Tuesday, August 6, 2013
How to Pitch a VC and Not Piss One Off!
Jessica Bruder Inc.com
Mark Suster explains what to do--and not to do--during your first meeting with a VC
Don't "tell and sell." The most effective pitches are two-way conversations. So stop talking once in a while and elicit feedback, Suster advises. Raise open-ended questions. Allow VCs to challenge you, and don't respond defensively. And if you don't have an answer right away, be honest. Use it as an excuse to follow up after the meeting.
Point out the elephant in the room...Handle any uncomfortable issues that are public knowledge head on. Maybe you got some bad press or a founder quit. Better to raise the obvious questions yourself--and be armed with answers--rather than let suspicions linger.
...but keep your skeletons hidden--at first. Speak up about public problems, but don't drag out your skeletons during a first date with a VC.
You're ethically obliged to address hidden problems prior to getting funded but not during the initial moments of courtship, Suster says. Just be sure to raise the issues with your sponsor before attending a full partner meeting.
Ask for referrals. If your company shows promise but isn't the right fit, many VCs will happily refer you to more suitable firms. So be sure to ask for referrals at the end of your meeting.
And Here are Sure Fire ways to Piss a VC off
Don't keep in touch. "Some people think, Well, I update the VC when we have board meetings," Suster says. "But when we have more context about what you're working on in a shorter cycle, we can be more helpful." Early-stage companies, especially, should send their VCs a brief summary every two weeks, charting recent accomplishments and short-term goals.
Focus on one partner. The venture firm that funded you may have half a dozen partners or more. Only one sits on the board of your company. "Almost all entrepreneurs I know just manage that one relationship," Suster says. "That's a big mistake. You have to build a relationship with all the partners." After all, funding decisions are made collectively.
Make it all about the money. Your venture capitalist isn't a wallet on legs. If you treat him or her like one, you're missing a valuable opportunity for mentorship. "Each partner has their own relationships, their own unique insights and experiences," Suster says. "That's a benefit to you. Not tapping into it is crazy."
Inc.com BY JESSICA BRUDER
Mark Suster is running late. Sitting in his Mercedes-Benz CLS63 AMG, he surveys the traffic on West Sunset Boulevard through mirrored sunglasses. When his cell phone rings, Suster apologizes to the caller, an up-and-comer in Silicon Valley. "I'm sorry," he says. "I had a crazy morning."
This was no exaggeration. That morning in May, Suster had attended a business summit with South Korean President Park Geun-hye, raced to a taping of a Wall Street Journal webcast co-starring social-media mogul Gary Vaynerchuk, and attended two meetings with start-up founders. Now, he is speeding off to give a talk at the Hollywood Roosevelt Hotel.
When the conversation with the caller turns to term sheets, Suster's tone goes from apologetic to irritated. "You earn the right, through success, to get the kind of terms and protections you want. But you don't even have a product," he lectures. "You're not at the point in your career where you get to act like a prima donna." With that, Suster ends the call, leaves his car with the valet, and strides into the hotel to make his presentation.
Suster (rhymes with rooster) is in high demand these days. The entrepreneur-turned-investor is best known for Both Sides of the Table--the brash, opinionated, and gleefully obscene blog he has been writing since 2009.
Being a founder, Suster says, means enduring long days of anxiety, exhaustion, airport delays, and bad fast food. It means staving off creditors and working with less than nine months' worth of cash in your family's or company's bank account at any given time.
Co-managing partner at Los Angeles venture capital firm GRP Partners, he has built his name into a powerful brand, much of which is based on his hype-deflating candor. Suster, 45, has a talent for tipping sacred cows--and, on occasion, infuriating his readers.
On his blog, founders who waste time strutting around industry gatherings are "conference hos." Businessmen who smile, shake hands, and then eviscerate you are "grin f--ers." For an entrepreneur, becoming a VC means "going to the dark side." Suster keeps a reminder of this last phrase--a Darth Vader bobblehead doll--on the windowsill of his corner office. "If you never piss anybody off, you're not trying hard enough," he says. "And I piss people off on a regular basis."
