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Last Build Date: Wed, 10 Jan 2018 14:58:37 +0000

 



The Scariest Thing About Working at a Growing Startup

Wed, 10 Jan 2018 15:23:05 +0000

The amount of work that goes into a job at a growing startup is insane.  As soon as you put one project to bed, three more pop up.

However, the most difficult aspect of the work isn't necessarily the effort required, but the emotions, with fear perhaps being the greatest one of all.

When you're part of a small team, you're indispensable.  You are literally doing three jobs at once--three jobs that should probably be done by two people each.  It's crazy, but there's also a certain security in that.  You won't be fired, because there's no one else to do the work.

As the team grows, however, you're asked to do something most people find really uncomfortable--you're asked to start letting go.  You're asked to document how you do your job, maybe your favorite aspects of your job, and to teach it to other people who, on day one, can't do it as well as you've learned how to do it.

The same holds true for relationships.  Maybe you were interfacing with inventory buyers, or interviewing every candidate--but at some point, you have to hand over those relationships, too.  

If other people start doing your job and leveraging your contacts, what happens to that security?  What happens to your sense of identity in the organization?  

Every early startup employee faces this choice.  Do you dig in and play the territorial game, or do you step up to become an indispensable manager?

An indispensable manager not only builds teams, but recognizes a new level of professional responsibility.  You speak with the weight of the company behind you, so you need to make sure you're actually on the same page as the rest of the company.  As an individual contributor, you may not see the effects of not being on board with management decisions--but as a manager, people look up to you. 

Sometimes you just have to say your peace behind closed doors and then get on board for the good of building something bigger then yourself.  At the end of the day, you're not the founder or the CEO--and the decision you have is to stick around and row in the direction everyone else is rowing or jump ship.  

Successful startup execs build bridges and consensus.  They recognize that what the enable the company to accomplish is their track record more than the series of their own person accomplishments.  This means ceding credit to a team and abandoning the "I" for the "we".  You don't want to win every last argument--you want the company to win.  

This is an extremely difficult thing for the type of go-getters and hard workers that are often attracted to startups.  A great individual contributor isn't necessarily a great team builder--but that doesn't mean it can't be learned.  The keys are professional feedback and self-awareness.  Knowing the ways you get in your own way are key to not letting it keep your career down.  Taking both outside and inside feedback--from above and below--to heart is a good first step.  I generally assume that any criticism someone has of me is true, until I can as objectively prove to myself that it isn't, and I wrote about that a while back here.

Startupping ain't easy, and neither is developing as an employee into a manager and executive.

 

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What Should I Include in a Pitch Deck? [VIDEO]

Mon, 08 Jan 2018 12:45:00 +0000

I've rewritten a lot of pitch decks over time and a lot of them are really bad--mostly because founders have been told what should go in them without a lot of consideration as to why.  Somewhere along the line, someone came up with things that are supposed to go in a pitch without ever asking investors how they take in a story.

Here what I want to see in the video below...

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Here are the notes...

1) Don't keep me in suspense as to what it is.

2) The team slide isn't as important as having the human in front of me, or hearing about your reputation elsewhere.  Team is important, but team slides are boring.

3) Get to the money part soon!  How do you make money?

4) Then, how do you make A LOT of money?  You sell lemonade for 50 cents a cup, but how do you sell enough lemonade to go public??

5) Why is your product special?  This isn't that stupid competitive chart where you have all the checkboxes and no one else does.  I want to understand if there's a reason why all of the sudden this angle is possible, and why others aren't likely to have the same advantage you will.  

6) What are you going to do with this money--specifically, what are the GOALS for the round, not how long will it take to spend.  Anyone can spend a million bucks in a year.

If you think you could use some help formulating your pitch for an investor, and you might want to do some good in the process, I'm running a series of pitch workshops called "Fix Your Pitch for Good!" for charity.

Startups can sign up to go through an abridged 30 min VC meeting, and then we'll talk for 30 minutes about what could be improved, how to organize it better, and what VCs need to see.

