Category: Startup lessons

Here’s the collection of lessons I have learned from building multiple startups. I hope you find some of it useful!

Rating VC answers

Yaron Galai2 Comments

Fred Wilson and Michael Eisenberg write about turning down entrepreneurs from the VC’s perspective. Michael Eisenberg says:

Personally, I find the hardest part of this business is telling an entrepreneur that we will not invest in his/her business…

…When saying “no” I get 2 sinking feelings in my stomach:
1. Is this really the right decision? Am I missing something that could be the next big thing?
2. The second is the horrible feeling you know the entrepreneur has after working hard in the diligence process and realizing that he needs to restart a process with another firm or angels. And, in the worst case, will need to give up his dream.

I thought I’d add an entrepreneur’s perspective on this. Here’s how I would rate the possible responses from a VC on a scale of 1-100:

  1. “Yes, we want to invest” – 100
  2. “No, we’ll pass on this” – 95
  3. “We like the company, lets continue talking” – 2

A few years ago I think I would have ranked this differently, in a way that would fit Michael’s description above much better. Hearing from a VC that they “like the company” and want to continue talking would get us all excited. We hated the VC’s that rejected us because they were stupid morons that didn’t ‘get it’.

But after having pitched to tens of VC’s (and not getting funded by any), I started realizing that getting a straight “No” is 10x more valuable than the time-waster also known as “We like the company”.

As Fred mentioned in his post, it is technically impossible for any VC to invest in all of the companies they like. This means that mathematically, any entrepreneur pitching VC’s will *not* get funded by many more VC’s than those that will fund him/her.

Once you understand that, getting a straightforward “No” from a VC actually becomes a desirable answer, because it lets you move on in a more rapid way to meet that one VC in the mathematical equation that will fund you.

Oh, and by the way – Michael Eisenberg, while at Israel Seed, is one of those many VC’s I had the pleasure of pitching Quigo to, and I have to admit that I noticed none of the inner struggles he described in his post…. Good poker face?…

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Jim Lavoie on Jimi Hendrix

Yaron GalaiLeave a comment
Credit:
Antonio Cambronero

I recently posted about Rite-Solutions and how it harvests ideas from its own employees. Chris Flanagan of the Business Innovation Factory (BIF) was kind enough to post a comment on this blog shortly after and point to the video of Jim Lavoie (Rite-Solutions CEO) speaking about these ideas at a BIF conference.

I saw the video and highly recommend it (though the first half is sort of skippable). Go see it here.

I wanted to post the transcript of the video but couldn’t find one, so I’ll contribute my own little transcript for one Jim Lavoie quote which I particularly liked:

Imagine Jimi Hendrix comes into a room and he’s got a new idea for a song. He’s standing in front of 6 fat white guys with their arms folded asking him if he looked at all the other music ever published in the world to see if his song is really unique. Or if he’s done a cost analysis. Or if he’s looked at doing it offshore because ‘maybe we don’t have to do it here’. And there’s always the boss who doesn’t even talk to Jimi. He asks the lawyer “Is there any risk?”.

I call it ‘when the inventor meets the preventers’. And that’s what’s really stopping innovation: white guys that haven’t written a song in a lot of years that stop the innovator with stupid questions.

Every word set in stone… Design (or management for that matter) by committee is a bad bad thing.

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Idea(l) flow

Yaron Galai1 Comment

John Moore of Brand Autopsy posted an excellent story a couple of weeks ago on how Rite-Solutions harvests ideas from its own employees. The quote (of a quote) which I personally liked the best is from James Lavoie, one of Rite-Solutions co-founders:

“We’re the founders, but we’re far from the smartest people here. At most companies, especially technology companies, the most brilliant insights tend to come from people other than senior management.”

Being a founder of a company, I could not agree more. The founders may have the best ideas at the early stages of the company, and they definitely usually have lots of other qualities such as persistence, leadership, foresight, luck, etc which are as important for the survival of a young company as are its ‘ideas’.
But as the company grows, I truly believe that “the most brilliant insights tend to come from people other than senior management” (excuse the repeat quote… I simply couldn’t have said it better…).

Moreover, I think that external outsourced “experts” are probably the worst possible source for ideas for the company (though they’ll show great powerpoints arguing to the contrary, and will charge enough $$’s to make it seem like they know what they’re talking about), as are in most cases the company’s clients. But I’ll keep these two groups for a different post… In the mean time, if you haven’t done so already, head to the always excellent Brand Autopsy to read about Harvesting Collective Genius.

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