Jeff’s Posthaven

99% of companies should not raise capital from venture capital firms.

But many founders who are in the 99% thinks they are the 1% who should. Sometimes investors think the same way and that may spell trouble many rounds or years later.

Work with your cofounders, advisors and investors to make sure where you stand.

If you are the 99% (and there is absolutely nothing wrong with this), and want to be the 1%, work hard and leverage on your team, capital and strategy (timing/speed), and execute to address larger markets (Y-axis) and increase the sophistication of your MOATs (X-axis). See http://reactionwheel.net/2019/09/a-taxonomy-of-moats.html.

Once you know who you are and what you will be in 7-10 years will you be able to honestly approach the right investors who fit you. 

Accelerators should exist in every country where a startup ecosystem has been initiated whether they raised private capital to operate or are government supported, here are a few tips for operators of accelerators (especially in emerging markets):

1. Go sector focused if you can as they are more dependent on being able to localize and where the power of local networks are more important.

2. Work on both inbound and outbound recruiting of founders. Leverage on PR, both on and off line marketing activations to improve your funnel. After knowing the profile of founders you would like to fund and assist, you can use Linkedin to do an outreach campaign to have them apply direct or engage with your team in a call to find out more. Work on improving your funnel.

3. If you are an agnostic accelerator, be as close to market standard as possible with your investment amount and terms. Best teams will either raise money on their own or apply to YC or nothing, so you need to be able to stand toe to toe when compared.

4. Set up an advisory panel of honest and committed founders and investors to help you select your final cohort. Diversify this panel of advisors to get the most honest set of feedback as possible. This will improve your selection of founder types, and ideas. In emerging countries, almost all ideas are copy-cats, the more data you have in your hands the easier to select the final cohort that will result in success.

5. Run a rigorous feedback loop during the program, focusing on company building exercises, and making sure they are venture back-able. Work with more people in the investment sector from angel, seed to Series B/C to help select, critique and refine models as they move along the program. This will help increase the funding rate post graduation. Also cut founders that do not fit your own criteria as an accelerator early on, ideally within the first 2 weeks.

6. Work on a sustainable model financially so you can build a brand to carry the product forward. Sometimes you rely on the investment model (e.g. x% of investment will be paid as a program fee or a put option to sell your stake at Series A), others may resort to doing consulting gigs with corporates and/or raising private capital or sponsorships to self sustain. There are various models, make sure it suits you and your team. 

Hope this helps any new or existing programs.

In the next many months, this might be the new normal. Meeting founders for the first time over Zoom and making bigger efforts with personal reference checks. Perhaps, if investors have a wide network or have team members in various outpost offices (for e.g. for us in Singapore and Jakarta) and already know potential founders before hand, the time scale will stretch out less.

How do you read people over video within 15 mins?

Using voice, and verbal cues as signals to judge people.

How do you source and rely upon on your network’s references?

New skills need to be acquired to collect such data for decision making.

Finally, trends for your business will accelerate, which means the traditional way of managing venture capital funds will change quicker sooner. Whatever you think that will happen in 10 years will happening in the next few years. Be prepared.

Points to note when you are fund raising:

1. Do your homework - Your job is to get your fund raising materials (deck, financials) to a level that is ready to be communicated and consumed. It will constantly be updated as you move along in your business as well as while you are pitching. Research your target investors really well to better optimise conversion rates (which stage and average check size, geography (your beach head market vs your eventual markets), sectors, do they lead or follow, post investment engagement with the company etc.).

2. Have a different mindset from selling - Your job is to get your "nos" as quickly as you can as you go down the list of investors to reach out to as opposed to trying to convince an investor and wrestle them down to a "yes". Investors know what they like to invest in, that is their day job. From your own research and interviews with founders who received investments from investors, you are only maybe 70% of the way there as far as you how much you know an investor and what do they like to invest in "at this time", it will never be apparent. 

3. Start with 3 warm up pitches followed by 7 ones - Use the first 3 pitches to hone your real-time pitch down, have a cofounder be in the room as well to jot down frequently asked questions and watch for any visual cues that signals that your pitch is weak or strong. If you get 10 straight rejections, stop fund raising and regroup with your team, advisers/investors and find out what is wrong. Sometimes its you, the targeted investors, or its because the investment environment has changed. Find out the cause and tweak (A/B test it) your approach again. Sometimes you need to hit a different set of investors to talk to, and most times it is not your pitch style or flow. And of course, there are times when the reason is you. But trust me, there are enough investors out there now to invest in all types of founders, so just keep going.