{"id":197,"date":"2024-04-18T18:18:28","date_gmt":"2024-04-18T22:18:28","guid":{"rendered":"https:\/\/web.colby.edu\/halloran-lab-learning\/?post_type=ht_kb&#038;p=197"},"modified":"2024-08-05T14:40:57","modified_gmt":"2024-08-05T18:40:57","slug":"investors","status":"publish","type":"ht_kb","link":"https:\/\/web.colby.edu\/halloran-lab-learning\/knowledge-base\/investors\/","title":{"rendered":"Investors"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\">Key Questions<\/h2>\n\n\n\n<ul>\n<li>What are the different types of investors?<\/li>\n\n\n\n<li>What types of people become investors?<\/li>\n\n\n\n<li>What are investors looking for in potential investments?<\/li>\n\n\n\n<li>How can I access investors?<\/li>\n\n\n\n<li>Once I have investors, how should I work with them?<\/li>\n\n\n\n<li>How can investors work for me, beyond the money they provide?<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Start Here<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Maximilian Fleitmann: <a href=\"https:\/\/www.youtube.com\/watch?v=wqOGAOYQmAo\">10 Questions You Should Ask Potential Investors<\/a><\/h3>\n\n\n\n<p>(6 min video.) In this video, Fleitmann discusses the essential role of dialogue in investor meetings for startups. He emphasizes that founders should approach these meetings not just as pitches but as opportunities to assess potential investors, akin to &#8220;dating&#8221; before a &#8220;marriage.&#8221; He presents 10 critical questions that founders should ask investors, covering topics from the investor&#8217;s unique strengths and their method of operation, to the support beyond financing they can offer. Fleitmann&#8217;s questions also probe the investor&#8217;s experience and learning in the field, their investment activity, decision-making processes, expectations from the startup team, and assumptions about the investment. He suggests confirming these insights by contacting other founders who have partnered with the investor, ensuring alignment in values and expectations, which is crucial for a long-term partnership.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Michael Seibel: <a href=\"https:\/\/www.youtube.com\/watch?v=A3MmYbH1hbs\">How to Cold Email Investors<\/a><\/h3>\n\n\n\n<p>(8 min video.) Seibel emphasizes writing concise cold emailing to investors, advocating for emails that can be absorbed in under a minute. He stresses the importance of highlighting key information\u2014problem, solution, metrics, market size, team, and insights\u2014while avoiding industry jargon. Seibel advises using a professional email address and potentially attaching a standard Silicon Valley deck to track engagement. He cautions against overwhelming investors with lengthy emails or immediate meeting requests, urging instead to initiate interest gradually. Seibel underscores the significance of focusing on the specific problem addressed and the compelling aspects of the solution, rather than solely describing the company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Paul Graham: <a href=\"https:\/\/www.paulgraham.com\/herd.html\">Investor Herd Dynamics<\/a><\/h3>\n\n\n\n<p>(4 min read.) Paul explains the forces that create a stampede of investor interest, pointing out that startups need to understand the investor herd dynamics so they can avoid surprises when fundraising. According to Graham, the main reason investors like a startup more when it attracts other investors is that they are poor judges of startups. He asserts that investors follow other investors because the startup becomes a better investment. Interest also builds up when a founder grows more confident due to previous success at fundraising, improving an investor\u2019s opinion of the company by association.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Learn More<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Steve Blank: <a href=\"https:\/\/thinkgrowth.org\/is-your-vc-founder-friendly-c03ffcf53bf5\">Is Your VC Founder Friendly?<\/a><\/h3>\n\n\n\n<p>(5 min read.) Steve offers advice to founding CEOs who want to make sure their money comes from founder-friendly VC investors. He lists five questions to ask to determine whether that is the case: What startup stage do the VCs typically invest in (since each stage requires different insights)? Do they understand customer development? Who are their advisors? How many of their founders still run their companies or retain an active role in the business? Are they willing to tailor a founder\u2019s vesting to his\/her contribution?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Jason Lemkin: <a href=\"https:\/\/jasonlk.medium.com\/5-things-to-be-wary-of-in-vc-financings-42ab293390e9\">5 Things to Be Wary of in VC Financings<\/a><\/h3>\n\n\n\n<p>(4 min read.) In this article, Lemkin underscores the potential risks associated with venture capital (VC) financing for startups. These include low-priced secondary liquidity, misaligned boards, conflicting interests among VCs, and the introduction of unqualified individuals. Lemkin advises founders to select VCs aligned with their vision and negotiate favorable terms to mitigate these risks. Thorough due diligence on potential investors and retaining control over the company&#8217;s direction are essential steps for founders to safeguard their interests.