sup" invitation. Stein also demonstrated how taking over someone's point of view could help Khosla spy on other VC firms, which Rabois appreciated.
"They jokingly said, 'You know what, we can get people to hang out in the parking lots of other VC firms, so you can see which entrepreneurs are pulling up to places like Sequoia Capital,'" Rabois says. "We're a competitive group, so it was funny."
They jokingly said, 'You know what, we can get people to hang out in the parking lots of other VC firms, so you can see which entrepreneurs are pulling up to Sequoia Capital.'
Stein admits the long-term vision for Sup might be a bit ahead of its time. He says he likes to pick startup ideas that "skate in front of the puck."
Rabois isn't worried about Stein's ambition, even though startups that are too forward thinking have been known to die.
"I don’t believe startups are ever too early," says Rabois. "Entrepreneurs put the world where they want it to be. That’s the number one job and responsibility for founders — to create product market fit today, not in the future."
Here's how to use Stein's new app.
When you open Sup, you can add friends from your mobile contact list or select a suggested person to video control (including Sup's founders, who are using their current mobile phones to deal with customer support issues via text.)
When you send a Sup request, Sup notifies the friend you want to start a video session with. It pings you when your friend has accepted or declined the request, and then connects your two devices in a FaceTime-like call.
But instead of both people being able to see each other's camera view-point, only the person who requested the conversation can see a video feed. The friend then becomes a camera man, taking directions to turn left or right, forward or backward, however the "Supper" swipes their finger on the screen...
A friend can also instruct the camera person to flip the view and take a selfie, or tell them to make certain faces. The video chat ends after a few seconds, or whenever you hit the "X" in the top left of the screen.
"Sup is unlocking the potential of 500 million live video cameras sitting unused in our pockets every day," says Stein. "Right now, you can use it with your friends. In the future, you'll be able to ask anyone to jump into their eyes, anywhere in the world."
Ryan Allis sold his startup, iContact, for $170 million in his 20s. A few days ago he turned 30 and he published a 1,284-slide PowerPoint on how to win in life, business, and the world.
So as not to break our CMS, we're publishing all the slides in three installments.
Installment 1 is 566 slides on how to win at life, and it can be found here.
Here is part two: how to win in business.
You can also skip ahead to installment 3, How to win in the world, according to Ryan Allis.
See the rest of the story at Business Insider
When I left New York for a three-month business trip to San Francisco, I exited my Upper East Side apartment at 5 a.m., held my hand out on First Avenue, and had a cab to Kennedy Airport within seconds.
It’s the kind of convenience I’ve become accustomed to after living in New York for over six years. I can get just about anything I want, whenever I want, all within a few blocks of my home. There’s a Starbucks 184 feet away from my front door. There’s a classy Italian steakhouse across the street. If I’m feeling adventurous, I can go to the other Starbucks about 1,000 feet away.
It’s not like that in San Francisco, a city where I now have to walk at least 15 minutes up a steep hill to get to my nearest grocery store. Plus, everything closes early. If I want a pint of Ben & Jerry’s at 2 a.m., I can’t just walk to my corner 24/7 bodega like I could in New York. I’m left unsatisfied and ice cream-less.
But San Francisco is also the largest incubator of tech startups in the country, a place where every entrepreneur with even the most basic coding knowledge is trying to turn some industry on its head through an app. Increasingly, that has applied to real-world tasks like cleaning, shopping, and eating. In my time here, I’ve still felt right at home by outsourcing a lot of what I do to others by using my smartphone.
New Yorkers are probably already familiar with the food-delivery service Seamless, but in San Francisco there’s a Seamless-like app for everything. Your laundry. Housekeeping. Groceries. Car rides. Even booze. And it all comes almost instantly.
Many of these services are so new that they’re being tested in just a few markets. And since a lot of them are based in San Francisco, they're available only here. Over the last few weeks I decided to satiate my need for instant gratification using as many of these apps as possible.
