3 Steps to Meeting Investors (at Events)

You’re at a big event, lots of investors are there – how do you optimize your chances of getting an investment from a VC or angel investor? Follow these three steps (and do not stray).

Your goal is to get a meeting. You’re not going to close a deal right there on the spot- understanding that and what you’re trying to achieve is essential. Securing funding is a multi-step process- you only need to take one step at a time. Step one is getting that meeting. So, on to the process:

1) Do not, and I repeat, do not walk up randomly and pitch them on the spot. (Aka Don’t pitch me, bro!)
VCs are busy – even if they are standing there alone, it’s been a full day of meetings meeting new companies or working with current ones. Their brain is full. They are probably tired. They probably don’t want to hear about your business – even if it’s a deal of great interest. If that’s the case, why are they there? For one, to keep current contacts fresh – to say Hi, ask about progress, see other VCs- ask about deals, etc. But, they are also there to meet new people… so, how do you meet them?

2) Get an intro from another VC, Angel or Portfolio Company.

Social validation is your best friend. Getting an intro to a VC is old info, but it’s far and away your best option. It is also rarely how companies approach me. Your chances of gettting a meeting go up exponentially if you’re introduced. Case in point- I was at the Seedcamp party last week. I’m chatting with the Seedcamp team on how the week had been going when a VC walks up to me with an entrepreneur in tow- he says “Sorry to interrupt, but I wanted to introduce you to Mr. X. I think they’re doing something great that would be of interest to you. How about I send you an email next week to connect you two?”. And that was it. The chances of Mr. X getting an HOUR of my time the following week was 100% at that point. The gain there is huge – my undivided attention and a full hour of it. Not 15 min in a loud venue, with no demo, no deck. And probably no deal.

3) Walk away.

Once you’ve made contact and made a good first impression – get out of there! In the above example, the entrepreneur simply shook my hand, said hello, and said he’d look forward to exchanging info. That’s the perfect thing to have done. I stopped him later in the evening, asked where he was based, and started checking dates for a meeting.

Now, you’ve got the meeting with the VC – what do you do? Prepare your slide deck and demo. I’ll post next week on my thoughts on the perfect pitch.

Good luck!

That two letter word…

[This is a guest post I wrote in 2010 on 24waystostart. It still applies, so I thought I’d repost it here]

“No.” It has to be one of hardest, yet most frequent words an investor says…

It’s not easy for us to say, and many times, not easy for an entrepreneur to hear. You’ve been working hard on your business, you think it’s great, your only friend thinks it’s great (you’ve lost everyone else because you’ve been holed up working on your project), your family parted with their hard-earned cash to help you out… and then you meet with investors and they say No.

Great. “Investors are such idiots” you’ll think… well, maybe. Or maybe not. It turns out No has many meanings…

First, I’ll admit I personally hate saying no, but I do try to be pretty blunt when doing so, and giving a good reason why I say no (not always, but I try). Your job as an Entrepreneur is to figure out what the investor is saying when they say no… because there are different flavors of No, and different reasons for No.

The most frequent No is actually “Not now”. If that is the case, all is not lost, find out how to get to “Yes.”. It’s going to be a specific milestone or proof point. Find out what it is, ask clearly if you achieve x or y, will they invest at that point. The answer will normally be “Yes.”, and they will lay out exactly what they want to see. This usually lowers the risk of some element they’re not comfortable with yet. If that’s the case – then get on it and get back there. You’ll find a way.

There’s also a variant of “Not now” known as the Excalibur Test. I’ve given many entrepreneurs the Excalibur Test – give them something to do then have them come back with it later. If they’re successful, you write a check. And if they don’t come back…well, the story ends there. Excalibur tests or proof points are fine; but be careful that an investor doesn’t have you running around in circles when they have no real intention of investing—regardless of the outcome.

Another reason investors say “No” is bandwidth. Most people don’t realize an investor will only make 1-5 deals per year—depending on many factors (stage, size, etc.) They may actually like your business, but simply can’t deal with another investment at that exact moment in time, even though they love it. It definitely happens…

Other reasons you may get a No: lack of fit with the firm or individual’s investment thesis/areas or stage. This one is far more likely. Many investors are not what they seem. Every VC you meet in London will say “We do early stage.” What they actually mean is “We invest in profitable companies that don’t really need money”. The risk profile of that firm is simply not one that’s going to invest into an early stage – let alone a seed stage business. Everyone says “Great companies get funded.” but that’s an urban myth. I know several very good companies that haven’t been able to get funded because they were simply “too early”. Think about Fit and Stage when you’re talking to an investor and understand that you may simply not fit the bill. You can test this by asking if they think you should talk to someone else. If they make a suggestion, ask for an intro. You will have confirmed that you’re not right for them, and the intro helps act as validation for your business in the next investors eyes.

