Category Archives: Venture & Start-ups

Pitch Errors from VCs’ Perspective

Ever wonder how VCs view & evaluate your company? It’s not hard, the problem is we are so tied to our own businesses, we don’t often see the blatant holes. I’ve put together a fake company, filled with (surprisingly) common problems and asked if you can spot the issues.

As a refresh of a talk I did in NYC, I hosted an interactive event at EvoNexus where I asked the audience to judge my fake pitch and made sure that all the landmines were identified. They did a great job and caught many of the issues (not all). I am attaching the talk and slide presentation below:

Think Like a VC! Wing Wednesday from CommNexus on Vimeo.

First half is the pitch – try to spot as many errors as you can. The second half tries to spell out most, but even more are mentioned in the talk above.

Entrepreneurs: Stop raising, please.

tl;dr – too many worry about funding, when they should be validating their business first.

I’m constantly talking to fellow or aspiring founders. The very first questions I try to ask are: 1) How can I help? and 2) What is your biggest challenge today. The top response (by far) to both these questions is “I need help raising capital.” I cringe a bit*, but wait and probe deeper: “Why? What do you need the capital for?”

Usually, the response is something about needing to build the product / hire the people or pay current ‘partners/co-founder’ so they can come on full-time / pay an outsourced developer or designer… Although not all terrible reasons, I view this general question and subsequent common responses as potentially missing the point.

I am really asking the entrepreneur about their underlying business and I don’t consider fundraising to be a step in validating the business. It might be required (usually optional, taken to accelerate progress), but is clearly a means to an end, not a destination. Further, an overwhelming percentage of those that ask me about fundraising are both not ready for financing and should probably not accept financing yet (if offered).

Why? The vast majority of startups have no solid indication of product-market fit. There are a lot of great resources online about this, but said simply: do you have something that people want (and hopefully are proving it to you by paying or enabling you to monetize through another channel). If you haven’t released anything, haven’t put up a landing page to test interest, haven’t even tried to sell to customers to get their reaction, it will be incredibly hard to raise capital from anyone savvy. Good investors know that it is so easy to glean early signal from the market on almost anything (yes, even big/hard stuff like healthcare, education, energy, etc.). The time, cost & effort to create a horrible prototype or a concept video, or try selling is approaching zero. The closer you can get to validating some product-market fit, the easier it will be to raise.

Look hard at your company/idea and ask what fundamental assumptions must be true for this business to exist. Make testable hypotheses that would validate (or invalidate) these assumptions as objectively & quickly as possible. This is essentially the Lean movement.

If that means living without a paycheck for another 3 months or not paying your partner or digging into your savings or throwing together a quick and small friends and family convertible note round – do it. If you can’t be scrappy about this stage, if you can’t convince people to take a risk on your venture with you, why is an investor going to believe you will be resourceful and resilient when the emotional and financial rollercoaster really gets cookin’.

[Here’s one of those cliché statements that no matter how many times you are told you don’t fully understand until it happens:] Fundraising is a full-time job. It is all consuming and during that time, at least one member of your team is not making any progress on the business. In such a vital stage, where growth percentages and traction metrics are kings, this can drastically reduce the attractiveness of your company if it is not moving in a clearly positive direction.

Also, the time it takes to close a round is highly correlated to the amount of validation you’ve achieved. Take the following hypothetical situation seriously, as I believe it is common: starting to raise money in your current state might take 3 months, where as spending 2 months to land your first 10 paying customers, might change the investment discussion so significantly that it takes 1 month to close. In the end, you have the same amount of money, but have a very different business. Further, that assumes you can even raise at all without that validation AND if it doesn’t work, you found out 5 months earlier (3 months of raising + the 2 months of business development).

*despite the fact that this is a topic I feel well equipped to discuss, I am anticipating their rationale.


UPDATE: At this point, I feel the need to address another common retort: “Shouldn’t I start to build relationships with investors so that when I want to start raising I can do it quickly?” This is an easy (yet potentially controversial answer): No. Don’t waste your time. Here’s why: you’re smart, your business sounds reasonable -> it is easy to get meetings (or have people reach out to you). You go meet with a potential investor, they give you some good tips, you feel like you are being productive and helping your business, they tell you they are interested and appear excited (remember that’s their job). They want to stay in touch. You decide to take a couple more similar meetings. A month later you look back and you’ve taken 10-15 meetings, spent a couple hours prepping – you’ve wasted a decent chunk of time that you could have used working on the business. Further, your business will likely change in the next few months – anchoring an investor with your (probably bad) initial ideas and lack of understanding puts a first impression in their mind that may be hard to shake later if you pivot. As a bonus, if you say “not yet, I’ll get back to you in a month when I am ready,” you seem both in control and like the sexy girl pushing her suitors off a bit so they.