Food was the obvious first step. Seamless and its sister app, GrubHub, are also in San Francisco, but many delivery places don’t work with those apps, and if they do, they charge you an absurd minimum before you can even place an order. I just can’t eat $30 worth of Chinese takeout.
A friend told me about Sprig, a startup that delivers gourmet meals to your door within about 15 minutes. Each day, there’s a limited menu of three or four dishes cooked up by the startup’s own executive chef. You tap what you want, enter your credit card information, and your food is on its way. I ordered a Thai noodle dish with pork, and it was at my door 12 minutes later, much faster — and healthier — than ordering a pizza. The delivery person handed me my order along with a free truffle for dessert and that was it. No need to exchange cash. The tip was included. And it was only $12.
I also tried Washio, a service that will pick up your dirty laundry and dry cleaning and have it back to you within 24 hours. Like Sprig, you manage Washio through a smartphone app to schedule your pickup and drop off times. Washio has an army of contractors — or, in startup parlance, “ninjas” — who swing by your place to get your dirty clothes. They also give you a free cookie with every pickup. The first time I tried Washio, my ninja gave me a bonus — a free pair of underwear as part of a cross promotion with another startup. (Yes, you can also get on-demand underwear in San Francisco.)
There are others. I used Handybook to hire someone to clean my apartment. I used Postmates to hire someone to pick up food for me when a certain place couldn’t deliver. And, of course, I frequently used Uber and Lyft to call a car whenever I needed to go somewhere because San Francisco’s public transportation system is notoriously awful. There are so many of these services that I had to create a special “On Demand” folder for all of them on my iPhone.
It’s worked out well so far. My laundry comes clean, ironed, and perfectly folded. The food is yummy. I never have to fumble with cash to pay a cab driver. Plus, many of these services are cheaper than or at cost with what I’d normally pay in New York. In many cases, using these services for the first time felt as transformative as using the iPhone for the first time. Everything just worked. “Why didn’t anyone think of this sooner?” I thought as I munched on my free Washio cookie.
The only negative experience I’ve had so far was with Instacart, an app that sends a personal shopper to a nearby grocery store to pick up whatever you need and deliver it to you within an hour. It works as advertised, but the prices are marked up, and customers run the risk of not being able to get what they want because the store is out of stock. Instacart’s shoppers try their best to find similar items, but in my case I couldn’t justify buying a five-pound package of bananas instead of a normal bunch. It feels less like Instacart isn't so much a handy service but a way to hack a grocery store to make money by marking up yogurt and eggs through an app.
To Instacart’s credit, a representative told me the company has agreements with the stores its contractors shop at. Plus, contractors will go out of their way to get you what you want, even if that means going to a second or third store to find it.
But it does demonstrate the downside to the so-called sharing economy and on-demand services. The customer gets what she wants, but many of these startups still rely on a network of contractors who are paid only on commission and tips. TaskRabbit, an app that lets you hire a worker to do anything from mow your lawn to dress like an elf and dance in front of your coworkers, recently tweaked the way it assigns tasks to its contractors, which caused many to complain that they had essentially been put out of work.
It’s an imperfect system, and one I doubt will be able to properly scale in many industries, especially in suburbs and rural areas where it’d be tough to find contractors willing to be glorified personal assistants for strangers. Then there's the thorn of labor issues — benefits, appropriate pay, and so on. Plus, there’s a notion here that everything, even basic stuff like fixing a leaky faucet can and should be disrupted by technology. Based on my experience so far, I don't think that's the case. But boy is the VC money flowing to startups trying to disrupt normal industries anyway. Those frothy times aren't going to last forever.
Still, it works in San Francisco, and likely will in other dense urban areas. I think something like it is a taste of things to come.
SEE ALSO: 13 cool things Siri can do for you
Tech reporters frequently get the following question: “What advice would you give to startups that are trying to pitch you?”
