The “Come-from-Behind” Lead Investor

As an entrepreneur, if you’re running a venture capital fundraise effectively, you’re treating the process like a sale process: identifying a set of prospects to fill the top of the funnel, cultivating those relationships over a series of meetings, then narrowing down to a handful of contender firms who will ultimately make an offer to invest with a term sheet. Of key importance, which we emphasize with our NextView portfolio companies when they’re out raising their Series A, is to run the conversations in parallel rather than serially. In other words, as much as feasible, to gate all of the VC discussions so that they’re progressing along essentially the same pace – with the goal to receive multiple terms sheets near simultaneously in order to best select the best offer and best partner, with full information.

But reality doesn’t always play out as neatly. Often for a myriad of often idiosyncratic reasons, an entrepreneur is introduced to an attractive new potential VC partner late in the game. The founder CEO is already a couple meetings deep into the process with others, at or nearing the final partner meeting decision, and somebody new is all of a sudden interested. Really interested. Is it worth paying attention to this potential “come-from-behind” VC investor?

The risk with engaging with an investor who isn’t as up to speed is a waste of the most valuable limited resource – time – when a CEO is concentrating on figuring out the best fit among the remaining candidates AND while simultaneously running a company, after all. There is also risk that the supposedly strong interest isn’t as sincere and the VC is merely “hanging around the hoop” and maintaining optionality to see if/what the contour of the round looks like, so that they can jump in front of the train at the last minute if validated by another fancier VC.

However, in my personal experience, the come-from-behind lead investor is worth incorporating into the process, as it turns out more often than you’d expect that they end up leading the round. This situation happens because a genuine come-from-behind lead investor is:

  • Self-selecting in because they’re really interested, not just going through the motions of whatever the most intriguing investment opportunity currently on their plate. If they’re fully aware of their initial position in the running, and despite that fact, they’ve decided to still push forward, they’re more likely to get to yes than the average firm in the process.
  • Driving their own internal decisioning process quickly, forgoing the unnecessary (internal political) steps, in an effort to reach a definitive yes-or-no sooner rather than later.
  • Cognizant of their position, they tend to be overly aggressive on company-attractive terms to win the deal.

The best litmus test to suss out whether or not a potential come-from-behind investor is worth paying attention to is if they’re “doing work.” And a lot of it in a short period of time: making diligence calls, using the product, striving to understand your market, engaging with questions to learn more about business. While often there’s a requirement to juggle schedules to meet other members of the firm, meeting other folks in the shop shouldn’t be the only activity going on the VC if s/he is truly getting up to speed. It should be clear that the come-from-behind investor is making every effort to fully appreciate the business as quickly as possible.

With the right motivation, abbreviated but ample time for conclusive diligence, and a willingness to overcommunicate to get to know a startup’s founder, the come-from-behind investor isn’t always the underdog in the VC financing process.

The post The “Come-from-Behind” Lead Investor appeared first on GenuineVC.

VC Cafe Turns 9

9ball

Image credit: generation pool

Last week LinkedIn reminded me that it’s been 9 years since I started VC Cafe (Dec 2005). Several people sent their congratulations (thank you btw), and it dawned on me that it’s been a while since I blogged regularly. I prefer springing into action rather than being sentimental, but I thought a little summary and a selection of highlights may inspire someone who is thinking about blogging to share their thoughts through this medium.

So, here it goes, 10 highlights from my *humble* blogging experience in the past 9 years:

  1. Always be learning – One of my motivations for starting VC Cafe was to understand how blogging works. There were a bunch of free tools out there. I started using Blogger, and kept looking for opportunities to learn, try stuff out, read and get out there. This is still one of the things I enjoy the most about blogging. I talked about this in my new years resolution post from last year –Learning Should be your top New Years Resolution, which was also posted onThe Next Web.
  2. Consuming a lot of information as a skill – When I was covering Israeli startup news, I didn’t want to miss a thing… email alerts, newsletters, a long list of RSS feeds, Techmeme – these were all scanned before 9am with the goal to ingest and digest tons of data and distil it into a post, a thought, or an insight. I summarized the list of tools I used to collect information about startups in the Ultimate Startup Intelligence Tools List and also crowdsourced the list of tools on hackpad (which was since acquired by Dropbox).
  3. Eating my own dogfood – I was obsessed with startups and venture capital… and I talked to a lot of people and picked up nuggets along the process. So, I guess I could say I was eating my own dogfood when I wrote “So you want to be a VC...” the post was also picked up by Venturebeat. Now that I actually am a VC (I’ve joined Google Ventures as General Partner last summer), reading this post brings a smile to my face ;)
  4. Leaving something behind – Have you ever thought about what you’d be leaving behind when you’re gone? Not the most pleasant thought, but a worthwhile exercise. Write your own eulogy, and you’ll see that it’s not a simple task. For me, VC Cafe is one of those things and being included in theTop 50 blogs in Venture Capital (#4!) is a great validation.
  5. Understanding trends and industries – We live in exciting times – Industries that have been ‘offline’ for years are being transformed by technology and there are countless examples – transportation, commerce, music, education and so on… you probably have a few startup names rolling around in your head as you read this list. I enjoyed writing the post on 10 tools to understanding and dissecting an industry and received some good feedback from folks. Related to that, my post on ‘Lean Market Research‘ was a summary of a talk I gave to entrepreneurship students at London Business School and is a good first step when you’re entertaining a startup idea as a founder or investor.
  6. Celebrating milestones – 2014 marked the 3rd year of Techbikers, my other labor of love and the best one yet. We raised over $200,000 so far for Room to Read, helping build 4 schools, 8 libraries and fund 3,000 scholarships for girls to attend school in Nepal, India and Cambodia. It was the highlight of my year and I was able to capture it in “The Story of Techbikers” and “Techbikers 2014 – mission accomplished!”. It all started from reading John Wood’s book in India, and couldn’t have been done without the unwavering support of friends, volunteers, donors, and sponsors, who are all impacting the life of kids in the places they need it most. Techbikers started spreading its wings internationally (Germany and now Ireland have chapters), and I’m truly excited for others to join us in this journey! VC Cafe also helped me mark other milestones including the launch of Campus London or celebrating the years go by!
  7. Founder advice – A friend once told me that one of his best sources for post ideas are emails with questions he gets from entrepreneurs. Instead of repeating himself to founders, he wrote a thorough answer once and published it as a blog post for others to see. Inspired by that, I wrote a series of blog post with the tag ‘101’ including what should founders should do before they get into the VC’s office (published on Techcrunch), How to raise money from Angels, How to evaluate a startup CEO, Introduction to growth hacking for startups, how to find startup cofounders online and in the real world and many more.
  8. Original ideas – did you ever have a thought come to you in the shower or while running? one of the joys of blogging is taking that moment of insight and fleshing it out. Putting it into the right words, finding the appropriate examples and getting feedback from people are all part of the fun. My favorites are:Business Symbiosis vs natural selection, Creating purple cows, the many forms of innovation and the future of work, why should startup think 10x from day one and the psychology of influence in online startups. Did I really write all of this?
  9. Resources, resources, resources – the startup resources page on VC Cafe is by far one of the most popular sections since inception. It’s a *messy* directory of tools of the trade for entrepreneurs. Whether it’s open source legal documents, A/B testing tools or finding office space, this list of tools got recognized as a valuable resource by Steve Blank.
  10. Self fulfillment – the top level of Maslaow’s hierarchy of needs, this is different for every individual, but much like going to the gym, meditating, or climbing a mountain, the challenge is finding ‘Flow’ and staying on the wagon. I’ll try to do more of it this year!

Wishing you a happy and productive new year. Onwards and upwards!

Israeli tech exits hit $6.94 Billion in 2014

A new report by IVC Research Center and law firm Meitar Liquornik Geva Leshem Tal found that 99 Israeli high tech exits reached $6.94 billion in 2014 up 5 percent from $6.59 billion of 2013 (90 exits).  The IPO activity in 2014 reached a 10 year peak, to $2.1 billion. 18 companies sold in the range of $100 million to $500 million, compared to 12 in 2013 and the M&A equity ratio is up sharply.