And if you're just curious, you can just come watch.

For startups pitching, the donation is $250, which will be 100% disbursed to some charities I'm currently raising money for, like the Challenged Athletes Foundation, Team for Kids, and ScriptEd. For attendees, the suggested donation is $25.  

 

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What Valuation Should I Expect in My Seed Round?

Mon, 01 Jan 2018 22:07:02 +0000

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I have to be honest, I'm a little suspect when one of the first questions a founder asks me is about valuation.  So many things about startups are difficult and so few startups raise *at all* versus the number who try, that this seems like not the most important question.

That being said, you want to feel like you got a good deal--and your lead investor should be able to walk you through how they got to a particular valuation and why they thought it was appropriate.  They should be able to provide examples of other deals, and talk openly and transparently about their thinking.

Look, at the end of the day, I'm incentivized to buy up as much of your company as possible, and you're trying to sell as little of it as possible.  On valuation, we're not aligned, but we can meet somewhere in the middle, both feel a little regretful about where we wound up, and that's probably the right price.  :)

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You Want on That List and Here's How

Tue, 26 Dec 2017 17:25:42 +0000

With each passing year, we get another set of lists:Startups to WatchFounders Who Crushed ItBald VCs in NYC You Should PitchWhen you're on the list, you're tweeting the heck out of it, very modestly of course, and getting all your investors in friends to do the same.  When you're not on it, you tell yourself the list was bullshit for whatever reason, or that you don't have time to pitch yourself because you're too busy running a real company.  Unfortunately, these lists do matter and when you're not on them, you're missing out on opportunities for press that can cascade over time.  For one, journalists often use existing lists as the basis for other lists.  Also, when event organizers are thinking about speakers, lists of founders and companies represent easy references for invites.  Later stage investors would also be lying if they don't reach out to see what's up and why a company might be featured.So how do you get on one of these lists?  Simply put, you need to make yourself known to the people writing them!  But how?  Ok, well, here are some tips:1) First, figure out who we're talking about.  Make yourself a comprehensive list of who is covering your space.  Who has written about the five startups most like yours or most likely to get mentioned in the same conversations?  Who has written about the five companies most likely to acquire you?  What influencers are building a brand about being an expert in the space?  Are there any podcasts you'd make a great guest on and who runs those shows?  Who runs the conferences you'd make a great speaker at (like, literally, which person picks the speakers?)2) Reach out.  The best way to contact someone is when you're not asking for anything.  Offer yourself as a resource.  You're an expert on something, otherwise you wouldn't be starting a company around it, right?  Write to all these contacts and just say that you're available if they need a quote, some background info on the space, or they want to spitball trend pieces.  Perhaps you might offer them 3-5 interesting facts they could use in future pieces--the kinds of surprising stats you might have had in investor pitch decks that made you want to start this company in the first place.  3) Interact over time.  Follow all of these folks on social media.  You decided to build your career in this space and they're pushing out content about it.  You should have opinions, be able to ask questions, and certainly be willing to share their content if you're looking for them to eventually share what you're up to.  It's a lot better to have 3-5 different touch points with someone and then wind up in their inbox than to be a complete stranger.  The best way to do this, obviously, is to do this authentically.  These journalists and influencers are people, after all--and they do more than just follow Fintech or the On Demand Economy.  Maybe they run or cook or they follow the same college sports team that you do.  Find ways in which you can connect on a more personal level and stand out for them as a person they identify with instead of just as a founder looking to get a story placed.  4) Offer up your own lists.  Share your view of other founders who are doing awesome stuff or offer to make introductions.  You're obviously not going to be the only company on a watchlist so if you can help someone fill out the rest of the list, you're more likely to be included.  And if you hate what everyone else is doing in the space, you're likely to be obnoxious to talk to and probably won't end up on anyone's list.  Don't be a hater.5) Invitations!  Host some group dinners of interesting founders and other movers and shakers in your space.  If you're a means of meeting other interesting people for a journalist, they'll likely stay in better touch with you because they think of your ne[...]



