How to Raise a Series A – featuring Justin Kan and Waseem Daher

– I think we should start it off by just introducing our panelists. So, and you guys are both accomplished, so let’s keep it brief
(audience laughs), just like a. – My background is way back in the day, I started in computer science at MIT. We had two companies prior to this, one was called Ksplice
that did software updates without rebooting that Oracle acquired. And then one was called
Zulip that Dropbox acquired before starting this thing. – What’s up, my name’s Justin. I’m the founder of Atrium. Started a lot of companies. The one that worked out, well, most of ’em failed. One worked well and was called Twitch. And then, I was a partner of Y Combinator for a couple years, advising
early stage companies. And then selective memory kicked in, and I decided to start another
company (audience laughs). So I’m in the struggle
with all of you now again and that company’s Atrium,
so I’m excited to be here. Thanks for coming. – Okay, so raising a Series
A is a really important milestone for start-ups, but it’s definitely not the
easiest round to secure. Can you guys explain the
concept of a Series A crunch and why it’s so difficult to
raise that round of capital? – Go for it. – Alright, so I think what happens in Silicon Valley is oftentimes founders find
it pretty difficult to raise a Series A and that’s kind of because of a bunch of things. In the market, what you’ve
seen in the past 10 to 15 years is the shift towards these
larger and larger seed rounds to get going. So many of you’ve probably
raised a seed round. When I was starting off,
when we raised our very first venture round for in 2007, we raised a Series A and
our seed round was like $300,000 dollars and our Series
A was two million dollars and we thought the two million
was like a pretty big number at the time. But now, you see seed rounds that are like multiple millions of dollars and they’re raised from
all sorts of different people who do very little diligence. So like angel investors, you know, people who’ve been
founders, maybe seed funds, but they’re all often done on these safe, sort of convertible
notes, really quickly as these massive party rounds
as people are investing you know, maybe a couple
hundred thousand dollars into a multi-million dollar round. And so they’re not really
doing that much diligence. The bar to get that money
from them is not that high. You know, maybe you have
a really great idea, you have a great product demo,
you have some early traction, you have a great team and
then you aggregate, you know, a one, two, or three or even larger million dollar seed round. And so, oftentimes people, you know, this happened for me actually
with one of my companies. It goes to your head. You’re like, that was super easy. I got this couple million dollars. And you think the next
round’s gonna be that easy and then, 12 to 24 months goes by, you’ve spent a lot of that money on maybe getting a little
bit more product traction, building out your team and then you go out to raise money and you’re completely unprepared for like the amount of diligence and expectations and kind of threshold milestones that a professional, you
know, venture capitalist is going to expect. And I think that’s when
the crunch happens. – Yeah, another thing I
think contributes to it is like, to raise the
seed, it’s a narrative about how great you are,
how great the vision is, like, you’re really selling the dream. Whereas, I think, especially
depending on the industry, when it’s time to raise the Series A, it is, it can be much,
much more metrics focused. The rubber’s finally met the road. Your investors are gonna look at well, what traction have
you actually achieved, like what did you actually do, which is, it’s basically
harder to fake, right? There’s some real stuff
that gets checked out, whereas for the seed it’s about how compelling is the team,
how compelling is the vision. – Okay, so let’s do some storytelling. Travel back in time to
your very first company. What was the process of fundraising like and it can be seed or Series A. But I mean did you have contacts and how did you go about
choosing who to reach out to? – For our first company,
so we did this in Boston. It was totally bootstrapped. We didn’t raise any money at all. I think what we did, is
actually we applied for like an NSF grant as like, total, it was a government grant. You filled out this like
massive 60-page application. Then like nine months later,
you hear that you get it and then you have to like keep time cards. The whole thing is, from
a bookkeeping perspective, very painful. For that company, for us, it was like, we were all like 21, 22. We were just out of school. I think we just did not know
anything about anything, especially when it came to fundraising. And this was like 2008
where you didn’t really have like the robust networks of
information on the internet. Like there wasn’t Hacker News,
YC wasn’t really a thing, like there was really no
one there to advise you. So I think we had some
like bumbling conversations with some Boston VC investors
and because it was 2008, they were like, normally
we would like slow no this, and we would just kinda
like slow play you, but because like of the financial crisis, we’re just gonna tell you no. (laughter) – There’s like no way we
ever wanted this (laughter). – Right, it was just like,
we’re gonna close that door right now (laughter). I was like, okay, fine. – What about the next time? – The next time, it was,
well for us, it was very nice because it was like, look
we have this track record of this first company,
Oracle had acquired it, the team had started to build some cred, so for the second company,
raising the seed round was a much more straightforward process. We just called up contacts we had made in the previous company and we’re like, hey, we got the band back together, we’re doing this other thing,
you wanna put in some money? And it was kind of as you said, it was like very minimal
diligence, like here’s the check. – For us, for, well,
I had a company before that that was really shitty and we raised $70,000 dollars, so
that doesn’t even really count but that process was basically like begging some of Paul
Graham’s rich friends. He was the founder of Y Combinator so he did this demo day. It was the very first YC batch and then, he cajoled maybe 10 of
his friends to show up. And so it was really just
badgering them for $70,000 dollars which lasted a whole year actually and then, you know, we failed, ended up selling that company on Ebay. It’s kind of an irrelevant story. But we ended up, for the next company, we actually raised a lot over
successive rounds, you know. So we raised that 300,000 seed round which was mostly hitting
up random angel investors and once again, repeating
that kind of begging process but this time, you know, we had like a maybe it was more narrative based. The narrative was completely bad. I mean, the idea behind the company was not a good one. It was us trying to make
our own reality tv show on the internet which is
a bad business for like a bunch of reasons but (audience laughs) I guess it doesn’t really matter. We convinced these guys to give us like a couple hundred thousand
dollars and then, we ended up raising two million dollars from this mediocre firm, maybe I don’t wanna say that, a great firm (audience
laughs) who supported us. An amazing firm ’cause they supported us. Actually, I think they’ve done quite well from a returns perspective now. But this firm called and now I’ve really painted
myself into a corner. – Yeah, you’re stuck (audience laughs). You just switch topics. – Yeah, so we raised
money from this small firm that raised two million
dollars back in 2007. And then we ended up
raising another 3.9 million in a kind of Series B. These are all much smaller
numbers at the time, about a year later. And then over the
lifecycle of the company, we raised about it was like 45 million total,
so whatever 45 million minus 6.2 million is, yeah, 38.8 million. Yeah and that was kind of
the fundraising history for which eventually
became Twitch and then yeah, that’s what we did. I forgot what the
original question was now. (audience laughs) – That’s fine, we’ll move
on to the next question. – Yeah. – So you guys make it sound
like it was a fairly positive and easy experience to raise capital, but I’m sure that there were days where it was a big struggle. Can you maybe elaborate on what
