Category: Apprentice VC

State of the Cloud 2019 · Bessemer Venture Partners

~ michael_msft ~ Leave a comment

State of the Cloud 2019 · Bessemer Venture Partners:

Operate with G.R.I.T.

Operational rigor is what separates early stage companies from the most influential cloud leaders. But take comfort in the fact that it’s possible: Twilio’s Jeff Lawson and Shopify’s Tobias Lütke are just two examples of the many first-time founders who were running cloud businesses during and post-recession.

At Bessemer, we recommend cloud founders operate on G.R.I.T.— a critical set of metrics that resilient, enduring cloud companies use as yardsticks of success.

This is pretty good read but it may not be apparent what G.R.I.T. is :

G = Growth

R = Retention

I = Money in the Bank

T = Targeted Spend

Bootstrap or not.

~ michael_msft ~ Leave a comment

Lots of chatter about this recently. 

Maybe it all kicked off with this article :: https://www.nytimes.com/2019/01/11/technology/start-ups-rejecting-venture-capital.html

I co-taught a class the other day at Insead and the subject was around boot strapping versus raising money. It really is an easy answer to be honest. If you can bootstrap then my advice, as a VC, is you should. Why take money if you don’t need to?

However people need to properly call out stuff – meaning bootstrapping typically means funding the company from operations or revenue. If you borrow money, have an angel investor or pumped in a bunch of your own money – you still took or made an investment. You now have investors and frankly this bit that VC money is bad but other money is good is silly. All money comes with terms and all of it expects to be paid back.

The only caveat to this is your own money could potentially be treated differently since you are the founder and you own the company. You could potentially never pay yourself back and settle yourself with an exit or profits.

I see so many silly deals in startup land where the founder stayed away from professional investors, say a VC, but took silly angel money and signed bad terms. I am quite sure those companies are worse off than another startup who took a round from a VC. Keep in mind angels can be evil, your rich uncle can be evil – obviously so can a VC. The point is know the terms of your money and its impact on you and your company.

The core difference in bootstrapping and not is really about growth. This does not mean that VC money encourages or forces growth – the VC can’t really force anything. It is your company but if you take VC money than you are expected to grow more or faster than if you didn’t. That is not some sinister plot by VC’s BTW – it is simply the notion that the capital is easier to get and more expensive therefore you need to use it accordingly. If you don’t like that grand bargain, then don’t take the money.

It is not like VC’s sit around and are desperate to throw money at someone in hopes of forcing them to do something they didn’t plan on doing. This is silly. Everyone knows what the deal is and believe me, we never write a check to any founder that isn’t on that same page.

That would be a waste of capital.

If you can build a solid business without VC money then do it. However don’t raise money from less than professional sources or with crappy terms and pretend this is better. Truly bootstrapping is generally from revenue. Most folks have a hard time doing that. If you can then great, you own more of the company and the outcome is generally better. That is the other myth to dispel – if you raise lots of money and don’t have a huge exit then you will take home less than someone who didn’t raise any money with a smaller exit. It’s just math.

If you have a method for using capital to grow much bigger and faster than if you didn’t take capital, plus you are comfortable with the terms and your investors then take the money. The decision rests with the founders, and VC’s only work with founders who already have arrived at making this decision for themselves.

How To Be Successful – Sam Altman (#11 Build a network)

~ michael_msft ~ Leave a comment

Wrote about some other points here :: https://seedvc.blog/2019/01/31/how-to-be-successful-sam-altman-9-willful/

I bolded the section I really try to adhere to the most. The paragraph right after that about taking care of people is also a good one.

You have to somehow outsize your own daily impact with network effects.

Took me too many years to learn this but in the VC trade it has been a good spot to apply the “helping” model.

For this I mean that I can only do so many transactions a year. Once I invest in a company I have to apply some level of priority to that company.

However I am always looking out for new startups, ways to help my current startups, and for people that also might be able to work for or help one of my current startups. I know though that this is not a one way street. There may be ways for me to help other startups or people I come across.