Suster wrote one of his most popular blog posts, "Entrepreneurshit," on a sleepless night in November after returning from a weeklong business trip. The post dismantled the kind of glamorous fantasies about start-up life that are perpetuated by the tech press and celebrity entrepreneurs.
"If you read the tech press every day, you'd get the impression that it's all glamor. It's not," he wrote. Being a founder, he continued, means enduring long days of anxiety, exhaustion, airport delays, and bad fast food. It means staving off creditors and working with less than nine months' worth of cash in your family's or company's bank account at any given time.
It means tamping down your insecurities long enough to persuade potential employees, customers, and investors to take a huge gamble on you. All of this in pursuit of a vision that, statistically, stands only the slimmest chance of success. "No, it's not as bad as working in coal mines," he wrote in the post. "But it is quite the roller coaster, and the stress is real."
In fact, most entrepreneurs shouldn't seek the "rocket fuel" of venture capital, he says, firmly and often. Many businesses haven't yet maximized what they can do without it, and some businesses just aren't made to scale.
And there's nothing wrong, he says, with starting a company that's not positioned for massive growth, even if folks in Silicon Valley may deride it as a "lifestyle business." His take on venture capitalists? "The VC industry is very lemmingish," he says. "They find a trend and then everyone does it. But the Internet is a winner-take-most market. So you either back the winner, or you don't have outsize returns."
Six years ago, Suster was a new and relatively unknown player in venture capital. He had built and sold two businesses--the second, a content-management company called Koral, was acquired by Salesforce.com--before joining his mentor and longtime investor, Yves Sisteron, as a partner at GRP.
His original plan was to move with his wife and two young sons to Los Angeles, spend a couple of years there learning the game from his fellow partners, then head home to open a satellite office in Silicon Valley.
But around 18 months into the work, he had a revelation. "I realized, Why on earth would I go to Silicon Valley and compete with 80 other firms on Sand Hill Road, when here we're the largest VC in town?" Suster recalls. "We have amazing entrepreneurs at our doorstep and very limited venture capital. There was this enormous opportunity."
Besides, when he looked back over the trajectory of Internet-era innovation, he saw how the focus had shifted from Web infrastructure (routers, switches, and the like) to what he calls the three C's--content, communication, and commerce, sectors that haven't historically been dominated by Silicon Valley. Los Angeles, he says, "is the content capital of the world in terms of film and television."
So he stayed put, dedicating himself to helping build the city's nascent tech scene. In 2009, he founded Launchpad LA, a mentorship network that encourages start-ups to grow locally--and stay local.
This evolved into an accelerator, which now offers young businesses up to $100,000 apiece and free space in an airy, open-plan office in Santa Monica, one block from the beach. (Notable alumni include Chromatik, maker of an iPad app and Web-based learning platform for musicians that is used on American Idol, and Sometrics, a company that helps publishers monetize online games using virtual currency and was acquired in 2011 by American Express.)
Launchpad invested in 18 start-ups last year; the companies ended up raising more than $30 million combined in outside capital.
Of course, exposure, Suster-style, isn't always flattering. Sam Teller, Launchpad LA's managing director, still remembers what happened two years ago, when Suster introduced him to Courtney Holt, the former president of Myspace Music.
Holt had just signed on as the chief operating officer at Maker Studios, a GRP portfolio company whose YouTube videos, including the blockbuster "Epic Rap Battles of History," together get more than three billion views a month. After the introduction, Teller emailed Holt to ask him out for lunch. The next morning, he recalls, Suster published a blog post titled "Never Ask a Busy Person to Lunch."
The post didn't out Teller by name, but the message was clear: Lunch lasts too long. It imposes on a busy person's schedule. Try coffee instead. (Teller wasn't offended, but a flame war broke out in response to the post. Commenters called Suster's stance "Machiavellian bullshit" and told him to "get over himself.")
Today, Suster is one of the most influential tech investors on the Web. He is often mentioned alongside--and linked by--the two VC-blogger titans he came up admiring: Brad Feld of the Foundry Group in Boulder, Colorado; and Fred Wilson of New York City's Union Square Ventures.