the biggest challenges were on those days when you wanted to give up? – Yeah, actually it wasn’t easy. I mean it sounds easy in retrospect when I like relate it in 30 seconds, but it really wasn’t very easy. So when we were, we felt for the first, actually the entire lifetime of Twitch we felt like it was basically begging. When we got the seed round,
that was a little easier. It was easier in the sense that there was it was just like rich people being like that’s a cool idea, alright. And because Paul had invested as like part of Y Combinator, that was, you know, kind of like it was this little, it wasn’t very popular back then, but it was a little bit
of a stamp for, you know, this very small community
of people were his friends. Then, when we raised the Series A, that was probably like
the easiest it ever was, this two million dollars Series A, we ended up because we launched this thing and it was kind of a
weird phenomenon of like Justin’s gonna do a
live-streaming reality show and it was all over the news. People thought that
meant it was getting used and watched which is
not usually, you know, they don’t correlate really one-to-one. And so there was like
all this hype around it, so people were at least
willing to talk to us. So we went up and down Sand Hill Road and talked to all these investors and were telling them about our business which was effectively like, we’re gonna make a reality tv show. And, you know, the nice ones were like, that’s a hits-based business which meant, you know, you
have to like make a hit. Right, it’s kind of like making a hit game or movie or something and they were like, we don’t invest in that kind of business. And then, most of them
just completely ghosted, but we did get two people
who were pretty interested and one of them end up saying, okay, they didn’t give us a term sheet, but they gave us this verbal offer and they were like, we’ll give you you know, we’d love to
invest like a million dollars at a five million dollar valuation. And so, then there was this other firm that we ended up raising from and I remember we lived in our apartment which was also our office which was a really crappy apartment. And we had these white
boards on the wall that were actually not even real white boards but they were the white
boards that you buy at like Home Depot that are like shower board that kind of serves as
white board but cheaper and doesn’t really erase properly. And so, we wrote on the wall, like the one million at five
million dollar valuation as like a, you know, we were kinda like mapping out our options. And then I remember we met
with this other investor and we met at our office
and we walked them past that on the way out accidentally actually. And then they were interested
and they came back actually with two million at a $10
million dollar valuation and so we ended up just taking that. That was like the easiest it ever was. Every round after that
was a series of like, we did it completely wrong. The main thing we did wrong. Well, there were two
things we did really badly. One was we were horrible
at telling a narrative of what our company was. And the second thing
that was really bad was we ran the entire process
linearly instead of in parallel. And so it was basically
going to one person and being like, hey,
will you give us money and they’d be like, no or
more likely, they’d ghost. And then we’d go to the next
guy and be like, give us money and then like repeat the
process over and over again. So the second time, for our Series B, which was the 3.9 million, we ended up talking to like everyone and we end up having to go back
to our existing investors who gave us another three million. And then, we got like a
$900,000 dollars from Tim Draper after his firm told us no. So he was like, I like them personally, so I’ll give them something, but my firm thinks they’re horrible so they were not actually
gonna make an investment. And then, after that, we
did this entire, like, who did we raise money from? We did another round of begging and got told no by almost everyone, and raised money from Bessemer and they were like, it was
like a non-competitive round. It was just like one investor and the valuation on that round was like an order of magnitude or two lower than other websites that had
comparable traffic, right. We were just like, so bad at doing this. And then we raised another
round that was led by Thrive and they only put
in five million dollars of a $20 million dollar round ’cause they were so not convinced. Once again, it was like much
suppressed valuation-wise compared to like comps. And so, the whole thing
was like horrible, actually and we learned a lot but
it was like not easy. – I think for us, ’cause our
history was little bit weird on it, too, with the first company, again, we really did bootstrap it. So the whole way we
operated the company was, you can’t spend money that you didn’t make selling your product, which I think forced a
certain amount of, like healthy discipline. But, again, we were like 22 or whatever and we don’t know anything
about how to run a company and I think we just felt, like, oh, we should really be raising money because like that’s what real companies do and we wanna be a real company. So we spent a lot of time. It was likely completely unprincipled. I think we didn’t really understand like, why we should do it or
even what we were gonna do with the money. We just kinda felt like we need
to be talking with investors which, like that’s actually
not a good strategy. We spent a lot of time
talking to this firm called In-Q-Tel, which is
like the VC arm of the CIA basically. And it was like the coolest meetings, ’cause they would take you to these like nondescript hotel rooms
and then they would like show you their credentials. And I’d be like, I don’t
know how to evaluate if this is a real CIA badge
or not, like okay (laughs). And we spent a bunch
of time talking to them but I think like because we
were not in the driver’s seat and we didn’t really know
like how much we wanted or what terms we wanted or
what we wanted to do with it, like, the conversations were just like very, very unstructured. And so that wasn’t like disheartening, but it was just sort of frustrating ’cause it was a lot of wasted time. I think the experience that was more like trying or emotionally
difficult for me was actually with the second company. So again, we had that
first company Ksplice that Oracle acquired. We were at Oracle for a year
to transition over the tech. And then the founders all left together and started another company. We kind of got the band back together. The seed round was quite
straightforward as I mentioned. We just kinda reached to
people in our network. We’re like, we’re doing this new company, do you wanna invest? It’s kinda what you were saying, it’s just like, they’ll
just write you a check. And I think because of the
success with the seed round, we’re like, oh, we’re doing so well, this company’s amazing, like,
we’re gonna have no trouble raising a Series A. Hence we went and we had
like a pretty aggressive ask and I think we ran
the process pretty well where we identified, like,
five or so firms we liked and we gave ’em the pitch. We showed them the
initial traction and like the narrative was reasonably tight. And I think we were trying to raise, I wanna say there was like six
million dollars or something and this was, I guess
like 2012 or something. And no one was really
biting and we were like, I don’t understand, like
I thought we had like this awesome team, like we had traction, like why doesn’t anyone
invest in our company? And then one firm came back
to us and they’re like, look, we don’t, like we like you, we think you’re on to
something interesting, but like, we wanna see more traction, like we want you to do more before we’re going to give you that scale money. We would give you two million dollars, which like, look, that’s
a good problem to have, like someone was willing to give us money but emotionally, we were like so sure we were gonna like get
this deal on the terms that we wanted and we’re
like, what do we do? How are we gonna tell the team about this? Like, should we take it, should we not? Like, ultimately the story resolved to everyone’s satisfaction because Dropbox acquired the company which was like awesome for the team and a great outcome for everyone but that, I think there was a lot
of existential angst for us about like is this an