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Jason Lemkin: <a href=\"https:\/\/jasonlk.medium.com\/10-things-that-make-your-investors-lose-confidence-a375fba55a38\">10 Things That Make Your Investors Lose Confidence<\/a><\/h3>\n\n\n\n<p>(4 min read.) In this article, Lemkin highlights ten crucial factors that can undermine investor confidence, stressing the significance of maintaining positive investor relationships, particularly in challenging times. He advises founders to avoid surprising investors with sudden announcements of poor performance and instead provide advance notice with clear plans for improvement. Lemkin emphasizes the importance of developing realistic growth plans, staying transparent about available cash runway, and providing regular, data-driven investor updates. He warns against blaming external factors for problems and emphasizes the need to promptly address bad hirings and execution issues. Lemkin underscores the importance of transparency in sharing financial information and advises against hiding issues, advocating for proactive disclosure and action planning.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Jason Lemkin: <a href=\"https:\/\/medium.com\/saastr-all-about-paid-web-services\/the-4-questions-every-founder-should-ask-every-vc-that-almost-no-one-asks-f9e4f85f23fd\">The 4 Questions Every Founder Should Ask Every VC That Almost No One Asks<\/a><\/h3>\n\n\n\n<p>(4 min read.) Lemkin advises founders to delve beyond surface-level considerations when seeking venture capital, posing critical questions to potential investors. By exploring scenarios such as exit strategies, future funding, assistance in raising subsequent rounds, and reactions to failure, founders gain valuable insights into investor perspectives and alignment with their goals. These inquiries help founders assess the investor&#8217;s commitment, risk tolerance, and potential contribution to the company&#8217;s success. By asking these questions early in the partnership exploration process, founders can make informed decisions about potential collaborations, ensuring alignment and maximizing the chances of a successful partnership.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Jason Lemkin: <a href=\"https:\/\/www.saastr.com\/only-23-of-you-would-pick-the-same-vcs-again\/\">Only 23% of You Would Pick the Same VCs Again<\/a><\/h3>\n\n\n\n<p>(3 min read.) In his blog post, Lemkin discusses the results of a SaaStr survey indicating that only 23% of founders would choose the same venture capitalists (VCs) if given a chance to select again. The article highlights various friction points between founders and VCs, such as founders&#8217; excessive spending, expectations for bailouts, and VCs&#8217; patronizing attitudes or manipulative behaviors. Lemkin emphasizes that while both parties often aim for startup success, natural tensions and misalignments lead to regrets post-funding. To navigate these challenges, he offers actionable advice: slow down the VC selection process, prioritize trust over nicety, be transparent with VCs, engage with their published content, conduct nuanced reference checks, and understand the emotional dynamics involved. Lemkin advises founders to carefully evaluate potential VCs to ensure alignment and support for their venture&#8217;s long-term success.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Max Fleit: <a href=\"https:\/\/www.youtube.com\/watch?v=FpgqUwwbHcs\">What Is a SPV (Special Purpose Vehicle)?<\/a><\/h3>\n\n\n\n<p>(6 min video.) A Special Purpose Vehicle (SPV) is a legal entity created for a specific purpose, commonly used in the startup and investment context to pool money from multiple investors to invest in a company. Ownership in the SPV is distributed proportionally among investors based on their contributions. SPVs are popular among angel investors and venture capitalists for running syndicates or deal-by-deal investments, providing smaller investors and limited partners of VC funds access to investment opportunities<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Ben Horowitz &amp; Marc Andreessen: <a href=\"https:\/\/youtu.be\/lPGDwqY-zi8?si=vmfDUc0ioR6Z-GUj&amp;t=30\">Ask Us Anything<\/a><\/h3>\n\n\n\n<p>(70 min video.) Horowitz discusses the best approaches for entrepreneurs to connect with venture capitalists (VCs). Horowitz emphasizes that the process of finding a VC is a test of an entrepreneur&#8217;s networking abilities. He advises leveraging personal connections to get introductions, noting that VCs are well-connected and accessible. Cold emailing, especially with guessed addresses, is discouraged. He stresses that networking is fundamental in the business world, and mastering it can significantly enhance an entrepreneur&#8217;s ability to build a successful company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Bill Gurley: <a href=\"https:\/\/abovethecrowd.com\/2022\/11\/28\/venture-capital-red-flag-checklist\/\">Venture Capital Red Flag Checklist<\/a><\/h3>\n\n\n\n<p>(7 min read.) In this article, Gurley uses John Ray III, FTX&#8217;s new CEO\u2019s, example who highlighted unprecedented corporate control failures at FTX, prompting a review of red flags for venture capitalists. Gurley emphasizes key warning signs including operating during frothy bull markets, lack of legitimate boards, dual-class stock, aversion to audits, unique financial presentations, unusual corporate counsel, atypical locations, large secondary transactions, overlapping corporate interests, and situations that seem too good to be true. Gurley says that while one or two signs might not indicate malfeasance, multiple red flags suggest higher risks. He stresses that sound governance can prevent reckless behavior and potential corporate fraud, ensuring a healthier business environment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Elad Gil: <a href=\"https:\/\/blog.eladgil.com\/p\/put-your-investors-to-work-for-you\">Put Your Investors to Work for You<\/a><\/h3>\n\n\n\n<p>(3 min read.) Gil emphasizes the underutilized potential of investors beyond funding in his article &#8220;Put Your Investors To Work For You.