entrepreneurship
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How to start a company in 4 days
Running a startup can be a complicated, difficult process fraught with pitfalls and ample opportunities to make mistakes. But the logistics of setting up a startup should be simple, because over the long run, complicated equity setups and cap tables cost more money in legal fees and administration time.
The logistics of setting up a startup should be simple, because over the long run, complicated equity setups and cap tables cost more money in legal fees and administration time.
My company, Pulley, has helped more than a thousand founders build their cap table and equity structure.
Here’s a tactical guide to get your startup running in just four days.
Day 1: Incorporate
It is now standard to incorporate your company at the seed stage itself. In the U.S., startups incorporate as Delaware C Corporations with 10 million authorized shares. This is the standard setup when you use services like Stripe Atlas or Clerky.
Post incorporation, you need to answer a few questions on how to grant equity to founders and future employees.
First, you should determine how you want to split the equity between the founders. There is no standard for doing so — some founders split shares equally, while others do 49/51 splits for control. Some founders even may have an 80/20 equity split because one founder spent an extra year on the idea.
At the end of the day, a good equity split is one that all founders find fair. If you can’t agree on a structure, you should have a deeper discussion on whether this is the right team to work with for the next decade or more.
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Founders must show investors that sustainability is more than lip service
Ending years of debates over environmental sustainability, the United States officially declared a climate crisis earlier this year, deeming climate considerations an “essential element” of foreign policy and national security. After recommitting the U.S. to the Paris Agreement, President Joseph R. Biden announced an aggressive new goal for reducing U.S. greenhouse gas emissions and pushed world leaders to collectively “step up” their fight against climate change.
At the same time, consumers are increasingly looking to do business with brands that align with their growing environmental values, rather than ignoring the climate consequences of their consumption. Even without regulation as a stick, consumer demand is now serving as a carrot to increase sustainability’s impact on public companies’ agendas.
Startups have already followed suit. Investors today view sustainability as an important pillar of any business model and are looking for entrepreneurs who “get it” from the beginning to build and scale next-generation companies. Startups interested in thriving cannot treat sustainability as an afterthought and should be prepared to enter the public eye with a plan for sustainable growth.
Today, companies of all sizes are being held to a higher standard by consumers, employees, potential partners and the media.
So what exactly do founders need to put in place to demonstrate that they’re on the right track when it comes to sustainability? Here are five attributes that investors are looking for.
1. A truly customer-centric feedback loop
It’s fairly easy for any company to claim that it understands customers’ wants and needs, but it’s challenging to have the tech stack in place to prove a company actually listens to customer feedback and meets those expectations.
Investors now expect startups to have both platforms and solutions — social listening channels, relationship management tools, surveying programs and review forums — that allow them to hear and act on the needs of their customers. Without the proper communications tools and actual people using them, your eco-friendly efforts will likely appear to be merely lip service.
Take the example of TemperPack, which manufactures recyclable insulated packaging solutions for shipments of cold, perishable foods and pharmaceuticals. The direct relationship between a packager like TemperPack and the end consumer is often invisible. But as we were looking into investing in the company, some of its life sciences customers told us about comments they had received from end users — people who were receiving medicine twice per day. Another supplier’s packaging required them to visit a recycler for disposal, a real-world pain point that was causing them to consider switching to a different medication.
Revolution Growth decided to add TemperPack as a portfolio company after directly seeing its customer feedback loop in action: End-user requests informed product development, proving both a market need and customer demand on the sustainability front. This firsthand example demonstrates how an investor, a packaging maker, a life sciences company and an end user are now interconnected in one relationship while underscoring how end-user feedback can connect the dots for sustainable product development.
2. Public commitment to sustainability goals
Over the past several years, we have seen millennials and Gen Z consumers demand transparency in sustainability efforts. As these generations grow in purchasing power, investors will look for startups that make their commitments to eco-friendly goals as transparent as possible to satisfy shrewd consumer needs.
