Lessons from silicon valley

LESSONS FROM SILICON VALLEYARIEL POLER @ariel

Ariel’s Background Founder: IPRO, Topica, Textmarks & Best of Angel.

Board Member: Kana, LinkExchange, Freedom Financial, Odeo, StumbleUpon, LOLapps, Scan, Strava.

Investor: AdMob, Flixster, Slideshare, Xobni, RockYou, Outright, BrightRoll, Instructables, Causes, VivaReal, Optimizely, Rally, Thumbtack, Viki, Pantheon, ApartmentList, Mashery, StumbleUpon, Kongregate and NexTag.

Personal: MIT (math), Stanford (mba), San Francisco (home).

Silicon Valley is Another Planet

It is not the US. It is not California. It does include San Francisco.

Company formation, financing, growth and sale have been “systematized”.

Tons of talent and resources – but even more demand for it - so you have to fight and pay up for it (salaries, rents, lawyers, parking…)

Kitesurf with Larry Page. Have lunch with Mark Zuckerberg. See a movie with Jack Dorsey. It is difficult to absorb during a short visit…

Fundraising

Seed Valuations & Terms• Most seed deals are convertibles with a cap,

many are priced with simple Series Seed terms.• Some seed valuations are stratospheric ($15-

20MM). On average most seed deals are valued in the $4-$6MM range. The amount of money raised can have (and should have) a big impact on valuation

• Common to have no lead and a rolling close• It is becoming more common to extend seed

rounds multiple times – and do follow on convertibles with higher caps

It is not a Black and White distinction between Angels, VCs, Private Equity

There are many shades of Grey...-Full time professional angels.-Angels with funds.-VCs that focus on seed investments.-VCs that participate in seed rounds.-VCs with Private Equity growth funds

What matters most is the individual, not the firm!Do your homework to identify the best possible people.

BTW, “Signaling” risks are exaggerated

On "average", It takes 6 Months... 

But averages are often meaningless

"Hot deals" are done in a few weeks, sometimes a few days

Many deals never get done.

And somehow the average is 6 months...

The best thing you can do to increase the odds of a successful financing is to move your business forward. Be careful about spending tons of time fundraising.

"You are too early” and other excuses

Most investors do deals when they get excited. But they don't like to say “I am not excited", so instead they use an easy excuses, such as:

- You are too early- The deal is too small- I want to see more customers/revenues/technology

Be careful about trying to solve address their excuses, because once you do they are likely to find others. Instead, figure out how to get them excited.

Investors like to keep their options open.

Tips for PitchingWho you pitch to is the most important thing

Don’t confuse product pitches (or sales pitches) with company pitches

Key points often overlookedCustomer acquisition strategyUnit economics

It is not about checking boxes. It is about getting the investor excited

International Companies have better chances of fundraising elsewhere

• Silicon Valley is the only region with too many good deals. Investors elsewhere HAVE TO invest outside their region, but we don't. So the bar is much higher...

• So non Silicon Valley companies might be better of fundraising in places such as London, New York or Boston.

• Of course, a few Silicon Valley investors do invest abroad, but the bar is higher and the choices scarce

Beyond Fundraising

You can’t literally follow all the advise that you get

There are many ways of building companies

You must find the approach that works for you

Advise should help you gain insights and to experiment

It is the same for competitive athletes…

Don’t believe what you ReadMost success stories are made with 20/20

revisionist hindsight

It often takes time, e.g. StumbleUpon and Twitter were not overnight successes as some people think…

20/20 Hindsight gives great strategic vision. Realistically, successes are built incrementally.So, don’t obsess over your world domination vision.

Just make sure you have a vision for a small success – from which you will be able to build a larger one. To use a baseball analogy, start by getting to 1st base.

Speed is overrated!

What good is going fast in the wrong direction?

The better you understand where you need to go, the faster you can move

But, never stand still!

If you have money you will spend it… Get it when you know how to use it

Risk is your friendMake big bold bets. All of the most successful

entrepreneurs do!

Use time to diversify: focusing on one thing at a time

But it is OK to experiment with different things for a while until you decide what you want to focus on. But just for a while…

Take advantage of opportunities - but be careful

about where you end up

IPRO story:Started with consumer analyticsFollowed customers to traffic auditingBecame World leader Web traffic auditorBUT…That turned out to be a lousy business!

Make sure you enjoy the roadPeople, product, learning, fun…

Hire Slow & Fire FastThe moment you start thinking someone might

not be working out, he/she most likely isn’tBut letting someone go is difficult and painful for

everyone, so…, take your time hiring.Same goes for co-founders, service providers, and

others.

Talent Over Experience

References!!! Or better yet, a trial period.

Focus on your most important market from

the startBe careful about starting with the “local”

market as a stepping stone to a larger market... You might get stuck there and never quite make it to the larger markets

If you want to be a global player, focus on a large market from the start

How to choose my entrepreneurs?

Did I have fun during the meeting?

Do I want to have him over for dinner?

Is the opportunity & market large & worthwhile?

Will the project have a meaningful impact?

Can I help?

Help me Help YouDo your homework

The right people to talk toThe topics you want to discuss

Be Specific

Add value