Customer Unit Economics & Financials

Taught a workshop yesterday on customer unit economics and startup financial models. It will be hard to capture without the discussion and example models, but just to make it available (since I haven’t found great resources for these topics elsewhere), I thought I’d share.

To summarize: Customer Unit Economics is a vital exercise (and essential metric to constantly track) to figure out what a customer is worth to your business. It is decomposed into Customer Acquisition Cost (CAC) or “how much does it cost to get a customer” and Lifetime Value (LTV) or “how much is that customer worth to me [over some reasonable amount of time].”

We discussed how to calculate CAC based on how you acquire customers, making sure you are tracking by channel (source). The biggest points of confusion were what to include (this is tough and customized to your business). Direct costs are simple (BoM, Sales, etc.), but are you having to do extra engineering customization? Are you training the customer? …

LTV clearly depends on how you monetize users. Then, most interesting for me, is the link between the two (LTV vs. CAC) and how you know if you’ve built a real business, and what you should be willing to pay for new customers based on where they enter the funnel. I encourage people to take a decent (reasonable stab) on LTV and work backwards to a target CAC.

For the second half, we reviewed basic startup financial models. This one is harder to summarize, since a lot was done with an example spreadsheet, but suffice it to say:

  • Don’t worry about traditional “financials” (Balance Sheet, Income Statement, Cash Flows) since they are basically worthless to a startup
  • Focus on your Revenue projections. What are the assumptions you have to believe to make the business big enough & interesting? Make the assumptions very clear. Do you believe them? What if you are off by half, etc.?
  • Build in calculations to key metrics that summarize the health of your business and be obsessive about putting in actuals every month as a reality check.
  • Layer in some basic costs, focusing on the few items that will be significant.
  • Have a summary tab that give the overview of both by year.

San Diego Startup Week – Recap & Thoughts

Whew! San Diego Startup Week is behind us. I hope you were there, met someone interesting, enjoyed yourself &/or learned something. Thanks again to all our sponsors and volunteers that made it all possible – we couldn’t have done it without your efforts and support.

Personally, I am glad for many reasons, but generally 1) thought it was overall a success and am proud of what a small team was able to put together, 2) it was a huge improvement over what we were able to do last year and 3) we can finally relax a bit and get back to personal priorities.

In the spirit of transparency, I wanted to share some takeaways, thoughts, and requests with the community. The organizers had a recap meeting a week after the event and synthesized your feedback from the survey (+ we want to hear more in the comments!).


  • Attendance. ~600-700 total attendees (~300 week long passes purchased, lots of one-off event passes sold) Almost all events were full, except end of week (burnout?)
  • Quality & Involvement. General caliber of events was vastly improved, still a range. 15 total events from 8 different startup organizations (+ some more the appeared last minute). Top 3 events (by ratings) were (in order): Opening CeremoniesTech CrawlMentor Night
  • PR. Attention in local press about the event, a few national pieces, even some TV spots!
  • Demographics. Especially impressed with the m/f balance (more than I’ve seen in any city)

Needs Improvement:

  • Better organization / information for events ahead of time
  • Too many parties.  One opening party and one to close would have probably been enough. Parties didn’t have the same attendance or energy as the week progressed.
  • Too many demos. While demos have their place, our feeling was there were ~4-5 pitch/demo-centric events within the same number of days. The events that were either geared towards topical issues or smaller interactions (or just fun) faired better.
  • Some events will be cut/changed as the response was only mediocre.

Future thoughts:

  • Moving the date so we have students in town
  • Topical tracks. Perhaps by stage (idea/team-building phase, pre-seed, post-funding) or biggest issues (like GTM or Customer Development or Fundraising)
  • Small interaction activities (more events like Mentor Night – one idea we plan to try is to enable groups of 4-8 people to grab dinner around town)
  • Career-fair type event for startups to recruit talent & interns (hopefully open-air)

Podcast interview with Paul Clifford from Disruptware

I was honored to be the featured interview on Paul Clifford’s Disruptware podcast this week. During the chat we discuss my background (min 1), Membright (min 10), San Diego startup ecosystem (min 20), and general startup tips/strategies (min 24).  Skip to whatever is interesting to you and let me know how you think it went!