Another reason investors may say No is simply a lack of vision. They don’t actually get what you’re doing. It happens a lot. This one is really easy to spot, and understand. If this is the type of No you get, take it and move on. It doesn’t mean they’re an idiot (although that’s what you’ll be thinking), and it also doesn’t mean you’re some gifted visionary (which actually you may be). More likely it just means you see the world differently. It’s a simple No. Move on…

And then sometimes, the No is actually because the baby is… well… ugly. No one likes the Ugly Baby and it’s even worse to have to say it; but bad ideas are plentiful. Perhaps the business won’t scale well (niche business), will be difficult to execute operationally (manually intensive, for example), doesn’t create any real value (reselling someone else’s product/service), is crawling with competitors, etc. This is the hardest one to swallow. When it finally sinks in… and you realize that you’re working on a dud, I’d recommend you cut your losses and do something else.

Whatever answer you hear, focus on your business (unless it’s an ugly baby), and your customers. You’ll get to a yes… maybe it’s a different investor, or it’s a paying customer. But it will be a Yes.

Keep pushing. Believe in yourself.

The Three P’s of Venture Capital

I’ve written many times about what VCs are looking for and what I’m looking for in particular.

I sent out a tweet recently about my 3 P’s of investing and thought I’d elaborate briefly.

1) People. I have to like you. I have to think we can work together. That you’re smart. Opinionated. Informed. That you listen, ask questions, ask for help. That you have a vision and you’re passionate about what you’re doing and that you can execute.

2) Product. I have to love it. Not like it, not see how others might like it after a few beers, but love it. I have want to touch the product, marvel at the design, dream about using the product again. It has to be unique. Not “The Airbnb of lunch” or “Spotify for newspapers”….

3) Potential. We’re doing this to impact millions of people. Why settle for less? In some cases though, great margins on high priced products with smaller markets are good too.

Hard to fit all that fine print into 140 characters…

The European start-up scene. It’s finally working.

What a difference a year makes.

Last April, I posted that:

Europe has always had problems gaining start-up momentum – there’s no epicenter, there’s no critical mass- and there are no Heros.

The Wired 100 list has gone a long way towards making 100 heroes visibile. Big applause for the Wired team. This year’s Wired 100 is on stands now – one person I was happy to see on the “bubbling list” – John Taysom. He’s an awesome guy. I’ve got a few other personal favorites that aren’t on the list yet, but I’ll cheer for them in silence… oh, and obviously congrats to everyone that’s on the list.

Europe *has* a start up scene now – and fortunately for me – most of it revolves around London. Spotify, Mind Candy (Moshi Monsters), Soundcloud – all amazing companies are doing well on a global stage. Young startups like Groupspaces or Lightbox (go David, go Thai) are popping up and getting funding from tier 1 investors.

I could count on one hand the number of hot European startups two years ago. I can count them on two hands now. I might even have to throw in a toe or two as well.

Silicon Roundabout is real now – thanks largely to initiatives like techhub. Seedcamp continues to expand it’s footprint and pulls together the who’s who of the European start-up world during seedcamp week each September. There’s an event this weekend spear-headed by Songkick for developers – silicon milkroundabout. Sign up for it here. This just wasn’t happening 2 years ago…

There’ve been some interesting companies getting acquired -M&A activity is picking up significantly – and money is getting returned to investors in Europe. But, we need to see more high-profile European IPOs. Skype is grabbing for the ring, just got bought by Microsoft for a cool $8.5bn, Daniel Ek at Spotify is (rumored) to be gunning for an IPO. (That would be awesome if you did Daniel.)

All of this is coming together to make London a hot spot. It’s a great time to be here… (plus the weather’s really great this year). One more turn of the wheel and I think we’re there –

hot or not?

hot or not?Facebook is going to be irrelevant in 10 years time. Google has lost the search war. Microsoft has lost the desktop war.

We live in exciting times. Change is in many ways the only constant we have. I started the post with what many would consider heresy- if you don’t believe me, or disagree, you have forgotten the rise and fall of all tech companies.

Altavista. Yahoo! – these were the kings of the search engine mountains before a little company called Google arrived. Google was the king of search on the web, and I would argue they still are. But they’ve already lost the mobile search war… Foursquare is far and away my favorite mobile search tool – I need to find a place to eat nearby, figure out if it’s good, and then move on to my next stop. Google fails miserably at this task, and fourquare shines…

Facebook connects you with lots of people you lost contact with 10 years ago. You’re so excited to reconnect. And then you remember why you forgot about them: “Just gave kitty some more milk!”. Yay. Please kill me now… I posted ages ago that the future of the web was all about privacy and intimacy… group chats are still trying to figure themselves out, but current examples are beluga or groupme. They’re amazing and very useful for communicating with small groups of people that matter. I’d be willing to bet you spend more time in this class of apps in 5 years time than on Facebook (or rather that anyone under twenty will. That may or may not be you in 5 years time.)