offer we should take. It felt like it was not success and were we just gonna like
be realists and accept it or like what the plan was gonna be there. – So in 2018, things are a lot different from when you guys started
your first businesses. And a lot of it has to do with SoftBank. So nowadays, Series A
investments and seed investments are larger than what they once were. So I’m curious, to you,
what is a Series A? What does that deal look like? And can you raise too
much money at that stage? – It is crazy that the numbers
now that are seed rounds used to be what you would call Series As. Like if you look at DropBox’s Series A in 2008 or whenever it was, it was like, that is the size and at a
valuation of a seed round today. So definitely everything
has kind of shifted up. I think when you think about
how much money to raise, it, like you can be somewhat
principled about it. At every fund raise, you’re raising money to get to another milestone. And the milestone is either, being profitable or the ability
to raise even more money. So I think the way to
do that is to back solve from like, okay, I’m raising my seed. What is it gonna take to
successfully raise an A? What’s required from
a metrics perspective? What is required from
a traction perspective? What does that imply about
how I’m gonna grow the team, how long it’s gonna take,
how much money I need? And I think being thoughtful
about the right amount of money does matter. I mean, better to have too
much than too little, but that’s sort of how I would think about it, amount raised. – Yeah, I agree, definitely. You wanna have a plan. You should have a, like,
I think a lot of people just make up number because
that’s what they see other people doing, but
you should have a plan that should be based on
some sort of operating plan to get to that milestone, if only for yourself. In fact, investors often
don’t even ask to see it or it’s kind of like a
checkbox after the fact, after they’ve decided that
they’re interested in you or not. Well, not not, after they decide
they’re interested in you, but it’s good for you to
have that plan for yourself. And then, you know, you
can add some buffer. – What does a Series
A-ready company look like? And how much does that
differ across industries? – The thing that people say in B2B SasS is like a million IRR. I don’t that that is really
a hard and fast rule. It definitely it is a rule
that if you talk to VCs they’ll talk about. I think there’s sort of like the calculus is a
little bit more complicated, where it’s like, okay there’s some like premium you’re getting because of the caliber of the team and there’s some premium
you’re getting because of like the traction you’ve gained. And like, depending on
how big this column is, this column doesn’t
have to be quite as big. Like, for us, we raised a Series A before we got to a million IRR. And I think the reason
we were able to do it with this company is like,
our investors were like, wow, this team is exceptional, like, we believe they can get there. We will, like, give them credit. We’ll like basically play
forward the trajectory of the company and invest
as though they were there. Whereas I think if the team
were more unknown or whatever, I think investors will look instead at well, what has the
company actually achieved. That’s what I would say on B2B SaaS, which is my main area of expertise. – Yeah, I think it’s
really highly dependent. There’s no formula, you know, they don’t plug you in to a formula. It’s really more about
finding some partner that’s gonna fall in
love with your company and you’re really just
setting up a process where you think that, after
you talk to a certain number of people at the top of the funnel, you’re gonna end up with like, one or more people in love with you. And so, you know, lots
of factors go into that as Waseem said. I definitely think it’s
mostly, at the Series A stage, and then even in later, subsequent rounds, about the narrative of
like that you’re pitching. I used to think that the
narrative was, you know for the seed round but I actually think it’s the primary driver of
every round up until even hundreds of millions of
dollars or potentially more than that in funds raised. And so, like, really making
sure that you have a tight story for, you know, this is a big problem
that you’re attacking. Why you have found the
solution to the problem, and how that solution’s just like kind of impacting the world, I think is the most important thing, kind of the most fundamentally important thing. – Very agreed on the narrative. I think people. It’s easy to think about VC as this like, kind of black box or machine that like takes in companies as input
and like puts out money. Like, they’re people. They’re people like us that have emotions and respond to stories
and I think the power of the well-crafted
narrative like does land and does matter, so I
think that’s exactly right. – So most first-time donors
don’t have their pick at VC firms. Some may, but if you do have
your pick at multiple firms, what characteristics are you looking for in the right partner? – Yeah, I was gonna say,
it’s not about the firm, it’s about the partner, I
think that’s exactly right. Which is, you’re gonna
be spending a lot of time with this person. And so, like, the basic
litmus test for me is like, is there chemistry there? Do you trust them? Do you think they have your back? Are they excited about your business? It’s like, do you wanna
spend time with this person? Because ultimately, you’re
gonna spend a lot of time with this person, so
if you don’t like them, you probably shouldn’t take their money. – Yeah, it’s somebody
you can’t fire, right. So you have these people,
they write a big check, they get a board seat, it’s
very hard to get rid of them so it should be someone
that you actually wanna see and get the advice of when you
do have those Board meetings and I think it’s really
important that you do some research beforehand, so figuring
out who you wanna talk to at every firm because they
have relevant experience or they’ve invested in,
you know, similar companies in the past, or, I dunno,
you just really like the way they think about
things in their blogging or tweeting or whatever. I think that’s super important. And then the other thing
I would do is, you know, spend time to get to know them once through the process,
really figuring out if you think they can be value-add to you. And then don’t be afraid, once you are going through that process or once you have the term sheet, really, you can ask for references
and call references of people they’ve invested in and even do some back-channel
references for people who, you know, they’ve invested
in that haven’t worked out. – What kind of value-add
to VCs provide you? I think, like, that seems really simple, but it’s not something
people really talk about that often. – Well, I mean, I think, like
many provide no value-add or capital. Capital’s a great word. But I think that, you
know, really good ones can really force you to think about issues that you maybe would choose to ignore if you didn’t have someone
you had to report to, right. I find that to be helpful. Just like having somebody who’s, it’s very hard internally
in your company to like, you maybe have co-founders
you have a really great relationship with, but
oftentimes, you know, you don’t have anyone who’s
gonna challenge you on your assumptions, and I
think it’s really helpful to have people around you that
will challenge you, right. That’s one. I think they’ll try to be
helpful in all these other ways sometimes, like, helping you find talent and with upstream capital
providers which, you know, may or may not be realized. Those are some of the things. And then brand, actually. I think it’s very helpful. You’re like kinda borrowing from the brand of the investor in a lot of ways. And that’s for, you know,
potential customers, potential candidates
who’ll join your company. It’s surprising, actually,
how much that matters. Like for Atrium, I actually didn’t think it would matter anymore, because like, I started building another company, c’mon. But with Andreessen, like once we raised the
money for Andreessen, it’s like it actually has, like, there is that brand halo and it’s pretty, it is interesting to see. – Yeah, I was gonna say
the bar, I think, is like not harmful. Like if you’re not harmful,
you’re already doing awesomely, which is, I guess, a pretty
cynical perspective, but I think the challenge with