It sounds counter-intuitive, but the honest response is: “Don’t talk to me.”
There is a place in the tech world for press. When done well, it introduces innovative new ideas, shares lesson-filled stories of failure and success, and keeps companies and the people who run them honest. But most startups don’t need, and shouldn’t want, to grace headlines.
A lot of startups think they need press to get off the ground. If they don't announce their new consumer startup, how will consumers know to start using it? How will they justify to friends, families and employees that they're building something really cool?
But in most cases, press creates only a temporary spike in traffic or downloads, then everything normalizes and you're back to what you should have been doing the whole time: building a business.
There are a few reasons most startups don't need press when they launch:
Scott Belsky, an angel investor in companies like Pinterest and Uber, often advises startups not to announce their launches. Instead, he tells them "news" can be written at any time; it doesn't need to be announced right when something happens and the timing should be strategic.
Belsky calls the desire to announce things prematurely "business narcissism," and it stems from founders being so wrapped up in their products that they think the whole world can't wait to learn what they've been working on.
Brook Hammerling, founder of Brew PR, says she's seen many startups make this mistake.
"It’s a head scratcher, but I’ve seen so many startups determined to stick to their timelines that they’ll unveil something before it works," Hammerling tells First Round Capital, in a post for the firm's site on this topic. "Then all of the bad press and feedback sets them back six months or more. You have to be patient. If you have to pull a plug, pull the marketing plug. Nobody’s setting those deadlines but you.”
One example of a startup that botched its launch news then got smart about press is Bustle. Before Bustle launched, its founder Bryan Goldberg wrote articles on PandoDaily teasing the company: "I can’t wait to launch my next site. It’s going to make me rich(er)." In August 2013, Goldberg personally wrote Bustle's launch news. Again, the press didn't go over well.
When Goldberg finally stopped talking and started building, things got a lot better. Bustle quietly reached 1 million unique visitors within three months of launch. A few months later, when Bustle passed 11 million monthly uniques, Goldberg opened back up to the press, and the company's news was much better received.
There are rare cases where press has put — and kept — startups on the map. Uber, for example, became a beloved tech company the second it launched thanks to support from influential writers such as TechCrunch founder Michael Arrington.
"Could UberCab have asked for better PR?" A Quora user asked in 2010.
"No," CEO Travis Kalanick replied. Today, Uber is worth more than $17 billion.
Email app Mailbox is another startup that cleverly used press to hype its way to a quick $100 million exit. It created a waitlist then got the press to write about the app to build up demand. Ultimately, more than 500,000 people signed up to download the app.
Similarly, Secret and Instagram were able to woo influential media members into supporting their startups early on, which created buzz that catapulted their businesses.
But in the case of Mailbox and Instagram, those products arose from the ashes of startups that struggled to get noticed by the media or users, Orchestra and PicPlz respectively. Secret is still relatively new, and it's unclear if it will break out of the Silicon Valley echo-chamber, which is where another buzzy startup, Path, has struggled.
Press with a purpose can be good for startups. If the goal is to raise money, then getting TechCrunch or Pando to cover a launch could attract VC readers. If a startup needs advertising dollars, a piece on AdAge could do the trick.
But if you ask yourself, "Why do I want press?" And the answer is, "I don't know," then spare everyone — especially your startup. At least until it's really ready for prime time and you have metrics to prove it.
"It’s hard to tell founders this kind of thing,"Hammerling tells First Round Capital. "It’s like telling them their child isn’t ready for an honors class yet. They want to fast-forward...People have a tendency to think today's news is just tomorrow’s trash, but not now. The internet is forever and people have long memories."
Four years ago Spark Capital's Andrew Parker made a chart, and it seems to go viral every year.
The chart is a screengrab of Craigslist homepage and a list of valuable startups that attack specific functionalities within Craigslist. For example, job site Indeed was acquired for about $1 billion and is competitive with Craigslist's Jobs section. Etsy is a $1 billion-plus company that competes with Craigslist's For Sale category.