In April 2008, I wrote a series of posts about the Golden Age of Israeli startups in the areas of funding, product innovation, mergers and acquisitions and  smart money, but then Lehman collapsed… are good times back or are we about to hit another market correction?

Update: according to PWC, Israeli exits reached a record $15 Billion in 2014, I’ve reached out to IVC for clarification. Here’s what IVC said in reply:

There is a profound difference in survey methodology between IVC and PWC. We use the globally customary methodology, while PWC apply their own methods used in PWC offices around the world. Two major differences are, as follows:

  1.  IVC report all the exit deals, while PWC clearly use a sampling method  – for ex. they reported 70 exits in 2014 – we had 99 exits in total (nearly 30 deals more).

  2. We count the actual money income from the deal, while PwC count valuations – ex.: looking at MobiEye IPO – we take into account the amount raised in the IPO – $1.02B, while they have the company valuation at the time of the IPO – $5B.

Worth quoting the PwC Israel partner, Rubi Suliman who said:

“In 2014, the stars were aligned exactly right for Israeli high-tech. The IPO window was open in the US and England, the maturity of many Israeli companies and investors, the major availability of money for high-tech from buyers and investors, and of course the strength of Israeli high-tech that knew how to reinvent itself and adapt to the times.”

Screen Shot 2015-01-06 at 11.51.19 AM Screen Shot 2015-01-06 at 11.50.53 AM

 

 

 

 

The Unique but Powerful Way the HubSpot Mafia is Impacting Boston Startups

It’s official: now two months after the IPO, HubSpot has surpassed the $1B market cap threshold and has become that “pillar” company that the tech ecosystem long anticipated. The benefits have been touted previously: an anchor for attracting and retaining talent in Boston, as well as a breeding ground for the next set of great Boston entrepreneurs and founders.

Already, a handful of groups have spun out to start new ventures, like the teams at Driftt, Bedrock Data, Grokky, and NextView-backed InsightSquared. As HubSpot co-founder and CTO Dharmesh Shah recently told BostInno, “We’ve wanted to not just build a great company, but also build some great entrepreneurs.”

Talk with my fellow venture capitalists, and they’ll no doubt confess how they’re “tracking” a potential founder or a given team set at the company in order to be ready with funding when it’s time for them to spin out. This entrepreneurial HubSpot spirit has — and will continue to have — a ripple effect throughout the Boston early stage startup ecosystem.

 

The HubSpot “Mafia” Will Have a Bigger Contribution Than Founders

In addition to these founding teams, there’s an even bigger contribution which HubSpot is already making to this same landscape: the proliferation of skilled marketing talent into a broader set of startup companies.

Historically, one of the (admittedly fair) critiques of Boston as a tech ecosystem is that the community is just that: a very tech-focused ecosystem, often at the expense of good marketing. “Build it and they will come” has been the philosophy. The focus is on creating some awesome technology, which is critical, except that the sales and marketing piece has been an afterthought in many cases. I can’t tell you how many pitch decks from local startups I’ve received over the past decade that barely even touch upon the key subject of distribution. And that thinking has carried out into the companies as they were being built.

But all of that is quickly changing. HubSpot has trained everyone in the company incredibly well (not just future founders), and many will eventually move on to other roles and be oriented towards distribution first.  The marketing training ground that is HubSpot creates a local DNA which will begin to pervade all companies in the area.

In a world which is increasingly won by startups who reach and then accelerate their product-market fit, not technology-market fit, this matters. A lot. I’m not just talking about B2B SaaS companies that feel similar to HubSpot either. This culture of being noisy about what you’re doing and implementing the right tactical techniques to get noticed will spread to consumer-facing startups as well.

I’ve begun to notice this effect first hand. With Jay Acunzo, HubSpot’s former head of content marketing, joining our team at NextView from HubSpot to support our investments in a platform role, he’s pushed the thinking about marketing across the entire portfolio. Former HubSpot marketing leader Rick Burnes also recently left for consumer-facing BookBub, where I’m on the Board, as VP of Content Products. (Here’s Rick’s take on HubSpot’s company DNA.) It’s becoming obvious that HubSpot marketing instincts span both B2B and consumer, and these are spilling into our entire community of companies following the IPO.