the average venture capitalist is like, they’re trying to be helpful and some of those motions
in the direction that seem like they’re helpful are actually not and they’re creating a bunch
of work for you or your team that can be a distraction from like the actual core mission
you should be focusing on. So I think there is a danger where like, even if they’re trying to be helpful, it can pivot you in ways that are maybe not appropriate
for the business. I think the ways that our
investors have been most helpful for us are like, one is, yeah, the external accountability. And it’s not even that they say something per se,
it’s just the forcing function of like, oh, we have a board meeting, so we have to prepare for a board meeting. It’s like a paper deadline. Like, you’re not gonna write the paper until the night before the deadline. It’s like okay, fine, we’re
finally gonna put together the operating plan. Or we’re finally gonna compute xyz, so it’s a nice forcing
function to make you reflect on, I think, the
larger strategic stuff. And as Justin mentioned, like, from a recruiting perspective, we’ve had our investors get
on calls with candidates, that kind of thing. – No need to name names, but
what are some of the worst experiences you had with VCs? And can you describe those a little bit? (audience laughs) – We had one experience where we were talking to a partner at a VC firm, and this person was like, very, very confident they
could get us a term sheet. They were like, look, I’m gonna bring you to
the partner meeting, I’m gonna get you this term sheet, it’s gonna be ABC, like, you’re gonna sign immediately afterwards. Don’t worry, this is like, all locked in, like, let’s do it. And we’re like, cool, yeah,
I like the terms, I like you, I’m excited to work with you,
like, let’s make it happen. So we go to this firm’s office. Like, we present to the partnership. And he’s like, I guess I said he, I’ve used ‘a’ previously. He said, okay, go wait
in this little room, like this is gonna take 15 minutes, we’re gonna quickly wrap it up and then we’ll come back with a term sheet and you’ll sign it. So we’re there and it’s
like 15 minutes pass and like, this guy doesn’t show up. Like another 15 minutes pass and this guy doesn’t show up. And it’s like, now it’s like an hour in and I’m looking at my co-founders. We’re like, what is going on? Like, it’s clear that
even though this person thought they had the
ability to get the deal done that they didn’t. And I think they did genuinely
believe that they could, they just happened to
lack the political capital within the firm. And I think it’s easy to
underestimate, I think, a lot of these kinda inner-firm dynamics where it is political and
there is a ranking order. And I think for us, we
felt quite burned by that because we were sort of going into it under the assumption
that we were, in fact, gonna get this term sheet and
have this firm invest in us. – Worst experience, I have
so many to choose from. (audience laughs) But some of them are
more serious than others. One light-hearted one, I went to pitch a VC, very prominent investor and the first, like, 20 minutes, he wanted to talk to me about he’d like learned to speak Chinese. And he’s like not Chinese. And I don’t speak Chinese I’m Chinese ethnically,
but my Chinese is horrible. But he like insisted on just being like starting to speak Chinese and just like, really just, like you know
(speaks Chinese words) and like, I was just
like kinda playing along but then it was just like
kept going on and I’m like (audience laughs) it’s just
at some point it’s awkward. That was one. And then, at the same firm, actually, a different time after
that time, that, you know, they didn’t invest. Another time, same firm, this other guy just
wanted to talk about how like, we were running Twitch. It’s going pretty well. But he just wanted to
talk about his experience as a PM at YouTube and
how they did this like I guess I can’t go in
to too much detail, but like, they did this project that was like a marketing project and
how like impactful it was to YouTube. And I was like, no, YouTube was successful ’cause you know, you get other
people to upload the videos and some of them are viral
and then other people come in, but he was just going on
about this marketing project and how it like made YouTube. And I was just like, that was
a horrible experience, too. They didn’t invest again. This other one where, oh, a recent one. You know I had a firm that was like, we were negotiating on a
verbal offer and he was like, and this is someone I
have a relationship with, you know, and then, basically changed his mind over the course of a week and I didn’t really care that much. Or, it wasn’t surprising, I guess. But, you know, it’s not great. But we’re still cool, it’s not a problem. I think that if that would
have been my only option, then I would feel a lot more annoyed. You know, other people just like ghosting. It’s weird, because they
don’t wanna tell you no, ’cause in the future they might wanna. Somehow like, ghosting on you is like better than telling
you no outright because it preserves the option, maybe, even though it’s, you
know, incredibly rude and disheartening to like people who really need your capital or want your capital. But I’ve had people, like,
lots of people ghost. And even now, that’s the
part that’s weird to me. Lots of people ghosted on me. Those are some of the worse ones, yeah. – So I’ve had a lot of founders tell me that they are always fundraising. Fundraising never ends. You’re fundraising until
you exit or you go public or whatever. Is that true? Or how long does the process take from you know, setting out into
the firm to closing the deal? – I think that’s a little hyperbolic. I think that, at a certain point, you need to like actually
build your product. Otherwise you are fucked. And so, you need to like, I think, what they, many founders who do a
good job at fundraising are building relationships during the time that they’re actually
working on their company. But when you’re really fundraising, you’re spending like
100 percent of your time on the process of having
meetings, doing pitches and driving people through
a funnel to convert to get to term sheets and
then close those term sheets. And you can’t really
be doing anything else. You can’t be in this
normal operating cadence of your company because usually, when you’re operating your company, you’re like, having
regular check-in meetings, you’re having one-on-ones. Those things happen at
the same time every week or every other week or
every month or whatever. And you know, driving up and down, like Sand Hill Road, you know
to do three pitch meetings in a day is highly
disruptive to any sort of operating cadence. So I think what they really mean is they’re always building
relationships with investors which I do think is a good idea because you know, you are building
relationships with someone and they’re more likely to want to invest if they believe that
you’re gonna be successful and they’re more likely to believe that you’re gonna be successful if you spend time getting to know someone, kind of subtly convincing them why you’re gonna be successful, or giving them opportunities to see how you are being successful. So I do think there is something to that. – Yeah, I would definitely
echo that, which is, my advice is to spend as
little time on fundraising as possible which is, any time you’re spending fundraising is time you’re not spending
growing your business and successful fundraising is not the same as success with your company is, I think, kind of piece one. And then piece two is
actually from a deal momentum perspective. You wanna just like declare,
hey, I’m raising money and then, you wanna just get it done. And the longer that
you’re like raising money and people are talking
like, oh, this company’s trying to raise money. Why haven’t they raised the money yet? Is there something wrong with them? Like, why haven’t the good investors made the investments yet? Like, there’s a lot of, like, the longer the process takes,
time is not on your side when you’re raising money. You like want to drive
the process to a close very, very quickly,
very, very efficiently. But to Justin’s point, it is also like a very relationships-based thing. And I think, people also
don’t like this idea that being totally transactional with you showing up for the first time being like, here’s my deck, here are