&#8221; He advises entrepreneurs to view investors as an active part of their business strategy rather than just financial backers. At Mixer Labs, engaging with investors significantly added value, likening them to a specialized team within the company. Gil suggests practical steps like minimizing routine update meetings, directing investors&#8217; strengths towards business needs, using updates to make specific requests, forming mini advisory boards, and organizing semi-annual all-hands meetings. According to him, this proactive approach not only leverages investors&#8217; expertise but also facilitates networking among them, enhancing the overall strategic capacity of the startup.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Sophia Amoruso: <a href=\"https:\/\/youtu.be\/oFMwjlRldws?si=KRf3QjsGeO79pb0W&amp;t=2983\">Lessons From the Rise and Fall of Nasty Gal<\/a><\/h3>\n\n\n\n<p>(60 min video.) Sophia reflects on the lessons learned from her entrepreneurial journey, including the rise and fall of her fashion brand. She emphasizes the importance of continuous learning, adaptation to change, and prioritization of focus in business. She also discusses her current endeavors, including investing in startups and creating online courses, highlighting the growth of the creator economy and its potential for success. She encourages listeners to embrace the journey of entrepreneurship, acknowledge that no one has all the answers, and share their experiences and learnings, even with mistakes.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Brad Feld: <a href=\"https:\/\/www.youtube.com\/watch?v=INyouAjKgR8&amp;t=1513s\">Startups&nbsp;<\/a><\/h3>\n\n\n\n<p>(80 min video.) Brad discusses his book &#8220;Startup Communities: Building an Entrepreneurial Ecosystem in Your City.&#8221; He shares insights on building successful startups and fostering entrepreneurial ecosystems, emphasizing the importance of product-centric teams and a shared company culture characterized by transparency, commitment, and life balance. He criticizes &#8220;douchebag&#8221; investors who are not actively involved in their portfolio companies and advocates for continuous involvement and engagement between investors and startups. He stresses that board meetings should focus on strategic discussions rather than rote reporting and emphasizes the importance of focusing on product and shared values over individual styles and personalities when building a successful startup.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Alfred Lin: <a href=\"https:\/\/outlierspath.com\/2024\/04\/03\/update-your-first-believers\/\">Update Your First Believers<\/a><\/h3>\n\n\n\n<p>(4 min read.) Alfred recommends a structured approach for startups to update their investors on progress. Using Summer Health as an example, the article outlines a format that includes key metrics, investor asks, shoutouts, people updates, monthly highlights and lowlights, and future plans. Alfred emphasizes the importance of communicating velocity, providing context for data, and showcasing the company&#8217;s ability to build a strong team. Summer Health&#8217;s update serves as a valuable template for startups seeking to effectively communicate their progress to investors, fostering a collaborative relationship.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Steve Blank: <a href=\"https:\/\/medium.com\/startup-grind\/vcs-are-not-your-friends-they-re-frenemies-e3dacb9be631\">VC&#8217;s are not your friends, they&#8217;re your frenemies<\/a><\/h3>\n\n\n\n<p>(4 min read.) 7x entrepreneur and educator Steve Blank discusses the complex relationship between entrepreneurs and venture capitalists (VCs), highlighting how VCs, while providing funding, often have conflicting interests with founders. He emphasizes that VCs primarily aim for maximum returns on their investments, which can lead to diverging priorities from the founders&#8217; vision. Steve advises entrepreneurs to approach VC relationships cautiously, maintaining awareness of potential conflicts of interest. He stresses the importance of clear communication and setting boundaries to safeguard the integrity of the startup&#8217;s mission and values.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key Questions Start Here Maximilian Fleitmann: 10 Questions You Should Ask Potential Investors (6 min video.) In this video, Fleitmann discusses the essential role of dialogue in investor meetings for startups. He emphasizes that founders should approach these meetings not just as pitches but as opportunities to assess potential investors,&#8230;<\/p>\n","protected":false},"author":19120,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"footnotes":""},"ht-kb-category":[564119],"ht-kb-tag":[],"_links":{"self":[{"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/ht-kb\/197"}],"collection":[{"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/ht-kb"}],"about":[{"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/types\/ht_kb"}],"author":[{"embeddable":true,"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/users\/19120"}],"replies":[{"embeddable":true,"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/comments?post=197"}],"version-history":[{"count":3,"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/ht-kb\/197\/revisions"}],"predecessor-version":[{"id":408,"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/ht-kb\/197\/revisions\/408"}],"wp:attachment":[{"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/media?parent=197"}],"wp:term":[{"taxonomy":"ht_kb_category","embeddable":true,"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/ht-kb-category?post=197"},{"taxonomy":"ht_kb_tag","embeddable":true,"href":"https:\/\/web.colby.edu\/halloran-lab-learning\/wp-json\/wp\/v2\/ht-kb-tag?post=197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}