Play the Podcast here


My Impressions: San Diego Startup Scene (1yr in)

(repost from

The following is my perspective on the San Diego Startup ecosystem and the amazing progress I’ve seen since. It will also give you a quick overview of some of the programs we run today…

A year ago, I returned to San Diego after 12 years (I grew up in San Diego before I left for college in 2001). After graduating from Y Combinator’s class, my return was prompted by my wife matching to her residency at UCSD. Thus, it was not fully my choice (and, honestly, probably wouldn’t have been vs. San Fran or NYC where my existing network were strong).

My general impression at the time was that there was a fledgling community here; people were working on exciting companies and trying to build an ecosystem, but the efforts seemed like disjointed silos run independently (with a wide range of quality & success). It reminded me a lot of what I had seen 3-4 years ago in Philly (which has made tremendous progress since).

Within the first week of arriving I met with two people at the center of the scene: Brant Cooper (lean startup author, community organizer and consultant) & Eric Otterson (Cooley Startup Liaison & Promoter). These guys got me plugged in quickly to some of the activities and people leading them. A few of us (Eric, Brant, Melani, Jon Belmonte, Dave Karlman) got together after that event and decided to make some changes. Startup San Diego was born from these eager startup enthusiasts.

Meanwhile, Brant published an infamous post to his blog that critiqued many of the institutions around town and where/why they were falling short of actually serving the needs of entrepreneurs. Quick summary: Events tended to be for the benefit of the host or sponsor and often not that helpful to actual entrepreneurs & no collective identity or cross-program support. The post got a lot of backlash and attention from the community which I generally bucket into two responses: 1) “you don’t know what you’re talking about” (+ insert an ad hominem attack) or 2) “you make some good points, let’s re-evaluate ourselves.” Unfortunately, the second bucket was very small, but most notably included EvoNexus.

Through the new group, we started a mentorship program with the help of Melani Gordon – CEO of Bevato. It was suppose to imitate the YC/TechStars/DreamIt office hours I had experienced in the past. The program connected some of the best mentors in town with startups for 4-5 short 30-minute meetings in a row (like speed dating). Since then we’ve hosted about 30 mentor events (involving over 100 different startups) and 4 large night versions (with over 30 companies at each) and about 50 of the top investors & successful entrepreneurs in the region.

The organizers of EvoNexus started hearing about our events and asking questions. Several of us met with the Evo team (specifically Michele & Kristen) about improving their program and eventually decided to team-up on several programs and aid in their internal transformation into more of an accelerator (EvoStart). I believe that they are currently the best program in San Diego and constantly improving.

The group quickly grew to include some of today’s most vital members (most notably Al Bsharah from Embarke). The momentum from these events inspired others and allowed us to launch similar types of programs:

·      Mentor Hours & Nights – 1-on-1 mentoring sessions w/ successful entrepreneurs
·      Domain Experts – 1-on-1 topic-specific meetings w/ service providers (design, legal, HR, etc.)
·      Seed San Diego – dinners/events with local investors (education & company connecting)
·      CEO Forum – trusted startup leaders discuss their latest challenges
·      Poker 2.0 – monthly poker tournaments w/ founders & investors
·      Startup SD website – news, calendars, ecosystem info and sign-ups

All that being said, it’s not all roses. There is still a long road ahead and a lot broken: no huge success stories to tout, many investors still acting backwards, lots of posers (on both entrepreneur and investor sides), general business etiquette lapses, etc. But 1) these are all fixable problems and 2) I’ll write more about these later.

I’ve been lucky enough to contribute something to the growth of several communities (NYC, Philly, Boston, SF), but have never seen the speed of improvement & growth that San Diego exhibits right now! It’s an exciting time to build your company in San Diego and the right time to get involved in the community – come join us! Do things – participate or, even better: help!


UPDATE: I’ve seen a new rise of gripes floating around the ecosystem. If you view this post as a complaint, I have sorely failed. It was suppose to celebrate the progress and direction we are heading. My responses to that hopefully appears consistent: get educated on what is really going on, then help out where we still need bolstering, or shut up. :)

Fundraising: Size of Rounds

Often asked, a surprisingly simple question without a straight answer is: what is the typical size of a _ round. Since I’ve tried to answer it many times, here is a stab on what I have seen over the years, and how they fit in my general buckets. Of course there are financings outside these ranges, but this should cover ~90%* of the distribution for each:


F&F:       $20-500K,   Avg 50K

Seed:      $100K-2M, Avg 300-800K

Series A: $1-10M,     Avg 2-3M

Series B: $5-40M,     Avg 7-15M

Series C+: bigger, but things get crazy with either down-rounds, bridges, or giant growth rounds if you are killing it.