"Some of [the startups] have IPO’d," Parker says. "Others are out of business. If you could have made investments in all of these companies back in 2010, you’d have a portfolio of 34 companies with roughly 6-8 billion dollar outcomes, which would likely be one of the best venture funds of the decade."
Here's the chart:
Thumbtack, a company that connects users with professionals in their area, just raised $100 million in a round led by Google Capital, the company's later-stage investment arm.
Thumbtack says it helps users complete more than 3 million projects per year, with listings for a wide array of jobs, like mural painting, voice coaching, yoga lessons, photo shoots, moving help, and more.
"As a consumer, it's the best product I've ever used to hire local professionals,"David Lawee, General Partner at Google Capital, says in the press release. "The bigger story, however, is the potential for small businesses: Thumbtack has a real opportunity to transform how local professionals find new customers."
Sequoia Capital, Tiger Global Management, and Javeline Venture Partners also participated Thumbtack's Series D round, and the company has raised $150 million to date.
There are benefits to being an angel investor. They can be the first money into companies that eventually become enormous, such as Uber and Airbnb.
For example, the first investors in Uber put money in when the company was only worth $4 million. Now Uber is a $17 billion+ company.
But as soon as a company becomes big enough to attract later-stage VCs, some of these angel investors are getting screwed over by firms with a lot more clout and cash, some angels say.
"Dear Series A/B investor: if [my fund] was in a prior round and you squeeze us out of a new round, you are NOT our friend," 500 Startups' Dave McClure tweeted last week. "Really f---ing tired of bigger investors pressuring founders not to let prior investors get pro-rata."
"Pro rata" is a concept in many private financings. It gives early investors have a right to buy a number of shares in a next round of financing to maintain the same ownership percentage they had when they first invested. So if an angel investor puts in $500,000 and owns 10% of the company, then the investor can put more money into the next round to maintain that 10% ownership. Angel investors have to have deep pockets to be able to match subsequent rounds however, which can require $1 million+ size checks to stay in the game.
The extra shares that the early investors buy come with a cost. When early investors maintain their pro-rata stakes, one or both of two things happen: 1) New investors get a smaller stake in the company than they might like (because existing investors are buying some of the newly issued shares), and/or 2) existing investors, including company management, suffer more dilution because the company issues more shares. As a result, there are often negotiations around pro-rata allocations, with each class of investor lobbying for its interests.
Recently, say some angels, some big VC firms have begun to put pressure on company founders to NOT give early investors the chance to buy their pro-rata stakes — either by persuading them not to exercise pro-rata rights, if they have them, or by not even telling them about the new financing in advance. This prevents the angels from maintaining their stakes in their successful portfolio companies—the ones that raise additional financing. This, in turn, reduces the angel investors' long-term returns and makes the profession more risky.
Here's how angels get squeezed out:
"A common scenario is either 1) seed investors have no pro rata rights and are fully excluded [in follow-on rounds] or 2) they have pro rata rights but the A/B investors say they won't do a deal unless the founder forces earlier rounds to not take their pro rata," an early stage investor explained to Business Insider via email.
So who's right, who's wrong, and who's getting screwed?
The Angel's Perspective: "I Found It First"
Since angel investors are the first to bet on startups, they want to make sure they're rewarded for that risk.
"I feel like I took the biggest risk coming in at the very beginning and with that I want to continue keeping my percent of the company," angel investor Joanne Wilson writes on her blog. "Most VCs use documents on their Series A that say unless someone (angel) invests a significant number (say $350-1M) then they cannot continue with their pro-rata rights on the next round. I think it is absolute bullshit. The VCs should allow the angels to continue to put in their pro-rata share if they want to."
Another early-stage investor referred to some large VC firms as "assholes on the cap tables" who "have no respect for the people who worked hard to help the founders create the value to date."