Finally, in my mind, there are two reasons we use any given app or service 1) raw utility. it works, you use it. Wikipedia is a great example. 2) peacocking. Part of what makes apps gain great popularity is an ability to make a user appear cooler than his/her peers. Using facebook 4 years ago was very cool, very cutting edge. Today, you’re one in 500 million. Using beluga? Congratulations! you and many thousands of other people are using it too (oh wait, facebook acquired beluga. smart move. maybe it will take a little longer to become irrelevant)…. Using google 10 years ago gave you a search edge, today, you’d better be using Quora, etc.

The list of companies is endless, but one of my final favorites is Myspace –> which has been replaced by Soundcloud…. a large part of my job is to try to figure out what’s hot next… the problem is no one can actually see beyond the event horizon. The mobile is a huge disruptor right now – and is driving the up and coming companies I’ve mentioned in this post. It’s a fun game to play, trend spotting and finding cool, useful apps… if you’ve got favorites as well, post them in the comments, or send them via twitter @jasonball. I’d love to know what’s hot. or not. but please don’t send me a note about geocities.

Think Small

Ok, you’ve finished the Thoughts on Entreprenurship series and you’re thinking:

“This doesn’t really work for me.”

I’d say you’re probably right. Thinking big and shooting to be the next Twitter isn’t for everyone. So,

Think Small.

Don’t raise external money- bootstrap. Don’t hire A-team players (don’t hire anybody for that matter). Don’t go to a hub – work from home. Don’t do any of those things. It’s OK. Worry only about launching, making the best product you can with limited resources and get profitable as quickly as you can. This is really the equivalent of a base hit vs a homerun. And for many businesses, and people, it makes sense. Maybe you have a day job that you *want* to keep (or need to keep), no problem. Run something in your spare time. If it starts to grow nicely, you can always leave your day job to run the business. Or not.

By keeping things small, you maintain control and flexibility. But small now doesn’t mean small forever; but it does mean you can take your time. Just be sure to get your product or service out the door as quickly as you can.

A quick story (no names for this one) to illustrate my point: A model airplane fan in one European country decided to start importing planes from China and selling them on eBay locally. He started small- buying only 10 planes or so and then reselling them. Once they were sold, he bought more- 100, then 500, then 1000, and so on. The business is now turning over 7 figures a year, with a very healthy profit. He runs the business with his wife out of their home outside of the Capital. The company will never make the front page of the Wall Street Journal, but it’s a *great* little business.

I recently launched 700x23c.com. It’s a small site that sells bicycle tires. Was I looking to start a big business, with big money and a big team? Nope. It’s small, it’s me, a few tires, some boxes and a printer. Total cost to launch- maybe $200 (I bought a good printer). Will it grow? I hope so… Do I do love it? Absolutely. Am I wearing 700x23c cycling jerseys on all my rides? You’d better believe it. (Side note to the non-cycling geek: 700x23c is the size of a road racing tire. If you ride a road bike, you know this number. You might even know what the “c” means). It’s a small project that with a little tlc may just become like the airplane business above, and turn a nice profit.

So I practice what I preach to some extent; I think small. (but try to think Big during my day job).

Good luck with your business-  which ever road you take…

Exit trends in 2010

January… a month for reflecting and prioritizing the new year.

I always kick off the year with a quick retrospective of M&A activity, with graphics thanks to my friends at ICON Corporate Finance, based here in sunny London.

This picture says it all:

Average exit valuations have returned to pre-recession levels, above 2x sales, and are outstripping the ratios seen in recent years. In the UK,  the highest multiple was Moneybookers, which sold at 9x sales. In the US, both Facebook and Groupon made headlines with their paper valuations at $50bn and $6bn, implying multiples of 25x and 12x, respectively. (Remember that Playfish was acquired by EA in 2009 for $300M, which was reported to be 4x revenues.)

While Facebook wasn’t an exit, and the Groupon offer was just that – an offer, 2011 looks like it’s going to be the Year Things Change. There are numerous venture-backed companies generating $100M+ in revenues that are going to IPO (some of our portfolio included). The NASDAQ was up 17% over the course of 2010, and 2011 is starting off well. My employer, Qualcomm, has already announced a $3bn acquisition of Atheros this month. Linkedin, Skype, Zipcar, etc. are all teeing up IPOs this year. I’m very bullish that 2011 is going to be the year we’ve all been waiting for. VCs and Entrepreneurs alike.

Hold on to your hats.