Feld first blogged about Suster in 2006, when Suster was still running his second company; Suster had lambasted a group of venture capitalists who started a meeting 30 minutes late and then barely paid attention to him.
For that, Gawker founder Nick Denton gave Suster a "hero award" on the Valleywag website. "I'm just glad I don't appear to be one of the assholes he met with," Feld wrote.
Suster's credibility comes from hard-won wisdom. In the aftermath of the dot-com collapse in 2000, he was forced to lay off more than half of the 92-person staff of his first company, BuildOnline, which made collaboration tools for the construction industry in Europe. "I cut some of my closest friends," he says. He was devastated.
Not long before, he had attended the Fortune Global Forum at the Palace of Versailles in France, where he dined alongside Michael Dell and sipped champagne in the private wine cellars of Bernard Arnault, the chief executive of French luxury group LVMH. "I drank my own Kool-Aid," he says. "I thought we were changing the world."
Six months later, no one would return his calls. The economy had taken a dive, and companies were less open to spending money on newfangled Web software. On top of those challenges, BuildOnline had grown too quickly. It had raised too much money, hired too many employees, and charged customers too much.
So austerity set in. Suster went from staying in high-end hotels to a 20-euro-a-night dump in Frankfurt, where guests had to step out into the snow to reach the communal bathrooms. "It was freezing, f--ing cold, and there were these Turkish construction workers with leopard-print underwear--like bikini-style underwear--going to shower with me, and I was like, 'What am I doing?' "Suster recalls.
Sisteron, his mentor and investor at GRP, watched him struggle. "Nothing teaches you more than that kind of punishment," Sisteron says. "He survived. He matured."
Now, Suster brings his unvarnished perspective to young entrepreneurs. A few hours after meeting South Korea's president in May, he commandeers a conference room at the Santa Monica offices of Burstly, one of GRP's portfolio companies. Two entrepreneurs--Salmaun Ahmad, 32, and Jamal Ashraf, 29--walk in to discuss their start-up, Advocus.
They had just moved from San Francisco to spend four months at Launchpad LA, where Suster had met them the week before. Ahmad nervously recaps Advocus's mission: helping businesses put potential clients in touch with their best customers for recommendations. "Every company has advocates and evangelists," he tells Suster. "We're making those advocates accessible in the sales process."
Suster, who was double fisting Diet Dr Pepper and coffee, interjects between bites of his turkey sandwich. He likes the idea but is skeptical about the implementation. "My best customers ought not be talking to the unwashed masses," he says. "And my medium and worst people ought not be talking to anybody.
I don't have all the answers. I don't pretend that I do. I'm just here to spar with you and make sure you're thinking about it the right way." Ahmad responds, "We hear you loud and clear." They agree to meet again.
Next, Suster walks down the hall to Burstly's rec room. On a couch beside Ping-Pong and foosball tables, he meets with Arye Barnehama and Laura Michelle Berman. Their start-up, Melon, makes a brainwave-measuring headband that works with a mobile app to help users gauge their concentration. "It's about turning the invisible activity of your mind visible in a meaningful way," Barnehama explains. "Almost like a 21st-century journal."
Suster likes the idea, wondering aloud if Melon could help kids with attention disorders. (Suster himself has ADD.) But did it really have to be a headband? "It kind of needs something that makes it feel less like, 'I'm John McEnroe,' " he quips.
Suster loves this kind of work. "I get paid to have the smartest people I know come to my office and hear how they want to change the world," he said. "And if I don't like the idea, I don't have to spend any more time with them."
He misses being an entrepreneur, but he says he sleeps better as a VC. "The highs are more muted, the lows are a little less panic driven," he explains. Having a bunch of start-ups in his portfolio dilutes his personal risk.
This spring, GRP promoted Suster to co-managing partner. With a young protégé, Jordan Hudson, he is preparing to rebrand the 17-year-old firm, which will be renamed Upfront Ventures, in a way that will emphasize openness, transparency, and strong opinions. In a sense, this project is his latest start-up. Its offices will move from buttoned-up Century City to lively Santa Monica, a hot spot in the Los Angeles start-up scene.
