TechCrunch Early Stage
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How to pick the right Series A investors
Early-stage startup founders who are embarking on a Series A fundraising round should consider this: their relationship with the members of their board might last longer than the average American marriage.
In other words, who invests in a startup matters as much — or more — than the total capital they’re bringing with them.
It’s important for founders to get to know the people coming onto their board because they’ll likely be a part of the company for a long time, and it’s really hard to fire them, Jake Saper of Emergence Capital noted during TechCrunch’s virtual Early Stage event in July. But forging a connection isn’t as easy as one might think, Saper added.
The fundraising process requires founders to pack in meetings with numerous investors before making a decision in a short period of time. “Neither party really gets to know the other well enough to know if this is a relationship they want to enter into,” Saper said.
“You want to work with people who give you energy,” he added. “And this is why I strongly encourage you to start to get to know potential Series A leads shortly after you close your seed round.”
Here are the best methods to meet, win over and select Series A investors.
Identify industry experts
Saper recommends extending the typically short Series A time frame by identifying a handful of potential leads as soon as a founder has closed their seed round. Founders shouldn’t just pick any one with a big name and impressive fund. Instead, he recommends focusing on investors who are suited to their startup’s business category or industry.
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Crisis management tips from startup whisperer Margit Wennmachers
When it comes to building a company, lots of things can and do go wrong. Margit Wennmachers — an operating partner at Andreessen Horowitz and long one of the most powerful public relations pros in the startup world — knows this firsthand.
Thankfully for all of you, Wennmachers was able to join us for our recent Early Stage event, where she shared some of her tips and tricks for dealing with everything from fast-ballooning crises that reporters catch wind of, to laying off people during a pandemic, to why lawsuits can actually fuel some companies’ growth.
It’s advice you might save for future reference. As she noted, how a crisis is handled can make or break a startup, and the list of things that can go wrong at even the smallest outfit is “long,” including a product needing to be recalled, a site going down, a cyber breach, a founding team that doesn’t get along, inappropriate behavior, lawsuits and cultural issues.
Some of her most actionable advice included:
Prepare for the inevitable crisis
First, said Wennmachers, spend time modeling out the scenarios, and “let your imagination run wild” as you do. Spend a month on this if necessary. As you’re thinking of worst-case scenarios, also figure out the team that would be involved in a crisis response. Legal will always have to be involved but also, often, HR, outside counsel, and, if a startup can afford it, the help of an outside crisis communications team. If it’s a product failure, you’ll also need the product lead, too, she noted.
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VCs and startups consider HaaS model for consumer devices
I’ve been following consumer audio electronics company Nura with great interest for a few years now — the Melbourne-based startup was one of the first companies I met with after starting with TechCrunch. At the time, its first prototype was a big mess of circuits and wires — the sort of thing you could never imagine shrunk down into a reasonably sized consumer device.
Nura managed, of course. And the final product looked and sounded great; hell, even the box was nice. If I’m lucky, I see a consumer hardware product once or twice a year that seems reasonably capable of disrupting an industry, and Nura’s custom sound profiles fit that bill. But the company was unique for another reason. A graduate of the HAX accelerator, the startup announced NuraNow roughly this time last year.
Hardware as a service (HaaS) has been a popular concept in the IT/enterprise space for some time, but it’s still fairly uncommon in the consumer category. For one thing: A hardware subscription presents a new paradigm for thinking about purchases. That is a big lift in a country like the U.S., which spent years weaning consumers off contract-based smartphones.
That Nura jumped at the chance shouldn’t be a big surprise. Backers HAX/SOSV have been proponents of the model for some time now. I’ve visited their Shenzhen offices a few times, and the topic of HaaS always seems to come up.
In a recent email exchange, General Partner Duncan Turner described HaaS as “a great way to keep in contact with your customers and up-sell them on new features. Most importantly, for startups, recurring revenue is critical for scaling a business with venture capital (and will help appeal to a broad set of investors). HaaS often has a low churn (as easier to put onto long-term contracts).”
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Building your startup’s customer advisory board
A customer advisory board (CAB) can be an invaluable resource for startups, but many founders struggle with putting together the right group of advisors and how to incentivize them. At our TechCrunch Early Stage event, Saam Motamedi, a general partner at Greylock Partners, talked about how he thinks about putting together the right CAB.
“We encourage all of our early-stage companies to put this in place,” Motamedi said. The goal here is to speed up the process to get to product/market fit since your CAB will provide you with regular feedback.
“The idea here is [that] you have this feedback loop from customers back to your product where you build, you go get feedback, you iterate — and the tighter this feedback loop is, the faster you’ll get to product-market fit. And you want to do things structurally to make this feedback loop tighter, starting with a CAB.”
Motamedi said a CAB should consist of about three to six customers. These should be “luminaries or forward thinkers” in the market you are serving. “You add them to the CAB — you might give them small advisory grants — and they become stakeholders and give you feedback as you work through the early stages of product development.”