Five Lessons Learned from the Ample Hills $8 Million Raise

Thu, 21 Dec 2017 20:14:00 +0000

Board meetings at @amplehills are dangerous. A post shared by Charlie O'Donnell (@ceonyc) on Dec 20, 2017 at 8:06am PST When you're Ample Hills Creamery, the #1 rated ice cream shop in the country you can pretty much throw everything you've been told about fundraising out the window.  Nothing seems to apply--you're not a tech company, you bootstrapped your way to millions in revenues before taking on capital, and you sell mostly through brick and mortar.  Yet, the lessons learned from their $8mm round of funding announced this week are still widely applicable to every startup--particularly food startups and those in four walls retail that struggle through the traditional venture process.Here's what I think everyone involved learned in this process.1) Find backers who love you for what you are, even if you're a square peg.When Ample Hills first raised $4 million in 2015, people asked if it was a seed round.  Technically, that's what we called it, but it didn't seem entirely appropriate given that it had already been up and running for years and had millions in revenue.  When we raised that first round, we needed to figure out who was even open to the idea of backing an ice cream shop with national and global ambition.  We hosted meeting after meeting, stuffing as many investors in the room as we good in groups, invited via waves of mass e-mails to anyone I thought might be interested.  What we found is that while most of the people turned down the invite, most of the people who showed up invested.  Ample Hills wasn't a deal for everyone, but for those that were open to it, they loved the company.Did that seed make this round our Series A?  Would we pitch Series A players?  I pushed that we should just say what it is--an $8 million raise to grow the company.  Who cares what we called it?  In fact, I thought we should have named our rounds after ice cream flavors but that was quickly shot down by the lawyers.  The truth is, it doesn't matter--that you can very easily get caught up in positioning, but at the end of the day, an investor who really wants to invest is going to invest.  It's too easy to think that if you tilt the pitch just a little one way or the other, that's going to make the difference, but that's Monday morning quarterbacking.  Rounds aren't close--they either happen or they don't, and an investor on the fence is a pass.  Investors who want to be in will find a way to come in and will structure an economic deal that makes sense, no matter what they call it.2) When you stray from traditional tech investors, leave yourself twice as much time, because they're twice as unpredictable.  Tech VC is a pretty mature marketplace--the players are known, the process is established, and so while relationship building might take time, usually you can estimate how long a deal will take with some accuracy (besides, of course, that it takes longer than the founder wants). AH kicked off this raise based on some inbound conversations with high net worth individuals back in the first quarter of this year--over nine months ago.  These types of folks, who may or may not have family offices that they work with, range in difficulty to work with.  Sometimes, the person whose money it is could just say yes, and points to a person to make it happen.  Other times, they hand it off to a team that could take months to do their work.  You just don't know.In AH's case, ultimately, the person we started talking with didn't actually wind up participating, but still remains a valuable contact and potentially a key partner for the future.  However, someone they introduced the company to wound up a writing seven figure check on a quick turnaround.  Point being, if you're working with family offices and high net worth folks, leave yourself plenty of time.  Investing in you isn't always their immediate pri[...]



Don't Be Dismissive

Mon, 18 Dec 2017 11:44:45 +0000

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Finding Community in NYC Tech Again

