I've had both success and failure as an advisor to startups. Here are some of the big lessons I've learned over the years:
Only advise startups you would consider investing in. Otherwise, the startups will ask you for intros to investors and you'll be in a constantly awkward position. If you don't intro the startup, they'll be upset at you as an advisor. And if you intro them to investors and you haven't invested yourself, then it's a negative signal. It also burns relationships between you and co-investors to show them questionable deals that you wouldn't invest in.
Don't accept compensation (cash/equity) in exchange for hitting fundraising milestones. This gives you weird incentives to peddle bad deals to investors. It's also a violation of SEC broker-dealer laws. Instead, provide advisory services which include many services (such as helping find product/market fit) and which vest over a long period of time. This decouples the advisory services from fundraising.
Don't accept cash in exchange for advising. Startups are cash-strapped and can't afford to pay you. Only accept equity.
Avoid adverse selection. Often times, startups that need advice self-select into ones that are at the bottom of the list of potentially successful startups. This is (again) why advising startups that you also invest in is a good litmus test -- you want startups that demand both advice and investment.
Schedule a recurring monthly call with the startups you advise. Don't rely on them to call you -- they'll forget. Then in 6 months they'll wonder why you're vesting advisory shares. The startups that are successful will cancel their contracts with you to consolidate their cap table. The ones that are unsuccessful will keep you onboard as an advisor and waste more of your time.
Wednesday, March 11, 2015
Wednesday, May 7, 2014
How to get introduced to other investors
One of the most common questions I get is, "will you introduce me to other investors?"
This a tricky question for an angel like me to answer. Unless I am committed as a current investor in the startup, if I intro the startup to other investors, then it may actually hurt them. This is because the other investors will inevitably call me and ask if I'm investing. Unless I say "yes" after having performed extensive due-diligence, it can result in the other investor getting scared to pull the trigger. This wastes both the startup's time in useless meetings, and the other investor's time.
This a tricky question for an angel like me to answer. Unless I am committed as a current investor in the startup, if I intro the startup to other investors, then it may actually hurt them. This is because the other investors will inevitably call me and ask if I'm investing. Unless I say "yes" after having performed extensive due-diligence, it can result in the other investor getting scared to pull the trigger. This wastes both the startup's time in useless meetings, and the other investor's time.
This shouldn't be interpreted as me not believing in the CEO personally, or in any way reflects my belief in their startup. I want very much to see all entrepreneurs to succeed. This is just a dilemma that gets created as a result of me not being an investor. It's one of the tricky things that investors have to deal with -- its a weird tightrope we need to walk sometimes.
How to meet investors
As an entrepreneur, here are some strategies for workarounds for this:
-Try to plan your fundraising ahead-of-time. When you're not yet fundraising, you can ask for intros related to advice rather than investment. Investors generally will take these meetings. But you should only do this when you genuinely don't need money since investors will smell it and you'll come across as desperate otherwise.
-You could try to determine which investors might be good to talk to who are a match for your stage / sector focus, and get introduced through other sources besides investors (i.e. entrepreneurs). The reason this is useful is entrepreneurs don't have signal risk because they aren't investors, so if an entrepreneur introduces you to an investor, it will not hurt you, and can only help you.
-Visit AngelList and look at the list of VCs/angels in your sector focus (you can search and filter that way). Then make sure your LinkedIn is up-to-date (import Gmail contacts if needed) and look for 2nd degree LinkedIn connections with investors who cover your sector focus, and ask someone (who is not an investor) for a warm intro that specific person.
How to meet investors
As an entrepreneur, here are some strategies for workarounds for this:
-Try to plan your fundraising ahead-of-time. When you're not yet fundraising, you can ask for intros related to advice rather than investment. Investors generally will take these meetings. But you should only do this when you genuinely don't need money since investors will smell it and you'll come across as desperate otherwise.
-You could try to determine which investors might be good to talk to who are a match for your stage / sector focus, and get introduced through other sources besides investors (i.e. entrepreneurs). The reason this is useful is entrepreneurs don't have signal risk because they aren't investors, so if an entrepreneur introduces you to an investor, it will not hurt you, and can only help you.
-Visit AngelList and look at the list of VCs/angels in your sector focus (you can search and filter that way). Then make sure your LinkedIn is up-to-date (import Gmail contacts if needed) and look for 2nd degree LinkedIn connections with investors who cover your sector focus, and ask someone (who is not an investor) for a warm intro that specific person.
Tuesday, January 14, 2014
Video Interview with Ooomf -- a new startup fundraising on AngelList
Interview between me and Mikael Cho, the CEO of Ooomf. Useful for investors to find out more about the deal.
This is being done as an experiment. I noticed that investors have a hard time knowing which startups to investigate. They don't have time to take meetings with all of them. So I recorded this Skype call of me interviewing the entrepreneur to help other investors see if this is a reasonable startup. I hope that by seeing the CEO on-camera it will encourage the investor to take a meeting and to waste less of the entrepreneur's time answering redundant questions from dozens of investors since I'm asking the basic questions already. Do you feel this experiment is useful?
This is being done as an experiment. I noticed that investors have a hard time knowing which startups to investigate. They don't have time to take meetings with all of them. So I recorded this Skype call of me interviewing the entrepreneur to help other investors see if this is a reasonable startup. I hope that by seeing the CEO on-camera it will encourage the investor to take a meeting and to waste less of the entrepreneur's time answering redundant questions from dozens of investors since I'm asking the basic questions already. Do you feel this experiment is useful?