Some VCs are 'assholes on the cap tables' who have no respect for the people who worked hard to help the founders create the value to date.
One firm this person named, Andreessen Horowitz, denies the claim. "We always try to be fair to early investors, especially angels," Andreessen Horowitz partner Margit Wennmachers tells Business Insider. "Most of [our partners] were angel investors at one point. I think they get that point of view from personal experience."
Sometimes, its not an VC's fault when an angel investor gets screwed over. Founders can be so eager to work with a prolific VC that they forget to look out for their early supporters.
"Founders at that early stage are often deer in the headlights when a big famous firm of blue shirts and khaki pants makes a request [to not accept an angel's pro rata rights]," an angel investor tells Business Insider.
The VC perspective: "We want a big chunk and we don't care how we get it"
VCs know what percentage of a startup they need to own for their investment to be worth it.
"Over 40 years of VC history it's been proven that if you don't own 20% or more in a Series A, you're just not going to have a successful fund," one investor tells Business Insider.
But to angels, these high percentages seem ridiculous and greedy.
"One thing these investors care about more than anything else is total ownership percentage," one angel tells Business Insider. This person recounted a time they were working with a VC who was a new partner at a fund. This person confided that "all he was judged by in the partner meeting was his percentage of ownership. Not the price. Just did he manage to get 25% or not."
Some top-tier firms admit they require higher percentages than others for their "premium" services. One VC says paying to work with a big-name firm over a cheaper, no-name firm is like choosing to drive a Porsche instead of a Toyota. When you consider that a VC-startup partnership can last ten years, a lot of founders will choose to pay up, even if it comes at an angel's expense.
"I get myself out of the middle," one VC explains. "I make the entrepreneur a post-money offer and say hey, 'We're going to invest $5 million on a $28 million post-money valuation. What I care about is my percentage. An entrepreneur can take more money from anyone else they want, but it comes at their expense. It dilutes them, but my negotiation with the entrepreneur is already complete."
The Founder's Perspective: I Don't Want To Get Diluted
VCs might apply pressure, but the decision to honor an angel's pro rata rights ultimately comes down the founder. The founder has to decide how much dilution he or she is willing to take, and how much each angel has contributed to the company's early success.
Sometimes angels who haven't done much for companies try to overstep their legal rights.
"Most of the time, a VC will be accommodating to an angel's pro rata rights," a VC tells Business Insider. "But if an angel comes out of the blue and hasn't negotiated those rights previously then says they want them we say, 'No f---ing way.' Often, they haven't been cheerleading the whole time."
If an angel has been very helpful to a startup, some founders will go to bat for them and ask VCs to make room in the Series A or B rounds.
Airbnb CEO Brian Chesky, for example, fought to get pro rata rights for Keith Rabois and Kevin Hartz when Greylock led the first big round. Airbnb has gone on to raise hundreds of millions of dollars and it is now worth $10 billion.
"That's common to see," Rabois tells Business Insider. "When a specific person has been helpful, the founder will ask the VC, and almost everyone will be fine with it."
It's hard to please everyone though. One founder who has worked with both angels and large VC firms says keeping investors happy is "always a dance."
"A newcomer is usually investing because they're very excited about the startup amd they want to get their chunk of it — they don’t want to do all the work and only have a small chunk," the founder tells Business Insider. "If you have deep-pocket investors already in, they want to maintain their share and support it, too. You have to balance everything together and you have to try to do the best by everyone."
When the balance gets too difficult, VCs often make good scapegoats for founders. It's easier to say a founder is feeling pressured by a VC then to tell an angel they haven't been helpful and don't deserve their pro-ratas.
McClure acknowledges that sometimes, angels could do more to make sure they don't get diluted.
"It's unclear whether the responsibility is on the founder, new investor, or even us for not working harder on behalf of the company," McClure tells Business Insider of being left out of deals. "In fairness to founders, if they don't feel investors are working on their behalf, they have no moral obligation to offer allocation to previous investors."