Mon, 11 Dec 2017 13:00:30 +0000

There's a thread going on Twitter about doing a BarCamp in NYC again.  I started with a tweet from Jeff Namnum about how he joined the tech community...Forever grateful to @tonybgoode @noneck @whitneyhess @ceonyc and others for making a Long Island guy feel welcome a hundred years ago at barcampNYC. Absolutely changed my trajectory.— Jeff Namnum (@namnum) December 8, 2017 It touched off a whole discussion about putting on a BarCamp here again--a collaborative, open "unconference" where people could come together to share and learn about a wide variety of topics.  We haven't done one in NYC in a while, but moreover it feels like the sense of a common community we used to have in the early days of the tech community has been replaced by scale and a lot of heads down work.  Where there used to be the same crews of people attending the NY Tech Meetup every month, there is now 5 tech oriented Meetups a night on specific things like cryptocurrencies, ecommerce conversion best practices, and Clojure.  Sure, it's great that NYC has scaled into the second largest tech community in the world, with layers upon layers of knowledge and experience, successful growing companies, etc., it feels a bit like we've lost a little something about how we used to convene in smaller, more consistent and intimate groups. I've been thinking about why this has happened and I can point to a few things:1) My peer group of twentyish somethings grew up a bit, became super successful, coupled up, procreated, moved out to Brooklyn, etc., and just doesn't have the social flexibility they once did.  Or, they just got a big fatigued with running around doing events they weren't getting paid for all the time.2) The larger companies outgrew the community.  Holiday season used to mean getting invites to holiday parties at companies like Squarespace and Foursquare.  Back then, they were in offices that were yet unfilled, and opening up to the community still meant a manageable number of people.  Today, their own companies are communities unto themselves--and marketing and recruiting has gotten a bit more mature than just e-mailing a lot of people to consume egg nog.  3) In some cases, it was a reflection of what was big at the time.  There were no better spokespeople for their own products than Dennis at Foursquare, David at Tumblr, Jacob at Vimeo, Kortina at Venmo, etc, etc...  Participating in the community was almost part of the job.  In today's NYC, you wouldn't market Warby, Datadog, MongoDB or Casper with photos from last night.  No one is coming up to you at a bar anymore trying to get you to try their social app (RIP Hot Potato.)4) Space doesn't seem to be as easy to come by these days.  Remember when Sun used to host events at 101 Park?  How many events did Jack open CRESA's doors for us?  These days, there's much more competition for space to hold events and a lot of the spaces have professionalized, charging because they're now in the business of space.  Whatever the case, it's hard to figure out where to tell someone to go in NYC's tech and startup community if they want to meet up with awesome people doing cool stuff.  You can't just swing by Tom and Jerry's anymore. That's one of my 2018 goals--is to help make NYC tech feel smaller again, and more connected.  I'm starting with building up some cohorts of new seed-funded companies.  Raising a first round of capital is as good a proxy for "Someone vouched for you and you're a legit founder doing cool stuff with actual resources to give it a shot."  I'm trying to bring together every single founder in NYC who raised their first $500k or more of capital in 2017.  (If that's you, check out the group  signup here and we'll invite you to the first meeting tomorrow (Tuesday) night on the 12th).We'll do a [...]



Rethinking Our Heroes

Mon, 20 Nov 2017 07:32:49 +0000

As I sat in the movie theater watching Justice League, I thought a lot about the idea of a hero in the context of 2017.  

Generally, we've thought of heroes as possessing some kind of special power--or larger than life.  We've confused the powerful and influential for people we should look up to.  Yet, as we've seen in the retelling of a lot of the comic book stories on screen, our heroes aren't always purely good, nor are they as good at being people as they are at being powerful.  

This year has seen a toppling of those heroes the likes of which we've never seen before--Hollywood Actors and Directors, Former Presidents, US Senators, Would Be Senators, Midas List VCs, and yes, Confederate Generals.  We're being forced to reckon with our ties to everyone from slave-owning forefathers to Bill Clinton.  

We look up to heroes because we see them exhibiting power over others--yet it's this power they often seen to struggle to control and use appropriately.

As 2017 winds down to a close in the next two months, perhaps we can all think about what kind of heroes we'd like to have in 2018.  As many heroes fell this year, many others found the heroes in themselves--taking to the streets in protest for the first time, sharing their stories of mistreatment, and taking the time to listen and learn about the struggles of others.  

What kind of hero do you want to be?  Will you risk speaking up on behalf of others when it isn't popular?  Will you be vulnerable?  Will you admit when you were wrong, and try to make up for when you fell short with people?

Not all of us have a cape.  Not all of us are rich.  

But we can all be heroes.  