the terms, are you in? Like, they wanna know you and
they wanna spend time with you and I think in the same way I would also try to like
time box that as well. Like, well in advance of your
trying to raise some money, I would try to identify a couple
firms, a couple people that I thought I’d potentially wanna work with and I’d wanna meet with them and have like a casual coffee like no
deck, just a conversation, hey, this is who I am,
this is what we’re up to. So that they like know who you are and you have a face and a name and so that six months later or whenever, when you actually are raising money, they have some context,
they know about you, they have the ability to
move much more quickly because you’ve kind of pre-seeded it with some information about yourself. – If you think about it, the reason that they
wanna get to know you is they think you can make a better decision. But it’s also in what
they’re selling, right. What they sell to LPs, you know VCs raise money from LPs, sometimes it’s high net worth individuals for smaller funds, but oftentimes it’s like big institutions,
right, pension funds and (mumbles) funds and then
also, you know, endowments. Their pitch is that they have
a process that is different from everybody else’s process, right, ’cause capital itself
is a commodity, right. Like if you get money
from General Catalyst or Sequoia or whoever, it all spends the same, doesn’t matter. Your vendors and employees don’t really care who’s money it is. And so, they’re, because it’s a commodity, it’s kinda like that Peter
Thiel thing where he’s like everything that, you
know, everyone who’s in a commodity business is
saying they’re a monopoly and everyone who’s in a monopoly business is saying they’re a commodity. They’re in the commodity
business with capital. And so they’re saying, we have this monopoly
on this process, right. We have a specific process that we do that finds the best company, that equals, at the end of the day, the best companies and the best returns. And so, usually that process involves like something that they were doing, right. And then getting to know you is like, usually oftentimes part of that process. So it’s almost like a self-identity thing that they’re gonna wanna get to know you, if that makes sense. – So when you have a firm
that wants to invest in you, what terms should you be wary of? – I mean, anything that’s not market, you know, most Silicon
Valley investors now are not like a lot of the terms are
definitely for seeds, you know, with safes and then,
later on with Series As have converged to like some
narrow band of market terms and your attorneys can help you with that or advisors, investors, you
know, previous investors. But you know, anything
that’s not market is like should be like a red flag because it means they’re also, you know, kind of trying to do something else, I guess, other than just like be a normal
VC and get money that way. And so, you know, we’re
always wary of random foreign investors who have
these like weird terms and stuff like that. – Yeah, I would echo
that which is also like, it is their job full-time to raise money, so they also, like, to invest money so they have a much better
grasp on the process than you do, so I think, the way you come at that or
the way you insulate yourself against that is, as Justin mentioned, like leaning on your advisors,
your lawyers, your investors, folks in your network
to sanity check, like, is this a reasonable term. – If you’re really
desperate to raise money and you have firm who wants to, you know, sign a term sheet with poor terms, do you walk away from the
deal or do you keep the money? Would you accept money even
if the terms of the deal are not to your liking
but you need the capital? – Yeah, (audience laughs) money is life. If you don’t have money
to operate your company, you are gonna die, right,
unless you’re profitable, which you should aspire to be, probably. But yeah, if you have no options, if you have one option,
then you should just take that option. I’ve been in that position a lot, so just take it and make the best of it. – Yeah, I would say within reason, like if the option is one that
totally neuters any of your future upside for you or the team, then like, it’s actually not better than just shutting the company down or having it be acquired
or whatever, like, there are some bars in that. – So if you needed the money, there’s nothing that would make
you walk away from the deal? – Well, if it’s like horrible, like if you’re selling yourself into
indentured servitude forever or you have to guarantee it
with your house or something maybe you don’t wanna do that, but for most cases, yeah,
you’re just gonna take the money and hope you can live
with the consequences. – Okay, I think we should
take some audience questions. And then maybe we can loop back
in and do a final few here. – Because we have this low
interest rate environment, there’s nothing, there’s
been nothing to invest in, and like, lots of people
have seen tech companies grow super fast and so, there’s
been this massive influx of capital by random people, including people who have
gotten liquidity from something else who were just
like, ah, that was easy, let’s like, do this again by
investing in my buddy’s startup and so, you’ve kind of seen that creep up and then there’s been
this like streamlining of the investment process
by using these convertible securities like safes
and convertible notes, which makes it easy for you
to raise money incrementally and so, that’s just made
it super easy and liquid to like get money in the seed round. Sure, you can do anything, right, like, I think it’s possible. Like, I’ve definitely
seen people raise money, like $10 million dollars and have this convertible note party round and then like, turn it into an, so I mean you can kinda like get money. I think people are always
like, in Silicon Valley, people are obsessed with this like, kind of path of raising money. There’s a seed round, there’s a Series A, there’s a Series B, there’s a Series C. Eventually, you get off
that path and you’re like, just trying to find capital
from whoever will give it to you at that stage or you’re
profitable, whatever. And so, you know, there’s
lots of different, you know, paths you can take, but I think I would try, there’s
a lot of other signals that go into, like, raising
Series A from like a good you know, VC, like, you
know that can help you in all those ways we
kinda talked about, so I think, and there might
be like negative signals from raising money from
a bunch of random people because people in the market
who might become your employees or future investors might
think you couldn’t get it from a real investor. – I’m trying to remember
the A specifically, like we definitely did a lot of diligence for the acquisitions. Here’s what happens. You get like a shared Dropbox folder. Dropbox if you’re lucky. Some like horrible Merrill Lynch data room if you’re unlucky (audience laughs). And then, you make a bunch of folders that each have a number
and then like a word. It’s like “1”, Employee Agreements. “2” like Contracts. “3” whatever. They like have a schedule of
stuff you have to put together and it’s like every employment
agreement you’ve ever signed like executed by the counter-party. Like, all of the contracts
you’ve ever signed, all of the terms of service
you’ve every agreed to, and like, any software
product you’ve ever used, like the list is quite onerous and one of the things you can
do to make your life easier on that stuff is, actually
being good about collecting it at the time it’s created as opposed to trying
to pull it all together after the fact. So yes, in general,
certainly for acquisition, I don’t even remember
what we did for the A, because my co-founder, thankfully, is like amazing at this stuff. Yes, we had to do a ton
of work to just like pull together a bunch of stuff. I don’t know if that was your experience. – Yeah, absolutely. Actually, we’re trying to
solve this problem at Atrium. (audience laughs) One of the things you can
do on the diligence side. So there’s like legal diligence
and business diligence, right, that your investors are gonna do. For our first price round, we raised like $10 and half million dollars
for General Catalyst and we didn’t have a business at the time. It was just a narrative, so there was no business diligence really. But the legal diligence process, I mean, it took about five weeks, I think, to close a round anyways,