For many VCs, making public commitments to sustainability goals is a sign that your startup is working toward becoming a next-generation company. Investors will look for goals that are thoughtful, with a clear understanding of where your company will have agency and influence, and that are S.M.A.R.T (Specific, Measurable, Achievable, Realistic and Timely). They will also expect regular reports on progress.
Although a company’s management establishes these goals, its board should play a behind-the-scenes role in driving the goals forward, keeping leadership on track and setting the playing field so executives understand that they’re being evaluated on criteria transcending positive EBIDTA.
Taking these steps will ensure goals are responsible and ambitious while also holding the company accountable to consumers and stakeholders to see the initiatives through to completion.
3. Purpose-driven culture
Even the best-laid sustainability goals will go unmet without a strong culture designed to guarantee leadership and employee alignment. Sustainability must be ingrained in a startup’s culture — from the top down and bottom up — and there’s a lot at stake if it’s not.
Another Revolution Growth portfolio company, the global fintech-revolutionizing startup Tala, demonstrates how young companies can imbue their cultures with purpose-driven values. While Tala’s mission is to provide credit to the unbanked, the company believes that the consumer’s best interests should always come first. During 2019’s holiday season, Tala contrasted with businesses fueling consumption by instead urging customers in Kenya to not take out loans, protecting them from predatory unregulated lenders amid a lack of functioning credit bureaus and loan-stacking databases. This forward-looking approach ultimately safeguarded Tala’s customers and its vibrant digital lending industry.
Beyond determining what they stand for, many of our portfolio companies face challenges securing talent. People have choices about where they want to work, and those with intrinsic motivations — such as concerns about the environment — will feel uncomfortable if their employers do not share their values. Regulatory risks and customer attrition pale in comparison to the human cost of losing star performers who seek other work cultures that better align with their values.
A clear values system should embed sustainability into the decision-making process, make obvious imperatives and empower employees to follow through.
4. Accountability
Companies aren’t only judged by their own initiatives — they’re also judged by their partners. As startups build new relationships or expand to work with new suppliers, investors will be keen to know that these outside parties align with their stated sustainability philosophies.
Before becoming publicly involved with another company, a startup should gauge each new supplier’s reputation, including insights into their employment practices. Take leading Mediterranean fast-casual restaurant Cava or healthy-inspired salad-centric chain Sweetgreen, both Revolution Growth portfolio companies; neither will source proteins from farms with inhumane policies. If companies are not aware of these factors, their customers will eventually let them know, and likely hold them accountable for the oversight.
Think of it this way: If a diagram of your partnerships and supplier relationships was printed on the front page of The New York Times, would you be comfortable with what it shows the world? Today, companies of all sizes are being held to a higher standard by consumers, employees, potential partners and the media. It’s no longer possible to fly under the radar with relationships that are antithetical to a company’s sustainability goals. So take a hard look at your supplier and partner ecosystem, and make clear that you are bringing your green vision to life through every extension of your business.
5. Financial realism
Financial realism acknowledges that a company can want to do good, but unless they have the economics, they won’t survive to make an impact. For most startups, beginning with financial realism as a mindset and incrementalism as an approach will be key to success, enabling all businesses to contribute to a more resilient planet. For startups that prioritize environmentally friendly business practices alongside a product or service, this strategy can prevent goodness from becoming the enemy of greatness. Founders in this position can commit to a stage-by-stage sustainability plan, rather than expecting an overnight transformation. Investors understand the delicate balance between striving to meet green goals and keeping the lights on.
Entrepreneurs looking to build a business that not only adopts eco-friendly practices but also has sustainability at its heart may have to consider starting in a niche industry or market that is less price-sensitive and ready for a solution today. Once that solution is firmly established, the business can build upon what they’ve created, rather than going big with something that doesn’t scale — and failing fast. Without an initial set of customers that value and love what you’re doing, you won’t get to the bigger play.
As the public and private sectors continue to address the climate crisis, sustainability will increasingly become a mandate rather than an option, and funding will increasingly flow to startups that have addressed potential environmental concerns. Unfortunately, pressure for companies to meet sustainability demands has led to “greenwashing” — the deceptive use of green marketing to persuade consumers that a company’s products, aims and policies are environmentally friendly.