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The Foolproof Way to Tell if Your Employees Have Issues

Thu, 09 Nov 2017 15:02:25 +0000

CEOs, founders and managers are more worried than ever about issues in their organization that they might not be aware of.  We've seen a ton of stories come out recently around bad workplace environments, and business leaders know that for every really bad story, there are a thousand festering smaller issues that need to be gotten out in front of before they get worse.  

That's why it's critical that they understand the one question that can fish out whether or not there are workplace issues lurking underneath the surface of their companies.

Here's the question...  are you ready?

You sure?

Ok...

Ask yourself, "Does my company have more than one human working in it?"

If you answered "Yes" then your company surely has workplace conflict and issues.  There is a 100% chance that when two individual humans work together in the same place, things will come up.  It's perfectly natural, but it's also something they don't have good tools to work out on their own. 

Bringing up conflict is difficult.  First, a lot of people are embarrassed that they can't fix a situation on their own.  They might feel like they're making a big deal out of nothing, even though it's making them more and more unhappy each day.  

Second, even when a company does have outlets, like manager reviews or HR staff members, these relationships can easily be perceived as conflicted.  Maybe you're not ready to talk to HR or the problem is with your direct boss, and you don't want to make the situation worse because you can't change your boss.  

Whatever the reason, these issues most often manifest themselves in unexpected churn.  How many times is the first hint of employee unhappiness the day they give notice about leaving?

At worst, these issues come out in headlines.  In so many of the worst stories we've seen this year, there was a moment where someone could have head something off before the issue grew.  

That's why Brooklyn Bridge Ventures recently funded Bravely.  

Bravely that offers conflict and communication coaching for employees navigating issues in the workplace.  Through Bravely’s application, employees can confidentially describe the issue they’re facing and schedule a phone consultation with a ‘Pro’, an expert coach or HR professional with deep experience in helping resolve conflict, structure effective communication plans, and develop skills for constructive work relationships.

Every single company has issues.  Hopefully not all of them are as serious as the ones that make headlines, but 65% of performance problems are linked to strained personal relationships, which happens everywhere.  Effective communication among colleagues, even for the small stuff that a lot of people let go, yields a significant impact on workplace wellbeing. 

The secret sauce of Bravely is to help employees feel empowered--given them strategies and language toolsets to address acute issues right on the spot.  Bravely is that first step; that safe place for venting, getting advice and putting a game plan together when you are not yet ready or lack the confidence to approach your boss or HR business partner.

I'm excited to work with Toby and Sarah, two experienced former startup pros, as well as my co-investors Primary Ventures, Trailmix, and Correlation. 

If your workplace has more than one human working in it, there is absolutely no reason why you shouldn't talk to Bravely now.

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Five Lessons to Learn from the Success of The Wing