because we had to like incorporate the company
and stuff like that. On the more recent round, we closed it pretty quickly, actually and a couple things that we
did to make that happen is like we compiled all our
business diligence upfront and we had it in a folder
and we just would share that folder with everyone who was kinda like you know, at a certain stage
in the fundraising process after like the second meeting. And then, the other thing we did was we anyone can do, is like you
can compile all this like legal diligence beforehand,
before you get a terms sheet so it’s ready to go. And lots of times, people
actually don’t do that and that like delays their process. You know, your lawyers
aren’t gonna like actually look at your documents before
you have a signed terms sheet in hand because they don’t
think they’re gonna get paid until you actually raise money. At Atrium, we encourage you to just like do all the diligence stuff upfront so that it will streamline your process post signing a terms sheet because, you know, it’s a faster process. So, regardless of what you decide to do, I think you should do
that diligence upfront if you want it to go quickly. Lots of times founders are like, they’re not worried
about the diligence part. They’re worried about getting
at terms sheet, understandably so they don’t do any of the pre-work. Well I don’t think we did a good job which is why it was like
begging the entire time even though they had
like (audience laughs) tens of millions of
MAU, you know and like, you know, millions of monthly, or like, probably tens of millions of
monthly hours of video watched. If I was to do it again,
today, I would definitely, you wanna show that it’s
a cultural phenomenon that’s happening, right. The hard part for Twitch
specifically was that the product was never used
by any investor, right. Investors are like,
45-year-old, like guys, right and with kids and stuff. And the product was used
by 13 to maybe mid-twenties at the time year old people. And so, they didn’t get it. They didn’t get why anyone
would wanna do this. In fact, oftentimes people
were just like nobody, I don’t believe it, right. You’re saying it as much as
I don’t believe the numbers. I think we really should’ve
focused a lot more on like this is a phenomenon
that’s happening, like, and really going deeper
into explaining what the, what Twitch fulfills
for those users, right. Like I think actually Twitch is, we spent a lot of time
talking about esports, but I actually think Twitch
itself is a lot more like talk radio where people
are just leaving it on in the background while
they’re doing other stuff. I think we should have spent more time really focusing on that narrative and explaining what the
phenomenon was and then, here’s the evidence that
we’ve cracked something that’s riding this big wave which is, you know, our numbers and metrics. – Look, in general, there
are two types of companies that exist in the world. Like, new market companies
that are building a thing that doesn’t currently exist. And this was kind of like the example you were giving a while ago. And there are like very solid,
existing market companies. And for us, the narrative on bookkeeping is that it is like, it is the
most existing market business possible basically. Like, in the history of the
world, of all civilization, like some of the oldest
known written artifacts are literally receipts. Like as soon as there was commerce, there was like people tracking
how many cows they had or whatever. So for us, it was like, look,
this market is enormous, every business has this problem, they’re basically legally
required to solve it. Like, the narrative really focused on, how big is the market and
answer is, oh, it’s huge. Like, you need to make it super huge. And then, like well how
big of a pain point is it on the like nice-to-have,
need-to-have spectrum? Like, you wanna be as
far towards need-to-have as you can possibly be. And I think once you check those boxes, it’s like fine, why will
our thing be better? And for us, I think in the early days, the narrative on why our
thing would be better was sort of two-fold. One is that like even though
we are a software company, what we’re actually
providing is the service of doing your books. And so the competition is
not another software company. It’s someone clicking around
totally by hand in QuickBooks. So we’re like, well,
what is the alternative? The alternative is the
absence of technology. We know how to make technology. Like, that’s why it will be better. And the second component
of it as well was, well, look at the team we’ve assembled. It’s just like an amazing
team on the engineering, product, design side. Like that the team you would believe that the team was capable
of building the thing that was 10x better than
what had previously existed. Yeah, that’s a tough one which is like how you get in front of the top firms. How do you get in front of firms, period? And I think the thing that
I have consistently heard from our investors is that
the thing they value the most is kind of, unfortunately, is warm intros from other founders. And that that’s way more
powerful than anything else, even intros from your
existing investors like, or interest from other
people in the ecosystem. So I think step one is like, getting connected with other founders, ideally founders that are
current portfolio companies in those firms. – That was a long, long question. Yeah, I think it’s a bunch of things. Definitely like, well, when I started off, probably the same for you,
I like didn’t know anything. I was bad at everything, actually. You know, even the core skills, like I was a bad programmer, definitely bad manager,
bad at fundraising. Really, the only thing
we had going for us was we would do this like crazy thing and stick with it. So now, you know, I’m like
not terrible at many things, actually and good at a few things, like telling a narrative and really selling, any sort of selling type
of thing, recruiting, kind of selling to journalists
or investors or clients. So I think that’s, you
know, that’s kinda just a core skills thing and then, I just think the exposure
through multiple companies you see the patterns of like, what works, you know, in
terms of attack factors into a market, what doesn’t work, you know, common mistakes
that you can avoid the second or third time. Yeah, some of that stuff. And I think the last thing I’d say is like there’s more purpose, for me. It’s more intentional. Like when I started the first company and even some of the other
companies it was like just something to do. You know, something to do
because it seemed like I could kind of work on something I
found interesting or whatever. But now, I think it’s a
lot more goals-based around what’s gonna facilitate my own
personal growth and learning. And I’ve decided that a company
is the best way to do that and so, there’s a little
bit more like intentionality around it. – Surprisingly similar answer. I think the biggest thing for me is just having the two other
data points to look at has really helped us like
internally prioritize and let me give you an example. So in the first company, we were all like 22 or whatever and similarly we lived in
like a crappy apartment in Cambridge where we also worked. Like the first floor
was like the living room and first floor bedroom and
they joined onto each other and we’re like, this is the office. And then, me and my co-founders lived on floors two and three. And my room was the biggest room, so it was declared that it
was also the conference room. So the layout of my room was literally, my bed, a table, a polycom speaker phone, like a ring of chairs, a couch, and then like my clothes (laughs). We just did not know
anything about anything and because of that everything
seemed like an emergency. Every single thing, all the time, felt like it was gonna kill the company. And so every single day,
we’re like, oh, my gawd, this is gonna kill the company. Like this bad code someone checked in is gonna kill the company. Like we need to fix it right now. Like we need better code review. Oh, no, this person emailed
like the Linux kernel mailing list with an idea
that sounded kinda like ours, that’s gonna be the end of this company. Like we really need to like work harder. It was just like everything was constantly in like emergency-mode. And like, one, that’s not
a healthy way to live. Like it’s very stressful.