Greenwashing has forced investors to look beyond mere words for action. As we move toward a more sustainable future, startups pursuing VC funding will need to prove to investors that sustainability is a priority across their entire organizations, aligning their outreach, public commitments and cultures with accountability and concrete examples of sustainable activities. Even if those examples are just steps toward larger goals, they will show investors and customers that startups are ready today to contribute to a greener and better tomorrow.
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6 career options for ex-founders seeking their next adventure
Hey, founders between gigs: What now?
If you exited your last company for airplane money and are now independently wealthy, congratulations! If you want to build another company, just self-fund. If you want outside capital, VCs will chase after you to invest.
Unfortunately, most founders are not in that position: nine out of 10 startups fail. Even if you achieve a high valuation, you might end up like FanDuel’s founders: Their investors got the benefit of a $465 million exit; the founders got zero.
As someone with “founder” on your resume, you face a greater challenge when trying to get a traditional salaried job. You’ve already shown that you really want to lead a company and not just rise up the ladder, which means some employers are less likely to hire you. One research paper found:
[F]ormer founders receive fewer callbacks than non-founders; however, all founders are not disadvantaged similarly. Former founders of successful ventures receive even fewer [emphasis added] callbacks than former founders of failed ventures. Through 20 interviews with technical recruiters, we highlight the mechanisms driving this founder-experience discount: concerns related to the applicant’s capability and ability to fit into and remain committed to the wage employment and the hiring firm.
At my prior firm, ff Venture Capital, we invested in a company co-founded by Nate Jenkins, who had a successful exit, but not quite enough to buy a private plane. He’s now researching his next opportunity and interviewing for some jobs. At the end of a recent interview, the interviewer summarized, “I’ll hire you, but is this what you really want to do?”
That said, Samuel Sabin, CEO of HireBlue, observed, “Some founders who work better with more resources at their disposal may be tapped for intrapreneurship roles. Also, some companies value a self-starter mentality.”
So what should you do? Especially if your life partner and/or bank account are burnt out on the income volatility of startups?
I’ve been in this situation myself when I shut down one startup and exited two others. I think you have six main options:
Full-time initiatives
- Launch a new company.
- Get a job.
Part-time activities
- Angel investing, venture capital and mentoring.
- Consulting.
- Sell information products.
- Education and self-improvement.
At Versatile VC, our new VC fund, we’re creating an online community just for founders who are in transition, Founders’ Next Move. We hope you will join us!
Full-time initiatives
Launch a new company
If you want to work on your startup idea, the bar for starting a company should always be very high. VCs have a diversified portfolio and most of their investments die. You don’t have a diverse portfolio and so you’re taking far more risk than the VCs. For free resources to help research your ideas, see What startup will you build? Identifying market white space.
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Architect Capital brings alternative capital to the early stage with new $100M fund
Early-stage startups are increasingly looking for alternative ways to access capital, meaning not every company wants to raise money from VCs or take on debt.
In recent years, a flurry of startups have emerged to give companies other options. (Think Pipe, for example.)
And today, San Francisco-based Architect Capital is a new firm that is launching with over $100 million in funds to serve as an “asset-based lender” to “high-growth,” early-stage tech companies. Specifically, the new firm aims to provide non-dilutive or less-dilutive financing options to asset-rich fintech, e-commerce and SaaS companies in the U.S. and Latin America, but with an emphasis on the latter. The region, Architect maintains, does not have a plethora of institutional financing available against assets.
The firm is not out to replace traditional venture capital or venture debt, emphasizes founder and CEO James Sagan, but rather to offer asset-based products that will complement them.
For some context, Sagan is no stranger to the startup world, having co-founded and served as managing partner of Arc Labs, an early-stage credit fund focused on lending to technology-enabled businesses. He’s been investing in Latin America for years, and recognized the need for new forms of financing to fund “novel and underappreciated assets.”
Also, he believes the region is home to “the most prominent fintech ecosystem in the world.”