Mon, 06 Nov 2017 12:27:00 +0000

Two years ago, Brooklyn Bridge Ventures became the largest seed investor in The Wing--a network of co-working and community spaces for women founded by Audrey Gelman and Lauren Kassan.  They recently opened their second location in Soho after raising an $8mm Series A from NEA earlier this year, and their 3rd and 4th will open in the next few months.  It's perhaps the most well executed company I've ever been involved with, and there are some key lessons to be taken from watching how they've become one of NYC's fastest growing rocket ships.1) Don't assume anything.What I said above isn't exactly true--I didn't really invest in "The Wing".  At the time, the company was a Powerpoint about a space called "Refresh"-- a four walls experience that was a lot more utilitarian than today's incarnation of The Wing.  What changed?  Well, instead of resting on the initial idea after a successful seed round, the founders surveyed their potential customer base to make sure the space had exactly what people wanted.  While there was interest in a women's space that had showers and a place to clean up between work and going out, among other amenities, there was a ton of interest and curiosity around who else might be at the space.  In fact, the desire to network and connect with other women in a safe and supportive space was so strong, it drove the brand in a more community centric direction.  Just because some investors put money into your idea doesn't mean you can't question it--even at its core.  2) Make big asks.The Wing raised a $2mm+ seed round on a Powerpoint and they made no bones about asking for a big Series A to launch three more locations.  The founders knew they had something special and desired to make it appropriately impactful, which could only be done with real capital.  It sent a strong signal to the investor community that they had national and global ambitions, more so than if they had asked for "just enough to break even" or a smaller round than they knew they could execute on.  This is something I see with too many non-male/non-white founders in general, and I often find myself asking, "Is this the right amount to raise?  What would you do with more?" Undercutting yourself on a raise is fixable, but it makes even me worry about whether or not you'll make the big asks the company needs down the road--for that NYT piece, for that hire that would be crazy to take that leap, etc.  3) MVP and great product aren't mutually exclusive.  The original Wing location is smaller than their new spaces--but it's a beautiful, extremely well done and expertly designed space.  It served as an example of what could be done when you create such a community space, but it was built on a reasonable budget and less space than what future locations would entail.  Too many products cut experience and design instead of cutting features, making the limited number of data points users and investors have about your MVP that you can't build something interesting.  The Wing showed that they could build a great product, even if a little smaller, without breaking the bank, but also without scrimping on who they worked with around the design and the brand either.  4) Build a network ahead of building a company.When I first got the pitch deck, I had no shortage of people telling me that Audrey Gelman was a rock star and that I had to meet her.  That stood out more than anything she could have put into a deck.  Having that kind of network and reputation is wind in the sails of any business--and should be worked on years in advance of setting out on your own to build something.  Who needs to know you to help you with this business?  Go build a relationship with them before you even start the business[...]



Why You Shouldn't Put VCs on a Pedestal

Sun, 22 Oct 2017 15:23:23 +0000

Influencers.  Kingmakers.  Sharks.  Power brokers.  Visionaries.There are a lot of ways the startup world describes venture capitalists that portrays a certain power dynamic, real or perceived, that I believe is at the heart of so many of the industry's problems.  The industry treats VCs as if they hold all the cards, and the worst behaviors of investors reflect that.Frankly, it makes me uncomfortable, because it's undeserved.Here's why...Who's really chasing who?Do you think there is more money out there looking for good opportunities, or more fantastic opportunities?Right.  Clearly, truly great ideas and great teams are at a premium--and there's a ton of money in the world.  It's rare that you really only have one option as a seed investor (follow on rounds are different, because it is expected that insiders are your first option, and their actions can influence others).  The idea that there's only one human on the face of the earth that will back you, and if that person is an asshat that you have to accept them is false.  If you can get one investor, you can get others.  Remember that we're lucky to be investing in your company, because ideas as good as yours don't come around too often, and that will change your approach as you try to gather your first check.A lot of our success is on paper, or just dumb luck.There was a time not too long ago when VC bios read "Fab investor", "Quirky investor", and "Gilt investor".  None of those companies produced great returns to their backers, so as the old saying goes, "Don't count the money until it's in the bank."  Today's Postmates might be tomorrow's Fab.On top of that, you've got companies like Bebo that were huge exits that were eventually folded or written off by their acquirers.  Be careful giving too much credit to an investor who lucked out because a stupid acquirer mistook a flaming pile of dog poo for the greatest thing since sliced bread.Founders do most of the hard work.VCs can provide a useful piece of advice at a key moment--or help make a key hire, but the day in and day out grind is done by the work of the founder and the team, and they deserve 99.999999% of the credit.  Most of the time, if that VC didn't back them, someone else would have and they would have been just as successful.  Good investor doesn't mean good person.I wish that only high character people were allowed to make boatloads of money, but that's not the way it works.  Some people are complete scumbags, make a fortune, and karma just never catches up with them.  It's not how I would want to reach success, but for some people, it doesn't bother them.  We can debate whether they're sociopaths, but we definitely shouldn't assume that every "great investor" is "great" at being human.  No one is perfect.Kind of the same as the prior one, but backed off a bit.  Even if you're not one of the worst, and you strive to do your best everyday, a VC isn't perfect.  They're just a regular person and they don't always get it right.  Founders are in that boat, too.Few of them made sacrifices to get where they are.There are a lot of things you don't get to choose--like the gender you were born with, your race, and whether you were born into money or not.  All of these increase the chances that someone winds up being an investor.  I hope that, in the future, a more diverse population of investors will come from more humble and less privileged beginnings, but the majority of VCs out there were born with advantages.  To put us up on a pedestal as if we built up our career from scratch is giving many of us too much credit.There...  If you go into your next pitch meeting and the VC seems cut down a notch, you c[...]