(audience laughs) And two is, it’s like,
it’s just not productive. And so I think for us,
in the second company, we were much more disciplined about oh, and as it turns out,
literally zero percent of those company killers had any impact on the
trajectory of the company. Like the things that actually mattered were not in that list
and were actually like mostly serendipity. So in the second company,
we were like, okay, here are the things we need to do. There’s a given day, we
haven’t completed task five. Is task five urgent? Do we need to do it tonight? If so, like yeah, let’s
stay here ’till it’s done. If we don’t, like I would rather me and our employees and our co-founders like spend time with
their partners or friends or like having dinner or like
reading a book or whatever so I think, like, it’s very
trite to talk about it, but I think we are a bit
better about work-life balance and that that has paid dividends. And like, I’m not amazing at that, still, but I’m definitely much better at it then I think we used to be. – Well, I mean it sounds
like for both of us is like you can’t raise any more
money so (audience laughs) and the relative option of what someone is in the corporate world is
willing to pay for your company is much higher than what you can get or more attractive, I guess,
then what you can get from investors. I actually think that big companies, like the fin companies
are much, much better than investors, like at
understanding what has value in general, on average, I should say. That’s not like, you know, on average. And so, yeah, for us, it was just like, at the same time that we, you know, got the $970 million dollar offer, we couldn’t raise money at a
$600 million dollar valuation for Twitch so it’s kind of a no-brainer. – Yeah, I think for us, it was a calculus. Like again, that was the
sort of narrative where like, there was an investor who was
willing to invest less money on terms we were not as excited about. So we had that kind of in one hand. And then we had the
acquisition offer in the other and I think there was like two or three main axes that
we tried to evaluate this on. One is like, financially. It’s like, okay, x dollars now
or x dollars as per the terms of the deal versus like, what do we think the risk-reward trajectory
of continuing to operate as a business is. Number two, and number two I
think actually matters more is like, is this gonna be
a good home for the team, both like for us the
founders but also like, the employees who’ve entrusted us to like take good care of them. And for us, like, when
we were thinking about committing to Dropbox, it was like, well,
okay, it checked the box on like the financials of the deal. And then we just thought it would like be an awesome place for our team. Like they would grow and thrive there and that we would like get
to do exciting stuff there. And I think number two is underrated. In other words, I think when
people talk about evaluating acquisition offers, they’re like well, who has the biggest number. I actually think that matters less than like how much you’re
gonna enjoy being there. Because if nothing else,
like, you personally are gonna be subject to
some amount of vesting when your company gets acquired and the actual dollars that
leave with you in your pocket are a function of how long you stay there. And there are companies
that you’ll really enjoy spending time at and
you’ll stay there longer. And there are companies that you will less enjoy spending time at, and you will not stay there as long. So that actually has a much a very material impact on
the financial outcome for you that I think that people don’t think that thoughtfully about. – Well, things are gonna change, but I would just make your
plan that you wanna execute, right, like the plan of
like, what are the milestones that we think we need to be convinced that you know, this business
can take more money and that we can accelerate
it for the next round, right. So I dunno, maybe that’s like
based on another company, if you understand, like,
what their metrics look like. You know if you’re like
building a, I dunno, direct-to-consumer CPG
company or something, you kinda understand what
the market looks like for what kinds of proof
points you need to deliver to like get to the next,
to raise the next round. That could be okay, I guess. But I would be doing it
for yourself, I guess, more than anyone else. – It’s a good question. I’m gonna be totally honest with you, which is I don’t totally remember. I think, like our feeling
was having looked at I think what other companies
were raising at the time and sort of like where we felt we were in the like spectrum of other companies like this felt like a healthy
amount of money to raise which I think is actually not
the right way to evaluate it. I think the way you wanna do
it is actually to back-solve it from subsequent fundraising, which is, okay, to raise the next round, this is where I’m gonna need to be. This is how long it’s gonna take me. This is how I have to staff up to do it. What does that imply
about how much capital I need to raise now? And we sort of had a
narrative around that. I don’t think our numbers
were wrong, actually. I think the problem, or
the resistance that we got from investors was that they
didn’t feel that our traction to-date justified an
investment of that size. And so they were much more like, well, why don’t you take
a smaller amount of money, prove it out a little bit more and then come back to us
in a year and then yes, if it actually unfolds like
you’re telling us it will, we’ll write that check that you want then. We just wanna like turn
some more cards over. It’s one of these things where it’s like mixing business and pleasure, it like has benefits and has downsides. Like there is a guy that isn’t, well, was not an
investor in our company that wanted to be an investor in our company and actually now, that has
led to a lot of friction between this person and
one of my co-founders. And so that was, I think, a relationship that used to be friendly, that because of our perceive snub
or slight on both parties, like is now not a friendly relationship. And like, that kinda sucks, yeah. – I guess for myself, when
it comes to your company, you know, that’s your. No one’s owed, you know,
the ability to invest. Yeah, so, I mean, I have
friends who wanted to invest and it was the wrong timing or whatever. Tried to accommodate, but, you know, they’re okay with it or not. But it’s not like, you know,
I always put my company first. You mean like the biggest
line item in your P & L that’s like gonna cause burn? It’s like probably your headcount if you’re here in San Francisco so you control that. Lots of you don’t control that very well. But that’s what I’d be thinking about. You know, it’s your plan is
probably mostly based around like how many people you’re hiring. I would separate them from like
the signal of that happening from the what you should
do about it, right. The signal of people, you’re
just working on your company, you’re growing so fast
and you don’t give a shit about raising money from VCs and they’re like begging
you to take meetings. That’s good, that’s great. That’s the position that
everybody in this room wants to be in, including me
and Waseem (audience laughs). What you should do about it though, I think there’s a temptation from founders which I think is wrong to
just go with whatever’s easy because someone’s like
coming in and saying, take my money, to just say, oh,
okay, I’m just gonna do that ’cause I hate fundraising. I don’t wanna talk to a lot of investors, so I’m just gonna take what’s easy. But I think you’re doing
yourself a disservice if you don’t run, like
make it into a process. It doesn’t have to be
a process that involves talking to everyone in Silicon Valley, but actually structuring it as like, I’m gonna decide to raise money because I can grow my business
faster or because of some, you know, I want it for my business. Okay, make that decision. And then, how am I gonna do this? Okay, maybe I’m gonna seed
this funnel with all the people who have reached out to me
and maybe some other set, that, you know, maybe other people who I want and think’ll be
a value-add to the business and then just like, run
it like a normal process. You know, because I think
taking that easy money from whoever’s there is, you know, it’s like recruiting, right. If you’re gonna recruit
someone to be on your team, would you, you might just put a JD out and then just wait for
someone to come in the door. But what’s the odds of