To Sagan, traditional forms of equity and debt financing in the venture world are vital for things like growing headcount, but he believes they are “not engineered to support the growth of a company’s underlying financial products.”
“VC is highly dilutive and should be used for ROI activities such as hiring engineers and building great teams,” Sagan told TechCrunch. “It’s expensive to use equity to fund assets. Equity should not be put in a loan book. We’ll fund the loan book.”
Image Credits: Architect Capital founder James Sagan / Architect Capital
Architect’s goal is to provide “tailored and less dilutive funding,” especially to companies that produce repeatable revenues, such as SaaS and subscription businesses.
Sagan said he first discovered the strategy in 2015 when he was working for a multifamily office that was lending against a bunch of traditional assets.
“A colleague and good friend of mine started a business and raised some equity and venture debt, but he couldn’t find the asset-specific financing for the receivables he was generating,” Sagan recalls. “He was lending to small businesses and needed asset-specific financing against those receivables.”
Venture debt doesn’t really work for receivables-based lending because venture debt shops typically are underwriting assets, or rather, underwriting the quality of the investors in the company, Sagan believes.
“So we really tailor our underwriting towards those assets themselves right and those assets range from unsecured consumer receivables to secure small business receivables to real estate,” he told TechCrunch. “Essentially, we’re providing an additional instrument for asset-heavy businesses that will allow them to scale in a way that venture debt will not.”
Architect’s LPs are mostly large institutions, as opposed to traditional high net worth individuals. The firm’s average check size will land at around $10 million to $15 million.
“Our portfolio allocation is more concentrated in general,” Sagan said. “We expect to grow our AUM (assets under management) pretty precipitously.”
Architect Capital has invested in six companies since inception, including PayJoy, a company that delivers consumer financing and smartphone technology to customers in emerging markets; Forum Brands, a U.S.-based e-commerce marketplace aggregator; and ADDI, a fintech that aims to give Colombian consumers access to fair and affordable credit through point-of-sale-financing that recently raised $65 million.
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The exit effect: 4 ways IPOs and acquisitions drive positive change across the global ecosystem
For many VCs, the exit is the endgame; you cash in and move on. But as we know, the startup world is evolving, and that means the impact of investment is no longer limited to how much money is made.
As investors, we’re looking further into what each investment means to human beings, at interlinking our mission with our money. And yet, one of the events that generates the most momentum for long-term impact — the successful exit of a portfolio company — is not being harnessed.
When leveraged properly, an exit can be the beginning of a firm’s true impact, especially when we’re talking about giving all founders equal opportunities and empowering the best ideas. The investment sphere is slowly shaking off its “America first” approach as foreign products take the world by storm and international businesses become the norm.
When leveraged properly, an exit can be the beginning of a firm’s true impact, especially when we’re talking about giving all founders equal opportunities and empowering the best ideas.
Investors will be driving forces in enabling the highest-potential companies to build products that countries everywhere will benefit from — no matter where they were conceived. The way they play the game can transform the industry into one in which a founder from across the ocean has as much of a chance to change the world as one from next door.
We know the basics of how to do this with cash: Investing in underrepresented founders is a necessary first step. But who’s talking about the power of exits to change the playing field for diverse founders? We must consider the psychological motivation of seeing a huge buyout on other entrepreneurs, what that startup’s ex-team members go on to build, and what the achievements of one citizen does for that nation’s reputation.
Last year, 41 venture-backed companies saw a billion-dollar exit, totaling over $100 billion, the highest numbers in a decade. We have an unprecedented amount of clout to do something with those power moves and four ways to turn them into a domino effect.
1. Competitor effect
When a foreign entrepreneur raises money from U.S. firms and sells to a U.S. company, other immigrants see that. Regardless of how groundbreaking their product idea might be, immigrant Americans will always be more wary of putting their eggs into the entrepreneurship basket, at least as long as 93% of all VC money continues to be controlled by white men.
This, despite research suggesting that immigrants contribute 40% more to innovation than local inventors.