Ooomf's website is http://www.ooomf.com and their AngelList page is http://angel.co/ooomf.
You can find out more about me at http://about.me/Edro. You can gain first-dibs access to investing in my startup dealflow at http://angel.co/edro/syndicate.
Saturday, January 11, 2014
Angel Investing Tips
Many angel investors have been asking me for advice on how I evaluate dealflow and what my investment thesis is.
I don't believe in proprietary information when it comes to evaluating investments since I don't want to see other angels get burned.
So I've done a writeup of my strategy, and hope it's useful -- see http://bit.ly/1dlMD6a
I don't believe in proprietary information when it comes to evaluating investments since I don't want to see other angels get burned.
So I've done a writeup of my strategy, and hope it's useful -- see http://bit.ly/1dlMD6a
Monday, March 5, 2012
Highlight - an amazing little iPhone app
The power of this app is remarkable -- imagine reconnecting with people you haven't seen in years because they happen to walk nearby you. If/when Highlight achieves critical mass, this will happen. The good news is the Highlight has a virality model that's smart -- it leverages your existing Facebook graph, and has an "Invite All" button to get your friends using it. There's a natural incentive for you to want to invite your friends because you want to know if they're around. This "natural" virality has made Highlight explode in popularity in just a short period of time.
I had my first Highlight meeting today. Someone who walked nearby and noticed me sent a message out of the blue asking to have coffee. I had some spare time, and was curious, so I agreed to meet him at a nearby coffee shop in downtown San Francisco. It turns out he was an entrepreneur too, from Montreal. I had just spoken at a startup conference in Montreal and so there was an immediate connection. He told me about his company -- he had grown it to $3.2m in revenue, was profitable, but didn't know how to raise money to fuel his growth. He was looking for a new CEO too.
For fun, I connect entrepreneurs with each other (and to investors) and so I was more than happy to help him. We're following up afterwards. Thanks to Highlight, he may well be on his way to taking his company to the next level, and I made a new friend :)
Thursday, January 12, 2012
A need for entrepreneurial "Best Practices" and "Case Studies"
Over the past year I've become very curious about what makes startups succeed verses fail. So I have started to informally interview entrepreneurs and document their case studies. From these case studies, I believe we can extract best practices which are short (few paragraph) summary of a reusable lesson learned when starting a business. This is similar to a design pattern in software engineering, which is a succinct, reusable solution to a commonly occurring problem in software design. Since the startups are not necessarily about programming, I decided to use a less technical term.
I'd like any feedback from the community about whether you feel this experiment would be valuable. Please reply with any thoughts. You are the customers for this product, and so I'd like to hear from you.
Do you feel that you may have a story about your startup that's compelling? I'd be happy to work with you on the writeup. Please email me (link available at http://about.me/Edro) or message me on twitter (@ed_roman). I'd love to hear from you.
I'd like any feedback from the community about whether you feel this experiment would be valuable. Please reply with any thoughts. You are the customers for this product, and so I'd like to hear from you.
Do you feel that you may have a story about your startup that's compelling? I'd be happy to work with you on the writeup. Please email me (link available at http://about.me/Edro) or message me on twitter (@ed_roman). I'd love to hear from you.
Thursday, March 10, 2011
The Lean Startup methodology
Over the past year, I've been networking quite heavily in Austin TX. Meeting with entrepreneurs for coffee, mentoring, and advising startups (both formally and informally). This has been a lot of fun, and I've met some amazing entrepreneurs as a result of this activity.
One of those amazing entrepreneurs I met is Ash Maurya, who just finished a book Running Lean (http://book.runningleanHQ.com). Ash is an expert in the Lean Startup methodology, which is an approach to starting a business that aims to improve the odds of 9/10 startups failing.
The Lean Startup methodology is of particular interest to me. One of the businesses that I launched, http://www.ghostfiregames.com, would have benefitted quite a bit from that methodology. That business lost money (we are still trying to recover the investment), primarily because we followed a more "traditional" way to start a product-based business, which is (Build Product -> Sell Product -> Build Demo). Unfortunately, this leaves little room for customer feedback, to iterate on your product, and to validate that customers want to buy your product. Had we built a Minimum Viable Product (MVP) rather than spending almost 2 years in development, we would have reduced risk considerably.
Lean Startup is becoming adopted all over the world -- there are dozens of meetup groups, including the USA, Israel, and the UK. Over 3700 people subscribe to the Lean Startup Circle google group. I've been informally advising companies on Lean Startup for several months now, and it really resonates with me.
-Ed
One of those amazing entrepreneurs I met is Ash Maurya, who just finished a book Running Lean (http://book.runningleanHQ.com). Ash is an expert in the Lean Startup methodology, which is an approach to starting a business that aims to improve the odds of 9/10 startups failing.
The Lean Startup methodology is of particular interest to me. One of the businesses that I launched, http://www.ghostfiregames.com, would have benefitted quite a bit from that methodology. That business lost money (we are still trying to recover the investment), primarily because we followed a more "traditional" way to start a product-based business, which is (Build Product -> Sell Product -> Build Demo). Unfortunately, this leaves little room for customer feedback, to iterate on your product, and to validate that customers want to buy your product. Had we built a Minimum Viable Product (MVP) rather than spending almost 2 years in development, we would have reduced risk considerably.
Lean Startup is becoming adopted all over the world -- there are dozens of meetup groups, including the USA, Israel, and the UK. Over 3700 people subscribe to the Lean Startup Circle google group. I've been informally advising companies on Lean Startup for several months now, and it really resonates with me.
-Ed
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