*while I am pulling numbers out of the air, why not one more!

Startup Weekend Strategies

UPDATE  while I have the unfair advantage of knowing the winners of Nov @nycSW:

  2. Design –
  3. Tech –  CK Tech
  4. Biz –  Reading Buddy
  5. Microsoft – (same as GrandPrize)
  6. My Turnstone – JDecker, JBerman
  7. Mashery –  MotiveList
  8. CloudMine –  TaxiNomi
  9. Twilio –  ClosedCapp

CONGRATS to you all, great work, great weekend.  VERY tight call in the judges room!

I thoroughly enjoy Start-up Weekends.

Having been to 4 now (mentoring & judging two), I’ve generalized some strategies / approaches that seem to derive the most value from the rapid-paced 2 day hack-a-thons.

Like any event, haters are gunna hate.  The only major problem I’ve seen is misaligned expectations about the event (usually from first-time participants).  Come to SW with the understanding that:

  1. Your idea will (probabilistically) not be picked.  This is NOT a problem.  I can’t tell you how many sore loosers with pipe dreams of building the next $xB business over the weekend stomp away after the initial pitch session muttering how much they’ll show everyone.  Don’t be a sore looser – that’s not the point NOR the main value of the event.
  2. Don’t pitch the wrong idea.  Certain ideas are better lent to making significant progress over a weekend.  Apps, eTailers are.  New cars, new drugs aren’t.
  3. Landing amazing tech talent is (still) hard.  Just cause you bought at ticket, then made it through/joined a team, you’ll still have to fill out the team.  Just because someone says they are technical, doesn’t mean you should automatically take them
  4. Weirdness around equity is foolish and counterproductive.  Join a team, chalk it up as a learning experience, and make new friends.  Obsession about who owns what is a waste of time and shows you aren’t there for the right reasons.  It’s a WEEKEND.  You aren’t going to build anything worth fighting over that couldn’t be replicated in ANOTHER WEEKEND.  Do your best to be an awesome teammate and people will want to work with you in the future (when it matters).

STRAT #1:  Working on progressing a (real, existing) start-up.  Some people come to get free help on their existing startup.  This tends not to work for several reasons:  a) Other participants realize they are unlikely to really be a part of the team, just a mercenary.  b) Even if they do join, the end discussion is now a bit harder as there is more at risk.  The way this CAN work: carve out a small project within your general business that can serve as validation to the bigger idea or a specific strategy.

STRAT #2:  Fun weekend idea.  IMHO – the best strategy is to come with a bordering on silly / fun / potentially viral idea that could be thrown together quickly.  Why?

  • You can actually get a MVP up by the end, and things that work tend to do much better in the final judging
  • Use it as a pseudo-audition.  You’ll work with these people in a situation that roughly replicated some of the stresses associated with building a business.  Check out how you work with your teammates – are they potential long term partners?  A missed opportunity is walking around and briefly checking what others are making and how they are working.  Are there people on other teams that are rockstars that you can keep in touch with?
  • You’ll enjoy your time if it is fun and something that the other participants will want to try.

STRAT #3:  From scratch -> big, complicated biz.  Given all the other comments, it should be obvious why I’m not such a fan.  Unclear if you can make meaningful progress or validation.

Misc. general advice:
  1. Be proactive and energetic.  In my first SW, I had one of the top ranked ideas in the initial pitch session.  I then sat back expecting it to rain programmers to help.  It didn’t.  The girl whose idea ranked near the bottom ran around the room telling programmers that they walked on water and she was moses…Guess what?…She had a the largest team of good tech talent that weekend.
  2. Use the service providers and mentors.  SW usually attracts some great mentors, judges, service providers ready to give you time and even help you build your product.  Please, it merits repeating: USE THEM.  This access can be invaluable.
  3. Be transparent about your expectations.  I’d start with something like: “that you for working on this idea with me for this weekend.  Let’s have some fun and focus on pushing it as far as we can.”
  4. Remain open to suggestions and critiques.  People just don’t want to work with you if you come across as a dominating figure, convinced you’re always right.

…and props to my friends at CloudMine for their newly announced Gold Sponsorship!  They help you with the backend to quickly build your mobile apps – use away!