What these foreign entrepreneurs most need is confidence, role models and success stories proving other people who look like them have made it, especially when those founders are making waves in the same industry as them.
So a big, well-publicized exit will create momentum in the industry for other foreign founders to give fuel to their venture and seek to take it to the next stage. Not only that, it will instill more self-assurance when it comes to fundraising, and investors will value that.
I was inspired to write this column after Returnly, a fintech founded by a fellow immigrant from Spain based in San Francisco — which, for full transparency, I invested in as an angel investor, and then for Series B and C via my fund — was acquired for $300 million by Affirm.
While there was undoubtedly a personal financial gain worth celebrating, the success of a foreign founder who persevered against the odds in such a competitive ecosystem as Silicon Valley, raised large rounds from U.S.-based investors, and was finally acquired by a U.S. company served as a moment of inspiration for other diverse founders around the world. We saw this in the amount of media attention it received in both business and mainstream press in Spain and the floods of connect requests and congratulations that followed on LinkedIn.
The impact of an exit is greater when it shows foreign entrepreneurs that there are globally minded organizations helping startups like theirs get equal access to funding. That means having VC firms that spotlight international entrepreneurship and foster global expert networks.
As investors, we can maximize the impact of our exits in the industry by highlighting the foreign origins of our founders in a big way when it comes to promoting the exit, including narrating the challenges and opportunities they encountered on their journey. We can use the victory to drive the point home to our fellow investors that diverse and international entrepreneurship is an undervalued gem. We can personally take the win to boost our brand as one that empowers foreign entrepreneurs in that niche, attracting more to seek funding with us in a positive reinforcement cycle.
2. Wealth effect
The windfall from a big exit puts all previous investors in a privileged position, and it’s unlikely that money will sit around for long. They’ll look to reinvest in other high-potential companies — probably ones that look a lot like the one that was just sold.
But in addition to those investors multiplying the positive impact in their own portfolio, they will rally other investors to behave in a similar way.
Each exit — good or bad — sets a precedent for that niche and that type of company. Other investors will follow suit if they sense that one of their peers is onto a cash cow. Because foreign and ethnic minority founders are still underrepresented in startup funding, it makes this field less competitive while harboring huge potential. VCs who have an eye out for unique opportunities will spot when an investor has made a hefty profit from an unconventional startup, especially if they continue to invest in others in that same field.
To help this along, angels and VCs who’ve been behind a recent exit and are reinvesting in similar founders should publicize those knock-on investments, explaining how their previous success motivated them to support similar ventures. They can also be vocal within their network about their decision to raise up certain entrepreneurs because they’ve seen it works.
Returnly’s founder recently offered to put some of his earnings back into our fund, enabling more foreign entrepreneurs like himself to access capital. If as investors we foster meaningful relationships with our funders and truly care about empowering diverse entrepreneurs, we’ll see more of that wealth circle back into our mission.
3. Team effect
The PayPal Mafia is a set of former PayPal executives and employees — such as Elon Musk, a South African, and Peter Thiel, a German American — who have gone on to seriously disrupt not one but multiple industries across tech. Among the companies they’ve founded are YouTube, LinkedIn, Yelp and Tesla, and they’ve even been named U.S. ambassadors. That’s just one company. Imagine what other diverse and driven teams can do with the influx of cash and inspiration that comes with a big exit. There will be a ripple effect of team members eager to start out on their own who feel empowered by the success of someone who believed in them.
Their ventures will be more likely to “pass it on” when it comes to giving equal opportunities to people regardless of origin and will generate more jobs for people with their mission. Take Thiel, who has to date backed over 40 companies in Europe alone.
As VCs, we can capitalize on this team effect by keeping our eye on any spinoff ventures that arise and supporting them when possible (with experience and contacts, if not with capital). But beyond this, you can also consider encouraging these people to join the investment sphere, maybe even within your firm. Many successful startup founders and executives go on to become investors — the PayPal Mafia has contributed to some of the most notorious funds out there today. The origin story of these former team members will make them more prone to supporting underrepresented founders they can get behind. In turn, new entrepreneurs will draw more value from their personal experiences.