Not that Suster has to be there to connect. Thanks to his blog, he gets cold pitched by strangers everywhere these days. They collar him when he walks down the street at South by Southwest or when he is dining with his wife at a restaurant in New York City.
That busy day in May is no different. That night, he attends a party at YouTube Space, a 41,000-square-foot Playa Vista aircraft hangar, to honor Cenk Uygur, co-founder of the Young Turks online news network, which has just reached one billion views.
After the party, Suster is waiting for a valet to pull his car around when he is rushed by the founder of a digital media start-up from Irvine, California. "I recognize you by your image," the man gushes. After 14 hours straight of accessibility and blunt talk, Suster is eager to get home to his family in Pacific Palisades. But he stands still, nodding patiently as he listens to the pitch.
That's the contradiction in Suster. Beneath the tough talk, many of his critiques are meant as tough love. Case in point: A week after he chastised the "prima donna" from Silicon Valley on the phone, he had an update. With Suster as the sponsoring partner, GRP would lead a $2 million round of financing for the company, which is set to debut this year. "Remember that guy I was talking to in the car?" he says. "We did sign a term sheet in the end. I got him to be reasonable."
Susterspeak: Here are some Susterisms defined
Entrepreneurshit. The unglamorous reality of start-up life.
Ballers on a budget. Founders who lease fancy cars as they rack up credit card bills.
Elephant hunters. Start-ups that focus on landing massive customers with enough "meat" to feed them for a long time. Instead, Suster says, you should hunt for deer--clients that are easier to catch but still have plenty of meat.
Gym salesmen VCs. VCs who pressure you to sign a term sheet in a couple of days and allude to pulling the deal if you don't.
Seagulls. Investors who know enough about your project to have an opinion but not enough to help. They swoop in for one day to check in, shit on you, and fly away.
Wednesday, July 31, 2013
Wednesday, July 24, 2013
Thursday, May 16, 2013
Monday, May 13, 2013
What Makes People Overshare? - WSJ.com http://ow.ly/l19O1
—Write to Elizabeth Bernstein at Bonds@wsj.com
After arguing with her husband one Sunday, Vasavi Kumar was so upset that she called up her mom, her dad, her sister and three of her closest friends. "This is it," she told each one. "He is never going to understand me. I am getting a divorce."
Guess what happened the next day. Ms. Kumar and her husband made up. They said they were sorry, hugged and agreed to put the argument behind them. Yet Ms. Kumar, a 30-year-old life coach and social worker in Overland Park, Kan., still had some more apologizing to do—to six other people. "I dropped a bomb on everyone, but I was now fine and dandy," she says. "I had to go clean it up."
Ever share too much information—and you weren't even tipsy? I call it BYB—Blabbing Your Business. It's happening a lot these days thanks to reality TV and social media sites, where it's perfectly normal for people to share every single detail of their lives, no matter how mundane or personal. In the culture we live in, it's hard to remember that some things should be private.
It isn't all Facebook's fault. Experts say oversharing often happens when we are trying subconsciously to control our own anxiety. This effort is known as "self regulation" and here is how it works: When having a conversation, we can use up a lot of mental energy trying to manage the other person's impression of us. We try to look smart, witty and interesting, but the effort required to do this leaves less brain power to filter what we say and to whom.
This explains why people often blurt out embarrassing things to precisely the people they want to impress most, whether it's the boss, a first date or a future in-law.
Consider this scenario: Your boss walks by and doesn't make eye contact. You feel uneasy and think of something you need to discuss with him or her. "If you are psychologically aware, you will realize you are feeling anxious and picking up rejection cues," says Hal Shorey, a psychologist and assistant professor for the Institute for Graduate Clinical Psychology at Widener University in Chester, Pa. "You're trying to reestablish connection."
Does this work? Of course not. We often regret our disclosures, feel like an idiot—and then worry even more about what the listener is thinking. We may feel compelled to "fix" the situation, leading to—you guessed it—even more blabbing. It's a cruel downward spiral.
I know I'm not the only person who over-shares. I got the idea for this column after three people in one week said these terrifying words to me, "I want to tell you something I've never told anyone—not my spouse, my therapist, or my best friend."
