Posts Tagged ‘startups’

Seed-Stage Investing: Time, Not Money

Monday, April 16th, 2018

If we don’t value our time, why should others? I have spent a good chunk of the past 3 years, inundated by entrepreneurs largely seeking help accessing global pools of predominantly private capital, at the seed stage. A timely blogpost yesterday by the insightful venture capitalist Fred Wilson reaffirmed a point that I have been reminding hundreds of individuals – “what is the return on your time invested, not your money”?

Here is what I see:

  • The Poverty Entrepreneur“: A majority of individuals, who have been a success in their “past” but they don’t act like a success today (forever claiming poverty, reluctant to hire external expertise on equitable terms, seeking endless “free” favours without regard to others’ time). Often relics of large management consultants or banking.
  • “The Abundant Entrepreneur”: the rare, hidden gem, more often than not a seasoned entrepreneur, who is respectful of others’ time, willing to pay equitably for high quality advice and has a high level of self-worth.
  • The Acquiescent Board Chair“: the well-known business person, who dabbles in young businesses either for affiliation needs with other impressive figures or the rare chance of a jackpot outcome. Very much a discretionary investment of their time, they are prone to ask apologetically for extended favours (contingent fee basis) from advisers, knowing in all probability it is a low return on everyone’s time invested but we are all in the “hope factory” together.
  • “The Scrambling Adviser”: A cohort of financial and corporate advisors (often solo and boutiques), who this IS their prime source of wealth. They are invariably failing to balance time invested, a sustainable business and a career successfully.  Few survive for long without exploring alternatives.
  • “The Luxury Adviser”: A cohort of financial and corporate advisors, whose principle source of wealth (founding business, a banking career etc.) affords them the luxury of dabbling as advisors and investors in the seed area without regard to the actual return on their time invested.
  • “The Blunt Investor”: A cohort of professional investors, whose prime source of wealth arises from seed stage investing, time is precious and they are wont to give very blunt responses to requests for their time or flatly ignore them.
  • The Luxury Investor“: A cohort of angel and high net worth individuals, whose prior success affords them the luxury of significant discretionary time. Driven by their intellectual curiosity and wealth (time and resources), they are more relaxed about time given to seed investments (an interesting alternative to “pro bono” advice and charitable giving).
  • The Tax Investor“: A cohort of angel and high net worth individuals, whose tax structuring particularly in the UK attracts them to seed investing. They are cogniscent of time in so much as it enables them to understand the net financial consequences of seed investments.

You undoubtedly recognise some of these individuals if you have got this far, perhaps yourself. I am not here to tell you what you should do but I am here to urge you to apply critical thinking, and to ask, “is this a great way to surrender my scarce time, not just my money?”

© James Berkeley 2018. All Rights Reserved.

 

Stanford for Start-Ups

Tuesday, November 8th, 2016

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“There is nothing special about Stanford, everyone around the Bay Area tech scene has been there”.

Those were the throwaway words from a West Coast adviser, when I first mentioned that I had been asked to speak to this year’s class in Stanford’s Continuing Education program. Of course, those comments were directed to the university students, not the global audience of largely mature students and entrepreneurs enthusiastically engaged in a discussion about capital raising. Here is my findings from a really informative session:

  1. The dynamics of raising money at any stage are largely similar but the consequences vary immensely. When less than 25% of seed-funded startups fail to get to the third funding round (they have died, been acquired or are self-sustaining), many entrepreneurs overlook the importance of building and nurturing really strong personal support systems. Family, friends and wise counsellors, who have your best interests at heart, are willing to provide frank solicited advice and a supportive shoulder, when it doesn’t work out.
  2. The in vogue buzzwords are “agile money”. I prefer to talk about “resilient money.” Finding investors sufficiently agile to adapt to your changing needs is helpful but finding those that are sufficiently resilient in the tough and the good times, is really the gold standard.
  3. More than 80% of the class are positive about tech investment in the next 12 months and don’t believe we are in a tech bubble.
  4. Students often ask tougher questions of themselves than serial entrepreneurs. “How do I give myself the best shot at being a successful entrepreneur?” Perhaps it is the desire not to repeat others mistakes or the willingness to readily invest in improving their own skills, behavioural traits and expertise. Too often the mindset flips for the entrepreneur in the real world, “let’s save every cent”, when investing in their own personal needs (mentor, coach, advisor) is critical to their success.
  5. More than 60% are intrigued by corporate venture capital but certainly not beholden to its’ charms. Great question, “Why are corporate businesses suddenly experts in startup investing?” Many believe that CVCs remain highly susceptible to short-term changes in executive decision-making.
  6. Entrepreneurs learn best when they are willing to be vulnerable. In our case, to jump into the role play seat with little preparation and test their abilities to direct the conversation with an investor towards their desired goal.
  7. Understanding the distinctions between public and private investors such as a traditional VC Fund, a Family Office and a Corporate Venture Capital fund requires thinking about the future, not just the present or the past. What are their highest potential future needs? How are you uniquely qualified to address those needs?
  8. We over estimate geographical differences. A multi-lingual global audience of 75 entrepreneurs drawn from 5 continents, brought together by a singular objective, to learn the shortest quickest route to their desired objectives.
  9. Technology won’t replace “in the classroom” learning but tools such as Zoom, enable an increasingly intimate learning experience that certainly narrows the gap, at a a fraction of the cost for the host, guest lecturer and students.
  10. There is something special about Stanford – its’ global brand power. The ability to charge a premium price for global learning, to attract globally re-known lecturers and a culturally diverse group of students. I learn more than the students at these events and I can highly recommend it to others.

© James Berkeley 2016. All Rights Reserved.