that’s like the perfect fit candidate? I dunno, it could be, but you might want to like, put
more people in the funnel so you get a feeling of like,
who’s available out there. – I’m like an old person, in a sense that like, my friend who’s very
into bitcoin, circa 2010 in this crappy apartment in Cambridge that I was talking about and he like set up a bitcoin miner and like
mined a block of 50 bitcoins or whatever and I was
like, this is stupid. And that’s, I mean, it’s not
a very widely held opinion, but I like, when it comes
to like ICOs and bitcoin and crypto, I’m just like,
I dunno, I’m not interested in hearing about it. Not to disparage it. I think there’s all kind
of interesting stuff that’s happening. I just, for me personally, I don’t have any thoughts on it. Yeah, it’s not my thing. – Well, I think, for, you know, last year, lots of people wanted to
participate in the market, ’cause they saw it as an
easy way to get capital. Lots of like, random companies
that couldn’t raise money from traditional capital
sources did it successfully. Now I think that’s like
kinda cooled off a lot. So, yeah, I dunno, probably
not a good option right now. – Sure, to the first
point about like, okay, you have a bunch of
associates reaching out. I mean, ideally, you
are spending your time with the people that can
actually make the decisions and that associates are, in general, not the people that
can make the decisions. And I think there are two
pieces that go on here. One is, I think the point
of contact at the firm ends up being like the
person that you first talk to at the company, like imprint
on you and it’s like, now that’s your person at the firm. So as much as possible, I
think you wanna make that as high level a person as possible. In general, my feeling on
these coffee conversations is again, I think you wanna sort of run it in a very process-oriented way, even if the step of the
process you’re in is like I’m in get-to-know-you
mode, I’m not raising money. Because I think you could
spend literally 100 percent of the hours in your day
just meeting with people that wanna get coffee with
you to talk about your company because that’s their job. Their job is to meet with as
many companies as possible to understand which companies are good and which companies are bad. So just because they’re
getting coffee with you doesn’t mean that they’re actually necessarily potentially interested. The same is true of M & A, like someone reaches out
from Corp Dev at Google and you’re like, oh, my gawd, my company’s gonna get acquired. It’s like, no, that person’s job is to meet every single
company in Silicon Valley and evaluate whether someday Google may or may not wanna buy it. So I think, my advice in general is like, kind of like Justin mentioned, just to be thoughtful about,
okay these are the firms or these are people I’d like to talk to. How do I constrain the time
requirement in that process? For our first company, we
had some technology for Linux where we could take a Linux kernel update and apply it on the
system without rebooting. So you know that pop-up you get. It’s like, you must reboot
to install new updates. We had some technology
to take those updates, transform them and you could
apply them on the system like literally while it was
running with no downtime. And like step one in this process was that all the other like Linux nerds, we’re like this is not
technically possible. There’s no way you’ll be able to do it. And then like, okay, we did it. And then we like showed
them that we did it and they’re like, fine,
I guess you can do it, but it’s like not that stable. And then we had to convince them like, yes, no, you can use it
on production system, and it is very stable. And they were like, okay, fine, now we’re convinced of that. Now we need to like find
the person who might like wanna buy it and use it on their systems and then we like went and
talked to a bunch of people to find someone who
like might wanna buy it to use on their systems. And then we had to figure out
how much they would pay for it because it was not a capability
that previously existed. And so we had to do all this work around on figuring out like how
much they would pay us for it and then we had to figure out like who the decision-maker was. There was a whole bunch of
work associated with the fact that this was basically
computer science research and we did it without like
the end-state really in mind. We’re like, we made this cool thing, how do we do a company with it? Whereas I think, perhaps
because I think it’s easier, for us, we’re like, look,
here’s a very visceral, painful problem where people’s hair is on fire. We think we can solve it. I mean, maybe this is
just my own laziness, but the shape of the problem
is just like much, much more compelling where it’s
like there’s a huge thing, everyone has it, we know
what they’ll pay for it, we know that they need it. Like, we just need to do it, as opposed to the first
company where it was this uphill battle every single
day convincing you that like you should run it on your systems. – I think Angels are good, you know, having those founders who can hopefully give you some
feedback about your business but then also, maybe, they
can provide you interest in their investors downstream is good. I think at the Series A stage, they don’t care where you
got the money for the seed round from, because they look
down on all the investors that invest in the seed
rounds (audience laughs). So, it could be your Mom or
your Grandma or your friends or loans or like government
grants, whatever. They’re just evaluating like,
is this a good business? Do I wanna spend time on this business? Do I like these founders? Do I think they’re gonna be successful? You know, how you got there, yeah everyone has like a you know, horrible story that
involves probably begging, you know, to get there. VCs don’t care. – I tend to agree. I think the other thing
that we found was true, like we had pretty big seed rounds and both company two and this company. It’s like, most of your Angels
are gonna do nothing for you. Ten percent, like, will
be extremely helpful but you don’t which 10 percent a priori. So like, my view is sorta
like, if you like and trust and want the people involved, like I think that’s the prerequisite. But if those past the test
and you do wanna raise that amount of capital, I kinda think it’s better
to let more people in than fewer people because you don’t know who’s
gonna be super-helpful. So for us in our second company, there was this guy who like we had kinda already raised the round, I didn’t like, did not
particularly wanna let him in, but like, he came to us sorta last minute. He’s like, look, I’m really
interested in this company. I really wanna invest. And we like had some heartburn about it. We’re like, fine, we’ll let you invest. And that guy was like the best guy. That guy was like super-helpful, like he’s an investor in the third. He’s just the best guy. I’m super glad that we let him invest and we would not have predicted that at the time we were
raising the seed round. – Yeah, it’s probably
different for our companies that it is for the average company, right, because we were selling to companies, especially lots of start ups. And so, which is what we’re doing here, sitting on stage, doing this
event (audience laughs). For us, my strategy for
the seed round was to raise money from, you know
General kind of led it, but we also included
like 90 other investors, including you know, Thrive,
Founders Fund, SV Angel, First Round Capital,
you know, Greylock, NEA and the list goes on under the theory that they would
be channel partners for us, well, maybe not partners,
but like, you know, they would be a channel
for us to sell into and so yeah, it has been a helpful strategy. – Yeah, same. We used to do this thing,
too, with our investor updates where there was literally
a leader board and like here’s how many customers
investor x referred this month. And so it did cause a little bit of like, oh, I need to refer more to beat that guy. So, yes, I mean, I was
definitely pro-strategy and I think for us, especially in the early days,
it was quite productive. Now, less so, like it just
doesn’t move the needle as much but, definitely in the early days, that was one of the things
that led to the calculus. – Alright, last one. – [Man] Can I get some warm introductions? (audience laughs) – I mean, I dunno who you are, so they’re not gonna be
that warm (audience laughs). – Alright thanks. – Alright, yeah, let’s
give a round of applause to our panelists (audience applauds).

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