Image Credits: Greylock Partners
As for the people who you put on the CAB, Motamedi suggests first setting the right expectations for the board.
“There are three components. Number one, the most valuable thing you can get from these customer advisors is their time. So the first piece is you want them to commit to a monthly cadence, that could be 60 minutes, it could be 90 minutes, where you’re going to say, ‘Hey, I’m going to come to the meeting, I’m going to bring two of my teammates, we’re going to show you the latest product demo, and you’re going to drill us with feedback. We’re going to do that once a month.’ […] And then piece two is this notion of customer days, you could do quarterly, you could also do twice a year.
“The idea is you want to bring the customers together. Because if you and I are both CIOs at Fortune 500 companies and we independently react to a product, that’s one thing, but if we sit in a room together, we all look at the product together, there’s going to be interesting data amongst us as customers and the founder is going to learn a lot from that.[…] And I think the third piece is just an expectation that as the company progresses and product maturity increases, that folks on the CAB are going to be advocates and evangelists for the company with their customer networks.”
Motamedi recommends outlining those expectations in a short document.
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Neo’s Ali Partovi on best practices for hiring early-stage startup engineers
On day one of TechCrunch’s Early Stage virtual conference, Ali Partovi joined us to discuss best practices for startups looking to hire engineers.
It’s a subject that’s near and dear to his heart: Partovi is co-founder and CEO of Neo, a venture aimed at including young engineers in a community alongside seasoned industry vets. The fund includes top executives from a slew of different industry titans, including Amazon, Airbnb, Dropbox, Facebook, Google, Microsoft and Stripe.
Partovi is probably best known in the Valley for co-founding Code.org with twin brother, Hadi. The nonprofit launched in 2013 with a high-profile video featuring Mark Zuckerberg, Bill Gates and Jack Dorsey, along with a mission to make coding education more accessible to the masses.
It was a two-summer internship at Microsoft while studying at Harvard that gave Partovi an entrée into the world of tech. And while it was clearly a formative experience for the college student, he advises against prospective startup founders looking to large corporations as career launch pads.
“I spend a lot of time mentoring college students, that’s a big part of what I do at Neo,” Partovi said.
“And for anyone who wants to be a founder of a company, there’s a spectrum, from giant companies like Microsoft or Google to early-stage startups. And I would say, find the smallest point on that spectrum that you’re comfortable with, and start your career there. Maybe that’s a 100-person company or maybe for you, it’s a 500-person company. But if you start at Microsoft, it’ll be a long time before you feel comfortable doing your own startup. The skills you gain at a giant company are very valuable for getting promoted and succeeding in giant companies. They’re not often as translatable to being your own founder.”
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Five days left to save on Early Stage online
Our inaugural TC Early Stage 2020 event takes place July 21-22, and we’re here to remind you to take advantage of early-bird savings while you still can. The price goes up on June 26, and that means you have just five days left to buy your ticket and keep $50 in your wallet.
We created TC Early Stage specifically for founders of early-stage startups — from pre-seed through Series A. Attendees can choose from more than 50 sessions that address vital issues that early founders wrestle with as they get their startups off the ground. Each session includes lively, interactive Q&A.
Experts spanning the startup spectrum will lead sessions on core topics ranging from fundraising, tech stack and growth marketing to term sheet construction, recruitment, product management and PR. You’ve got questions and you’ll get answers at Early Stage — along with actionable tips and advice that you can use to move your startup forward.
Here’s a small sample of the sessions you’ll find at Early Stage 2020 (check out the agenda here):
How to build a tech stack that can go the distance — The beautiful flower of your tech stack starts with a seed and a series of decisions. Which fertilizer will you use? How often should you water it? Where can you give it the right amount of sunlight? Every decision you make about your tech stack affects how it will hold up, and evolve, over time. Hear from HappyFunCorp’s co-founder and CEO Ben Schippers and CTO Jon Evans about how you can avoid regretting those decisions.
How to get your first yes — Fundraising can be a bit like dominoes. Once you get one investor on board, it’s much easier to bring others along for the ride. But getting that first “yes” can be the most difficult part. Hear the dos and don’ts of hyper-early-stage fundraising from Cyan Banister, seed-stage investor and partner at Founders Fund.
Here’s where you really need to pay attention. We’re limiting each session to 100 people, and it’s a first-come, first-serve situation. If you want to be in a session to get your burning questions answered, buy your ticket now to avoid getting shut out. On the upside, we’ll make videos of all the sessions available on demand after the event.
TC Early Stage takes place July 21-22, but your shot at an early-bird savings ends in just five days, on June 26. Buy your ticket, secure your $50 savings and get a leg up on moving your business forward!
Is your company interested in sponsoring TC Early Stage? Contact our sponsorship sales team by filling out this form.
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