As an entrepreneur and investor in seed-stage start-ups, I often get asked by founders:
- “What do you look for in an investment?”
- “What are the criteria you use to evaluate start-ups?”
And to be honest the answers I give mostly feel inadequate. If it’s a quick conversational answer, I’ll say something like :
- “The most important 3 things for me are: the business, the team, and the traction”
With a little more time, I’ll try to explain what I mean by each one, and the significance to me. I’ll say things like:
- “By ‘business’ I mean ‘the attractiveness of the market’ and the ‘strength, and uniqueness of the product’…Team is super important because…blah, blah, blah”.
With more time and inclination, I will break things down further in an attempt to take generic words like “attractiveness” and “strength” and give them more meaning. And so on, adding additional levels of detail and description. Sound familiar?
There is nothing actually incorrect here; this stuff is ‘right’. Perhaps, insightful at times to some who are asking. But unless I have an hour and some slides, it feels like it falls flat to me. Why? Well if I put my founder hat back on, what I really would want to know is:
- “What does this mean for me and MY START-UP?”
- “What can I emphasize/change/add to MY START-UP that will make it more attractive to investors?”
As a founder, I am looking for an “actionable” answer. An answer that I can actually use; something that will change my pitch perhaps and make me more successful with investors. What I don’t need is more “articulate bullshit”. Stuff that sounds good: concise, well organized, and delivered with confidence. Maybe it’s even “correct”, but doesn’t allow me change anything in my start-up. Sound familiar?
I know you have heard these kind of answers a lot. These answers sound good, they make the investor/ speaker/ guru feel smart by saying them, and give founders a sound bite to remember easily….everyone’s feeling smart and happy J….. but, their impact is zero, because they are not actionable; hence:
However, much I may complain, the problem is not actually in these pithy summarizations (e.g. The most important 3 things are…); high level ideas are important and useful. Simplifying complex concepts is a powerful approach to explaining them. The problem is in believing that these simple, high-level ideas will be very useful by themselves. I mean as a founder what can I really change as a result of someone telling me
- “Traction’ is super important.”
I mean, “duh”, like as a founder I don’t know that getting users and clients is important? That, having more traction than I have today would be better? Really!?! How insightful!! I better write that down!!
But at the same time, the statement is completely true:
- “Traction actually is super important.”
The real problem is taking these simple “true-isms” and …….. getting lazy. It’s tempting to read a “10 most important things” list and
- Believe in them as gospel. “Fred Wilson said traction and team are critical. This must be true.”
- Dismiss them as crap. “This is bullshit. It’s what Fab and Foursquare did.”
- Implement them simplistically. “Team is the most important thing. So it belongs on page one of the pitch deck.”
It’s tempting to have this kind of quick reaction because it’s easy, and appeals to our entrepreneurial bias toward action: Absorb data. Triage it. Move on to next thing. In the complex, conflicting world of start-up advice, simplifying things feels good. Simple IS good because it’s clear, concise and understandable (hopefully). But the world isn’t simple, and raising money for your start-up is really hard. So we should expect that the real answers will be hard, complex and nuanced.
My advice: Avoid simple answers. Avoid trafficking in “articulate bullshit”. Don’t be lazy, think:
- “How and when is this advice really true? And how and when is it completely wrong?”
- “Why does this person think this advice is important? What are the underlying drivers?”
- And then….”How does this apply, and not apply, to my start-up?”
So for instance, take the common truism:
- “Team is the important factor in evaluating a start-up.”
- “What does ‘team’ really mean? What does it mean to be a “great team” for a start-up?”
- “What would the “perfect” team look like for my start-up? The perfect set of skills and experiences to drive success?”
- “Why does it make sense for some start-ups to pitch with team on the first page, and others to have it in the middle of the deck?
- And then….”OK. Now given the team I actually have in my start-up, where are my strengths and weaknesses? What can I emphasize in my pitch? What can I to mitigate my weakness by adding to the team, or my advisors?”
Now we are starting to get somewhere. We have dug in a bit and we are trying to push it to something that is actionable to me today. Taking a high level concept (thoughtfully) to “what could/should I change today? Why? How can I test this out?”
- Recognize and avoid…….”articulate bullshit”.
- Don’t be lazy, dig in and ask the harder questions.
- Bring it back to “how does this apply (and not) to my start-up?”
- Gather advice and “facts”. Try to integrate them. Take action: test it out. Repeat.