At Splash Oakland, Poler shares lessons and advice from two decades of investing
Here's the most popular Breakout Session talk at Vator Splash Oakland 2015.
Ariel Poler, one of the more prolific early angel investors in Silicon Valley, gave a straight-shooting talk on what great entrepreneurs have in common to what to consider when fundraising.
This year's Vator Splash Oakland 2015 had three Breakout Session tracks. Track 1 was on "Entrepreneurship - tips on scaling, fundraising, assessing risk, etc." Track 2 was on Investors - tips on how to strategies. Track 2 was the "Startup Toolkit" track, with speakers giving advice on legal, accounting, workspace, marketing and more technical questions most every entrepreneur faces.
Here's highlights from Poler's standing-room only segment [slightly edited].
- The importance of chemistry
Smart entrepreneurs are the ones who target the right investors. Suppose you go out on a date. You’re worried about whether you should go out to dinner for Chinese or French. But if there's no chemistry between you and your date, it doesn't matter where you eat. Same thing with investors. If you get a receptive investor, you're halfway there. As investors, we see so many companies. I do about five a year, and I see 20 I really like - the ones that get me excited. Sometimes they don't meet our check list. But sometimes, it doesn't matter.
- Shouldn't financials matter? Why is chemistry so important?
It depends on the investor. But ultimately, you never know where these deals are going to go and many deals go south. So if the deals go south, at least you'll have liked working with them. For me, life is too short. I want to hang out with people I enjoy working with. For some people and in later-stage startups, it’s a matter of the numbers.
- Don't just sell your product
Often entrepreneurs sell their product, when they should also be selling their company. Often they don't know how to explain unit economics, and this matters.
- Excuses just means they won't do the deal
Many entrepreneurs hear excuses, like "You're too early," or "The deal is too small," or "I want to see more customers, revenue and technology." I often see entrepreneurs who get those answers and then try to fix it. But ultimately, these investors are just trying to be nice, and keep their options open and they're not interested. So move on. Do try to get some signals through back channels to see what the investor is really thinking.
- Getting checks from Angels vs VCs
There's no black and white distinction. Entrepreneurs tend to be concerned about whether they should go to an angel or a large VC. But some of the largest VCs write the small checks. Entrepreneurs should just look at the individual they want to partner with.
- Reasonable cap for a convertible and typical seed range?
Typical seed range today is between $3 million and $8 million. Some YC companies can get a little higher, even if they're so young. But it's more about the percentage the startup is giving away. If you're raising $500,000 at a $4 million pre-money valuation, that's about 12% of your company. If you're raising $1.5 million at a $4 million pre, that's 27%. But if you're raising $1 million at a $15 million pre, it's a lot less to your early invesotrs. That doesn't seem fair.
- Speed is overrated
Most successful startups understand that building companies is not a sprint. Back in ’95, at my first company, we thought we had six months and it’d be game over. But yet other competitors were born years later and had IPOs. So it's not a sprint. Still, you can't move slow. You need to be fast about refnining your course.
- Risk is your friend
I stole this from Ali Partovi, who spoke in Vegas about how do replicate Silicon Valley. He said one thing needs to be understood and that is the way Silicon Valley residents think and deal with risk. The way we deal with them is that we take them. The way we hedge them is over time. We don't split our time doing multiple things to hedge our bets. We go all in and experiment and make bold moves. It's like going after target markets. You don't go after five, you go after one. So for risks, you take them. If you fail, you move on, and take another.
- Don’t believe what you read
Most successful stories are made with 20/20 revisionist hindsight. And there's no such thing as an overnight success.
- Hire slow. Fire fast
Probably the most important lesson is in hiring. My rule of thumb is that the moment you think someone might not be working, if that crosses your mind once, then the odds are that he/she won't work. Be thorough with references. Some questions you can ask are: Can you be specific about how hard this person works? What could this person improve upon? Can you rank this person from 1 to 10? Would you hire this person?
Splash LA 2015 is around the corner. We already have a great lineup. Check it out here. Register early for Super Early Bird tickets. And if you want to apply to present in the startup competition, apply here.
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Joined Vator onEntrepreneur, mentor and investor. Founder of IPRO, Topica & TextMarks. Director of Freedom Financial, Strava, StumbleUpon, LinkExchange & Odeo. Investor in AdMob, SlideShare, Optimizely, Thumbtack, Flixster, BrightRoll... Into Human Augmentatiion.