The above were just two immediate examples for me, but there are many more individuals adding to this emerging “Marketer Mafia” phenomenon. Jay and I took a look and created a graphic below depicting this HubSpot marketing talent which is starting to penetrate the Boston ecosystem:

Yes, HubSpot is going to spawn many successful startups, which will have a real impact onto the Boston ecosystem, which hopefully creates another set of pillar companies. But the more immediate and arguably more important contribution which the company is making is the marketing talent which is leaking out and flooding the local startup community, elevating the entire startup ecosystem.

 

The post The Unique but Powerful Way the HubSpot Mafia is Impacting Boston Startups appeared first on GenuineVC.

The Unique but Powerful Way the HubSpot Mafia is Impacting Boston Startups

It’s official: now two months after the IPO, HubSpot has surpassed the $1B market cap threshold and has become that “pillar” company that the tech ecosystem long anticipated. The benefits have been touted previously: an anchor for attracting and retaining talent in Boston, as well as a breeding ground for the next set of great Boston entrepreneurs and founders.

Already, a handful of groups have spun out to start new ventures, like the teams at Driftt, Bedrock Data, Grokky, and NextView-backed InsightSquared. As HubSpot co-founder and CTO Dharmesh Shah recently told BostInno, “We’ve wanted to not just build a great company, but also build some great entrepreneurs.”

Talk with my fellow venture capitalists, and they’ll no doubt confess how they’re “tracking” a potential founder or a given team set at the company in order to be ready with funding when it’s time for them to spin out. This entrepreneurial HubSpot spirit has — and will continue to have — a ripple effect throughout the Boston early stage startup ecosystem.

 

The HubSpot “Mafia” Will Have a Bigger Contribution Than Founders

In addition to these founding teams, there’s an even bigger contribution which HubSpot is already making to this same landscape: the proliferation of skilled marketing talent into a broader set of startup companies.

Historically, one of the (admittedly fair) critiques of Boston as a tech ecosystem is that the community is just that: a very tech-focused ecosystem, often at the expense of good marketing. “Build it and they will come” has been the philosophy. The focus is on creating some awesome technology, which is critical, except that the sales and marketing piece has been an afterthought in many cases. I can’t tell you how many pitch decks from local startups I’ve received over the past decade that barely even touch upon the key subject of distribution. And that thinking has carried out into the companies as they were being built.

But all of that is quickly changing. HubSpot has trained everyone in the company incredibly well (not just future founders), and many will eventually move on to other roles and be oriented towards distribution first.  The marketing training ground that is HubSpot creates a local DNA which will begin to pervade all companies in the area.

In a world which is increasingly won by startups who reach and then accelerate their product-market fit, not technology-market fit, this matters. A lot. I’m not just talking about B2B SaaS companies that feel similar to HubSpot either. This culture of being noisy about what you’re doing and implementing the right tactical techniques to get noticed will spread to consumer-facing startups as well.

I’ve begun to notice this effect first hand. With Jay Acunzo, HubSpot’s former head of content marketing, joining our team at NextView from HubSpot to support our investments in a platform role, he’s pushed the thinking about marketing across the entire portfolio. Former HubSpot marketing leader Rick Burnes also recently left for consumer-facing BookBub, where I’m on the Board, as VP of Content Products. (Here’s Rick’s take on HubSpot’s company DNA.) It’s becoming obvious that HubSpot marketing instincts span both B2B and consumer, and these are spilling into our entire community of companies following the IPO.

The above were just two immediate examples for me, but there are many more individuals adding to this emerging “Marketer Mafia” phenomenon. Jay and I took a look and created a graphic below depicting this HubSpot marketing talent which is starting to penetrate the Boston ecosystem:

Yes, HubSpot is going to spawn many successful startups, which will have a real impact onto the Boston ecosystem, which hopefully creates another set of pillar companies. But the more immediate and arguably more important contribution which the company is making is the marketing talent which is leaking out and flooding the local startup community, elevating the entire startup ecosystem.