4. Reputation effect
Although Returnly is headquartered in San Francisco, its founder is Spanish and many of its employees were based in Spain.
That means that the impact of Returnly’s exit will be felt on the other side of the Atlantic as well as among co-nationals in the United States. The same is true of other notable sales, like AlienVault, which was founded in Spain and had multiple offices there. AlienVault was acquired by U.S. telecommunications giant AT&T for $900 million. Or IPOs — earlier this month, the Spanish-origin payments company Flywire filed for an IPO that could value the company at $3 billion. One startup’s success boosts the reputation of its entire team, and with it other founders and talent with their same country of origin, background, education and drive.
It follows that investors and other stakeholders will be more inclined to back opportunities among founders from the same home country if it says something about the mission, expertise and culture they bring to their startup.
At the same time, growing startups will be more interested in hiring the talent of evidently successful teams. That doesn’t just mean hiring more foreign experts in the United States, but seeking to outsource farther afield. We’re already becoming far more comfortable with remote teams, and it’s more capital-efficient for one half of the team to be working while the other half sleeps. But founders will always gravitate more to countries where local talent and innovation is already seen to be thriving. Open up that conversation with your portfolio companies.
VCs have the power to change an industry forever, to connect startup ecosystems across continents and to see startups expand worldwide. But this is about staying relevant as an investor as much as it’s about ensuring this next stage in the startup world is a positive one.
Investors who don’t recognize that the future of startups is global and diverse in nature won’t be in sync with the best opportunities — and won’t be selected by the best founders. Rather than trying to play catchup, help build that ecosystem.
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Dismantling the myths around raising your first check
As startups and venture capital grow in tandem, fundraising has gone from a formal affair on Sand Hill Road to a process that can happen anywhere from Twitter to Zoom.
While fundraising may no longer require a trip to California, it might depend on whether you got an invite to a private audio app. And while you may not need to be an insider, second-time founders — largely male and white — still have a competitive advantage.
If your intention is to build a company that you want to own and run indefinitely, and/or to grow more slowly and take fewer risks, traditional venture capital is not right for what you want to build.
The growing complexity of fundraising has the opportunity to make tech either inclusive or exclusive. For new founders looking to raise money, let’s dismantle the myths about raising your first check and instead focus on how investors and other successful founders describe the nuance needed to secure money.
What makes my business venture-worthy?
This question is existential, but it should be at the forefront throughout your journey as a founder. Elizabeth Yin, founding partner of Hustle Fund, says startups should be able to hit one of two goals: Reach $100 million ARR by its fifth year or get to $1 billion in valuation in the same time period.
“This is hard to do. And most businesses will never get there — not for a lack of trying — but there’s a lot of luck whether your idea has that much demand that quickly,” she added.
“I think you will know in the first year or two how ‘easy’ or ‘hard’ it is to get customers and whether you think on that trajectory you can get to $100 million a year in a few years,” Yin said. “And if it’s really hard, it doesn’t mean you throw in the towel. … There are many great companies that are not VC-backable where the founders will make a lot of money, but it just means you need to think through where to get your financing. Perhaps it’s from angels. Perhaps it’s from revenue-based financing funds. Perhaps it’s from customer crowdfunding.”
While VC is the flashy gold medal, the rapid growth of emerging fund managers means that a first check can be piecemealed together from a variety of different sources. The options for financing are seemingly endless: syndicates, public crowdfunding, VC firms, accelerators, debt financing, rolling funds, and, for the profitable few, bootstrapping.
“When people go around saying, ‘Do you want to run a VC-backable company?’ that feels weird — you don’t necessarily get to pick how fast you can grow — the market just may or may not be there,” Yin said. “There’s a lot of luck with that.”
Leslie Feinzaig, founder of Female Founders Collective, said that beyond economics, the hardest part of knowing whether your startup makes sense as a VC-backed business is understanding your own goals as an entrepreneur.