Mock Pitch: MoBowl

Just for fun…

To highlight many of the common the mistakes I see in pitches… I thought I would publicly share my mock business pitch made for Genacast & GA’s “VC’s unleashed” event.  It was a fun event where 4 VC associates made fake businesses that the partners publically tore apart.  Now it’s your turn, can you spot all the major errors?

SlideRocket of MoBowl

Investing Thesis

One of the reasons I work for Genacast Ventures (besides the main reason: Gil Beyda himself) is that my personal biases are 90% aligned with the fund’s investment thesis:

  • Early Stage
  • Internet Tech
  • Disruptive / innovative tech
  • B2B models   

Fledgling companyEarly-Stage

Who doesn’t like being on the cutting edge of technology and business?  That being said, not everyone has the stomach for the inherent risk.  Betting on businesses this early means you are relying on gut and your judgment of the founders’ character traits more than tangible data.  Many companies Genacast considers have no revenue, little traction, and an incomplete product.

Let me emphasize, although early sounds sexy, most people are frustrated by “filter fatigue”(tm) of being the first line of defense against the droves of crazies.  For me, the excitement of these unknowns outweighs the enormous risk and effort required to find the needles.  Further, as you move from early to later stages, the work (and associated skillset) morph from emphasizing team, addressable market, and product vision into a deeper analysis of what’s been built, the financials, and likely exit opportunities.  Ex-bankers (or corp. dev. types) excel at these tasks (read: most MBAs trying to get into VC are probably a better fit here).


= "a series of tubes"Internet technologies

Obviously, Internet adoption continues to grow at a tremendous rate (esp. internationally).  More business is transacted online, the amount of data is growing exponentially, and the resulting white spaces are vast and uncharted.   Areas like Cloud, SaaS, eCommerce, Mobile, Security, BI/analytics, even Gaming will continue to grow as the demand online (including mobile access) expands.

All that being said, the opportunities and risk with more traditional industries (services companies, physical products, [debatably] real estate) are statistically better bets to create & capture value (amass wealth).  These sectors are neglected by many of the most enterprising among us.  Like moths to a flame, many of us flock to these sexy internet/tech/start-up spaces admiring the huge successes (often ignoring the countless failures).

And here, I am GUILTY as charged.  I have always had a penchant for tech & startups and it’s hard to fight with this passion to get excited enough about one of these other spaces.


THE most innovative product since Pet Rock!Innovative & Disruptive Tech

I am particularly excited by unique and innovative technology.  Genacast’s thesis revolves around interesting tech that serves to un-level the playing field for some amount of time.  Like I mentioned from my 3Qs post, these should not be immediately replicable or transparent when viewed by a savvy user of your service.  Having something truly different translates to a competitive advantage, potential for acquisition, and frankly ability of the team to identify a gap and create rather than replicate.

My qualifier here, (I hope) I am not obsessed with innovation for innovation sake, but realistic about its application.  The tech that sparks my interest most tends to be commercially viable in the short term (1-2 years) where I can see the real-world impact playing out.


Biz 2 Biz Baby

B2B Business Models

In B2C, you could have 2M “users” without any revenue.  Numeric user traction is only an indicator, not real validation of a business until ‘consumers’ start paying (convert to ‘customers’) or you are able to monetize in other ways (ads or emails are pitiful justification).  Whereas in B2B models, having a customer usually means something in terms of large checks in the door.  These customers have considered a capital outlay, gone through a couple meetings and decided you could bring more value to them than the cost.  They act fairly predictably and constructing a pitch that hits their needs is increasingly transparent after learning the dynamics of the space.  Furthermore, your potential customers are identifiable and easily found.  Yes, sales cycles can be long and taxing, but this type of traction is much more indicative of success.

Similarly, the ‘picks & shovels’ approach is a bit of a hedge in a particular model.  If you create the platform that all the couponing sites should use, you are more likely to succeed than the thousands of daily deal, geo-local coupon, discounted shopping, social shopping apps are, since you are linked to many of them.

Since B2C is easily understood by everyone without deep tech or industry expertise, it seems to be the default approach.  Sadly, there is a dearth of good companies pursuing B2B approaches.

Clearly, this is a preference rather than a hard line – have fallen in love with many B2C companies as well…

closeness = access = potential helpfulnessEast Coast

Personally, I don’t really care about this filter, but it makes sense.  Proximity to young companies is more important than one might think – ability to be there when needed, help make introductions or conduct interviews, proximity to the core of your network tends to be somewhat regional, physical presence at board meetings, etc.  I’m a West-coaster originally, but agree that seed-stage investing should be relatively close if an investor plans to have a substantive impact on progress.