 

The post The Unique but Powerful Way the HubSpot Mafia is Impacting Boston Startups appeared first on GenuineVC.

The Unique but Powerful Way the HubSpot Mafia is Impacting Boston Startups

It’s official: now two months after the IPO, HubSpot has surpassed the $1B market cap threshold and has become that “pillar” company that the tech ecosystem long anticipated. The benefits have been touted previously: an anchor for attracting and retaining talent in Boston, as well as a breeding ground for the next set of great Boston entrepreneurs and founders.

Already, a handful of groups have spun out to start new ventures, like the teams at Driftt, Bedrock Data, Grokky, and NextView-backed InsightSquared. As HubSpot co-founder and CTO Dharmesh Shah recently told BostInno, “We’ve wanted to not just build a great company, but also build some great entrepreneurs.”

Talk with my fellow venture capitalists, and they’ll no doubt confess how they’re “tracking” a potential founder or a given team set at the company in order to be ready with funding when it’s time for them to spin out. This entrepreneurial HubSpot spirit has — and will continue to have — a ripple effect throughout the Boston early stage startup ecosystem.

 

The HubSpot “Mafia” Will Have a Bigger Contribution Than Founders

In addition to these founding teams, there’s an even bigger contribution which HubSpot is already making to this same landscape: the proliferation of skilled marketing talent into a broader set of startup companies.

Historically, one of the (admittedly fair) critiques of Boston as a tech ecosystem is that the community is just that: a very tech-focused ecosystem, often at the expense of good marketing. “Build it and they will come” has been the philosophy. The focus is on creating some awesome technology, which is critical, except that the sales and marketing piece has been an afterthought in many cases. I can’t tell you how many pitch decks from local startups I’ve received over the past decade that barely even touch upon the key subject of distribution. And that thinking has carried out into the companies as they were being built.

But all of that is quickly changing. HubSpot has trained everyone in the company incredibly well (not just future founders), and many will eventually move on to other roles and be oriented towards distribution first.  The marketing training ground that is HubSpot creates a local DNA which will begin to pervade all companies in the area.

In a world which is increasingly won by startups who reach and then accelerate their product-market fit, not technology-market fit, this matters. A lot. I’m not just talking about B2B SaaS companies that feel similar to HubSpot either. This culture of being noisy about what you’re doing and implementing the right tactical techniques to get noticed will spread to consumer-facing startups as well.

I’ve begun to notice this effect first hand. With Jay Acunzo, HubSpot’s former head of content marketing, joining our team at NextView from HubSpot to support our investments in a platform role, he’s pushed the thinking about marketing across the entire portfolio. Former HubSpot marketing leader Rick Burnes also recently left for consumer-facing BookBub, where I’m on the Board, as VP of Content Products. (Here’s Rick’s take on HubSpot’s company DNA.) It’s becoming obvious that HubSpot marketing instincts span both B2B and consumer, and these are spilling into our entire community of companies following the IPO.

The above were just two immediate examples for me, but there are many more individuals adding to this emerging “Marketer Mafia” phenomenon. Jay and I took a look and created a graphic below depicting this HubSpot marketing talent which is starting to penetrate the Boston ecosystem:

Yes, HubSpot is going to spawn many successful startups, which will have a real impact onto the Boston ecosystem, which hopefully creates another set of pillar companies. But the more immediate and arguably more important contribution which the company is making is the marketing talent which is leaking out and flooding the local startup community, elevating the entire startup ecosystem.

 

The post The Unique but Powerful Way the HubSpot Mafia is Impacting Boston Startups appeared first on GenuineVC.

The Math of VC Returns…

…or how important winners are to venture returns and how difficult it is to find them. Excerpts from a recent Seth Levine post (emphasis added): Based on their data, a full 65% of financings fail to return 1x capital.  And perhaps more interestingly, only 4% produce a return of 10x or more and only 10% produce a […]