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Orbiit raises seed funding to automate the interactions within an online community
Orbiit, a startup that automates the interactions within an online community, has raised a $2.7 million round led by Bread and Butter Ventures, with participation from new investors High Alpha Capital, LAUNCHub Ventures and Company Ventures. Existing investors Founders Fund, which led Orbiit’s $1 million pre-seed round, Acceleprise and other angels also participated. The capital will be used to build out the Orbiit product and engineering team.
Orbiit says its platform handles the communications, matching, scheduling, feedback collection and analytics for people connecting with each other in an online community. The idea is that the communities therefore learn and network better, engage more and share more knowledge.
CEO and co-founder Bilyana Freye said: “Tailored 1:1 connections allow members to discuss difficult topics, be vulnerable and share learnings with one another. Those 1:1 connections are the hardest to execute, but when you start investing in them, with the help of Orbiit, you see engagement feeding into all other initiatives and a vibrant, active community that truly delivers on the promise to its members.”
Bread and Butter Ventures Managing Partner Mary Grove added: “This age-old question of how to leverage technology at scale to drive meaningful connections across communities both internal to an organization and across the globe is a problem we’ve been actively seeking a solution to for a decade. Orbiit brings the perfect blend of tech-enabled software with human curation to create strong connections and provide insights back to community managers.”
The platform is being used by startup communities at True Ventures, GGV and Lerer Hippeau; private networking groups such as Dreamers & Doers; and customer communities, like the CFO community run by fintech leader Spendesk.
Founders Fund Principal Delian Asparouhov said: “We see Orbiit as a key platform for peer learning within companies and communities, unlocking untapped knowledge through curated matchmaking.”
LAUNCHub Ventures participated in the round, following the recent first close of its new $70 million fund.
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Vise CEO Samir Vasavada and Sequoia’s Shaun Maguire break down the art of the pitch
In just a few short years, Vise has gone from launching on the Disrupt Battlefield stage to unicorn. Co-founders Samir Vasavada and Runik Mehrotra met Sequoia’s Shaun Maguire at an afterparty at the event, and Maguire ended up leading a seed and Series A round while Sequoia led the Series B. Last week, Vise raised its Series C of $65 million and was officially valued at $1 billion post-money.
A good pitch deck is short and simple, and covers the key points in less than 12 words a slide.
We sat down with Vasavada and Maguire to talk about the early fundraising process for Vise, specifically the seed round, and get a look at the startup’s first pitch deck. We discussed what Vasavada has learned about delivering a good fundraising pitch, and what stood out about the pitch and the product for Maguire.
Simplicity is key
Vasavada says he’s made dozens of pitch decks since starting Vise and that this early deck was not his best because it was trying to do too much.
“A good pitch deck is short and simple, and covers the key points in less than 12 words a slide,” said Vasavada, adding that many founders think they need to show investors every part of their business.
“The deck has to show that you’re solving an important problem, that you’ve got the path to an important solution, that there is a big market opportunity, and that your team is positioned to execute,” he said. “Those are the only four things that matter. Everything else can be discussed in the Q&A.”
The goal of a pitch meeting is not to get the “yes” instantly, and satisfy every curiosity, but rather to give the investor something to think about and a reason to want another conversation.
Vasavada explained to the audience that this early seed deck certainly went into too much detail and was too text-heavy. (You can check out the full deck below.)
Why will this product be successful right now?
Beyond the problem, solution, market and team, there is an additional X factor that makes a difference in pitching for fundraising.
Timing can make or break a startup. Incredible ideas, ones that have gone on to be some of the biggest businesses in the world, have fizzled out and died for being too early.
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2 CEOs are better than 1
Netflix has two CEOs: Co-founder Reed Hastings oversees the streaming side of the company, while Ted Sarandos guides Netflix’s content.
Warby Parker has co-CEOs as well — its co-founders went to college together. Other companies like the tech giant Oracle and luggage maker Away have shifted from having co-CEOs in recent years, sparking a wave of headlines suggesting that the model is broken.
It’s impossible to be in two places at once or clone yourself. With co-CEOs, you can effectively do just that.