A sort of constantly paying it forward model where I try to be of value outside of any transaction.

It could be advice, a connection or introduction or even just seeing if I can in some small way make a positive impact on that person or their startup.

I am not expecting to get anything or even expecting that I made a difference. I just want to be helpful.

My goal is to be helpful knowing that it will always be a positive in their life and it will make mine better but probably over a long arc. But this long arc will create a long term network effect that is bigger than my everyday activities or day to day impact.

Time will tell but I like the model. If more humans did this the world would simply be more pleasant for everyone.

How To Be Successful – Sam Altman:

11. Build a network

Great work requires teams. Developing a network of talented people to work with—sometimes closely, sometimes loosely—is an essential part of a great career. The size of the network of really talented people you know often becomes the limiter for what you can accomplish.

An effective way to build a network is to help people as much as you can. Doing this, over a long period of time, is what lead to most of my best career opportunities and three of my four best investments. I’m continually surprised how often something good happens to me because of something I did to help a founder ten years ago.

One of the best ways to build a network is to develop a reputation for really taking care of the people who work with you. Be overly generous with sharing the upside; it will come back to you 10x. Also, learn how to evaluate what people are great at, and put them in those roles. (This is the most important thing I have learned about management, and I haven’t read much about it.) You want to have a reputation for pushing people hard enough that they accomplish more than they thought they could, but not so hard they burn out.

Everyone is better at some things than others. Define yourself by your strengths, not your weaknesses. Acknowledge your weaknesses and figure out how to work around them, but don’t let them stop you from doing what you want to do. “I can’t do X because I’m not good at Y” is something I hear from entrepreneurs surprisingly often, and almost always reflects a lack of creativity. The best way to make up for your weaknesses is to hire complementary team members instead of just hiring people who are good at the same things you are.

A particularly valuable part of building a network is to get good at discovering undiscovered talent. Quickly spotting intelligence, drive, and creativity gets much easier with practice. The easiest way to learn is just to meet a lot of people, and keep track of who goes on to impress you and who doesn’t. Remember that you are mostly looking for rate of improvement, and don’t overvalue experience or current accomplishment.

I try to always ask myself when I meet someone new “is this person a force of nature?” It’s a pretty good heuristic for finding people who are likely to accomplish great things.

A special case of developing a network is finding someone eminent to take a bet on you, ideally early in your career. The best way to do this, no surprise, is to go out of your way to be helpful. (And remember that you have to pay this forward at some point later!)

Finally, remember to spend your time with positive people who support your ambitions.

How To Be Successful – Sam Altman (#9 Willful)

~ michael_msft ~ Leave a comment

Wrote this before :: https://seedvc.blog/2019/01/28/how-to-be-successful-sam-altman-focus-6/

I also like #9. It is a personal one to me since sometimes I let the forces around me dictate at times or at least influence my attitude.

I am specifically trying to improve this about myself this year.

How To Be Successful – Sam Altman:

9. Be willful

A big secret is that you can bend the world to your will a surprising percentage of the time—most people don’t even try, and just accept that things are the way that they are.

People have an enormous capacity to make things happen. A combination of self-doubt, giving up too early, and not pushing hard enough prevents most people from ever reaching anywhere near their potential.

Ask for what you want. You usually won’t get it, and often the rejection will be painful. But when this works, it works surprisingly well.

Almost always, the people who say “I am going to keep going until this works, and no matter what the challenges are I’m going to figure them out”, and mean it, go on to succeed. They are persistent long enough to give themselves a chance for luck to go their way.

Airbnb is my benchmark for this. There are so many stories they tell that I wouldn’t recommend trying to reproduce (keeping maxed-out credit cards in those nine-slot three-ring binder pages kids use for baseball cards, eating dollar store cereal for every meal, battle after battle with powerful entrenched interest, and on and on) but they managed to survive long enough for luck to go their way.

To be willful, you have to be optimistic—hopefully this is a personality trait that can be improved with practice. I have never met a very successful pessimistic person.