Still, some people by nature blab more than others. They tend to be individuals with an anxious or "preoccupied" attachment style according to attachment theory, which psychologists developed starting in the mid-1900s. Our attachment system is the evolutionary byproduct of a process humans developed to stay alive, Dr. Shorey says. Attachment style is partly genetic, but it also is determined in part by how our parents related to us as young children.
There are three basic attachment types: Secure, anxious and avoidant. Secure people, roughly 55% of the population, had parents who were consistently caring and responsive; these people are typically loving and comfortable with intimacy. The other 45% have an attachment style that is more problematic—either anxious, avoidant or some combination.
Avoidant people, about 15% of the population, try to minimize closeness. Their parents typically were withholding or unresponsive. These folks aren't your blabbers. In fact, in interviews to determine personality type, therapists consider short, concise answers to be a marker of an avoidant attachment style.
Long, drawn-out answers typically indicate an anxious type. Anxious people, who make up roughly 15% of the population, typically had parents who were inconsistently nurturing. They are overly sensitive to social cues and prone to overmanaging their personal connections. (The other 15% are a combination.)
Of course, we all have our own bursting point, when under emotional stress we can no longer contain ourselves, says Sharon Gilchrest O'Neill, a Mount Kisco, N.Y., marriage and family therapist. "They think, 'Oh God, does that feel good to talk,' " she says. "But they're definitely not thinking of the other person and this may hurt their relationship."
The real trouble starts when you share information that isn't really yours to share. In her therapy practice, Ms. O'Neill says she regularly sees people who tell someone about their own marital problems, or a divorce or separation before it actually happens. Another common scenario involves mothers sharing information about their daughters. In all these cases, she says, "it usually comes back to haunt them."
So how do you stop yourself from blabbing too much? Do what your mother said: Stop and think before you open your mouth. "Go through the process in your mind where you walk through the ultimate effects of sharing," Ms. O'Neill says.
These are specific questions you should ask yourself, Dr. Shorey says. "Does my listener have time right now—and is he or she emotionally available to listen?" "Will your blabbing relieve your anxiety—or make it worse?" "In other words," Dr. Shorey says, "you can probably anticipate worrying that your boss will think you're an idiot for oversharing if you just take the time to think about it."
If you should find that you said too much, how do you recover? Most people think it's a good idea to go back and apologize. Most often, though, it isn't. "When I work with people in my office, I try to help them think through what the consequences will be," Ms. O'Neill says. "Will there be a boomerang effect?"
If you decide your listener has fundamentally changed the way he or she sees you, then apologize, but keep it short and low-key. "You should say, 'Listen, I don't want to make a big deal of this, but I want you to know I embarrassed myself and this isn't like me,' " Ms. O'Neill says. "And leave it at that."
Ms. Kumar recalls she was always an oversharer. Her childhood nickname was "Loose Lips." "I did it primarily as a way to connect with people, to get them to like me," she says.
When she called her father to apologize for telling him prematurely that she was getting a divorce, he started to cry. "He said, 'I just can't take this anymore. I am getting too old. I am taking blood-pressure medication. I have a nervous breakdown every time I see your name come up on the phone.' "
These days, Ms. Kumar says before speaking she asks herself, "Why am I sharing this with this specific person? What am I looking for here?"
"Otherwise, it's almost like you've spilled this debris over people's lives, telling them your stuff," she says. "And then you have to go back and clean up the mess you created."
1. Recognize situations where you might overshare. You might be eager to make a good impression or nervous about what others think of you.
2. Before revealing information, ask yourself, "Does the listener have time to listen? Is he or she emotionally available at this time?"
3. Will sharing, rather than relieve anxiety, make you feel more anxious? Then don't.
4. Imagine the negative effects of oversharing and the regret you might feel afterward.
If you have overshared...
1. Think twice about revisiting the topic with the listener. He or she will probably forget about it if you don't drag out the awkwardness.
2. If you must return to the subject, keep it brief.
3. Your message is an apology. Don't seek approval. State your apology in as few words as possible and move on.
Sources: Sharon Gilchrest O'Neill, Hal Shorey