While there isn’t a lot of research on companies with multiple CEOs, the data is more promising than the headlines would suggest. One study on public companies with co-CEOs revealed that the average tenure for co-CEOs, about 4.5 years, was comparable to solitary CEOs, “suggesting that this arrangement is more stable than previously believed.”
The study’s authors also found that co-CEOs were spread across industry types and that splitting the role can “complement each other in terms of educational background or executive responsibilities.”
I serve as co-CEO of an organic meal delivery company with my sister Laureen. Having two CEOs has helped us take Fresh n’ Lean to new heights. We closed 2020 with $87 million in revenue, more than double from the year before, and project similar growth this year.
We complement each other well, and the results bear that out. During the decade that we’ve served as co-CEOs, the company has grown from a very small team to 475 full-time employees and 40 part-time employees. We’ve delivered more than 17 million meals, launched four different meal lines, expanded our retail offerings, partnered with some great names in sports and fitness, and saw our annual revenues climb exponentially.
The leadership structure isn’t for every company, but it’s been a great fit for Fresh n’ Lean. Here’s why.
Divide and conquer to shorten your learning curve by 50%
Laureen launched the company in 2010 out of her one-bedroom apartment.
“Those early years were especially tough,” she said. “I consistently worked 20-hour days as I performed just about every role — cooking dishes, preparing labels, making deliveries and performing customer service duties. I was devoting so much energy into product, packaging and logistics, but in order for the company to grow, I needed help with marketing, tech and finance.”
Those areas happened to be my strengths. There was too much for one person to oversee as CEO and not enough hours in the day. But given the equal challenges that both sides of the company presented and the trust we shared, it made sense for us to be side by side on the organizational chart.
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When to walk away from a VC who wants to invest in your startup
Venture capitalists add value in a number of ways. For example, one of my business’ backers has a deep tech “pod” that generates events and content we are always welcomed to be a part of. Another one of our investors gives us full commercial support through its network of mentors that are there to support the business, not the VC.
Due diligence works both ways, and entrepreneurs shouldn’t be in a rush to take investment from anyone that offers it.
I might not expect that from every VC, but if they promise those “assets” by saying that they are here to drive innovation and growth, then I expect them to deliver, just as I have to back up the claim of having a team of supersmart machine learning researchers.
They might know the forks in the road, directions to take, and who to speak to based on having been through the process with similar companies. They might have venture partners that can mentor you and a network of investors that can participate in follow-on rounds. That is where they add value.
The best ones will seek to connect with you personally. They’ll have prepared thoroughly beforehand and are brimming with questions. While they may have preconceived and potentially ill-informed ideas, they demonstrate enthusiasm by starting sentences with “what if,” and they leave me emboldened but contemplative. I fully expect to be provoked in the right way.
However, some also play God. One experience offered up a major warning sign, one that would make me walk on by.
I’m pleased to say my business has some outstanding investors who totally get it. Our investors’ head of investment told representatives at one of New York’s top funds that one of their leading deep tech portfolio companies was coming to town for a “blitz meeting session.” They announced that they were committing to the round I was raising and that we were looking for a new lead investor.
So, put it this way: I wasn’t a guy who walked off the street with a crazy idea, but you might have thought otherwise, given the experience that followed. To be clear, I don’t expect all VCs to open their arms and embrace everyone, but there are rules of engagement.
The transparency and value of DocSend
After a very positive morning meeting, I’d scheduled a couple of hours for a quick chance to grab a breather at my hotel. Flicking through my phone, an email from the associate at the VC I was due to meet next pinged into my inbox.
“Hey Ofri, it’s Jessica [not her real name], really sorry, I’m not feeling great so am thinking I might cut the day short. I know you’re only in New York the next two days, so let’s catch up later on a call and next time you’re over I’m sure we can revisit.”
I started composing a polite response: “Really sorry to hear that. Absolutely fine to reschedule. Let me know your availability, etc., etc.” In truth, I was irritated — this had been in the diary for two months and was one of six meetings scheduled. I was not sorry; I was annoyed.
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