I Can Be Difficult

Mon, 16 Oct 2017 11:45:00 +0000

Last week, I heard the word "difficult" describing investors twice.  Once was about me and once wasn't.  The founder and investor relationship is, in fact, a difficult one to get right.  Both sides walk in with a lot of cognitive biases and style differences unique to every pair.  Meanwhile, the work of trust building is hard and takes a long time.In one instance, there was an investor holding up a round after agreeing to sign off on something verbally.  They weren't wrong about the term in question, but the dollar impact to their investment was so small that it wasn't meaningful to a fund of their size.  That's the kind of thing where you have to choose between being right and seeing the bigger picture in order to facilitate a transaction that was good for the company. No one wants that kind of difficulty in an investor and it frustrates me on behalf of my founders to see that.That being said, I can be difficult in other ways.On my side, I was told by a founder that they found some of our interactions difficult--a little too blunt without enough understanding of where the entrepreneur was coming from, doing all of this for the first time. The most successful founders have often told that they're crazy or stupid or both on many many occasions on their way up--and none of that helped them get there, at least, not on a productive way.  It's important as an investor in the company to make sure that when you have constructive feedback, it comes with support and respect.  Founders are going to hear a lot of naysayers from the outside, and so when you're on board with the company, you want a founder to feel like you believe in them personally, even if you disagree with them.This isn't always easy.VCs get the benefit of having worked with dozens and dozens of companies--and so it's easy to have a dismissive reaction to what you might see as a bad course of action, without realizing that the founder doesn't have the benefit of your experience.  Not only that, but a founder is basing their decisions on a lot more information than you--so while you're concerned about the what, perhaps you should be diving deeper into the why before you react.Being a founder can feel like driving a car for the first time.  You're nervous enough--the last thing you need is a parent yelling at you for clipping the curb with the back tire on a turn.Doesn't mean it isn't hard to freak out when you're a passenger in that car when you hit something!  Still, it's something I need to work on more.At the same time, there's also a "good difficult"--being willing to deliver tough feedback or pushing the founder to do difficult things they'd rather not do that are better for the company in the long term. This is something I'm unapologetic about.I can think of a few instances where I've been "difficult" and I think ultimately it was better for the founder and the company.For example, I've been putting in a spending clause in my term sheets lately, where above a certain one-time spend triggers a conversation.  The founder can spend whatever they want whenever they want, but we just have to talk about it.  It's a seed round, and so it winds up happening around hires, rent, and contracts with agencies or lawyers most often.Some might see that as a pain because other investors won't ask for that--but it's already facilitated a lot of great conversations.  For example, it helps to hear why you're hiring who you're hiring early on.  I want to understand your thought process and make sure that you have a method to salary and equity compensation.  That's not only good discipline, but it helps me figure out who to send you to help with recruiting in the future, because I [...]



The Cold E-mail and the Crazy Big Idea: Industrial Organic Announces Seed Round

Mon, 09 Oct 2017 04:51:57 +0000

"Hi Charlie,

I've requested a meeting with you during the first week of March. Here are ten reasons why you should take the meeting..."

This is an e-mail I got from Amanda Weeks in February 2014, and the beginning of a two and a half year journey that culminated with Brooklyn Bridge Ventures leading a pre-seed round for Industrial Organic that kicked off about a year ago.  The round, which was raised in two tranches, was recently announced by Inc Magazine.

Amanda and her co-founder Brett Van Aalsburg researched for two years and developed an anaerobic fermentatio process that quickly breaks down food waste in a matter of days.  Byproducts of the process can be turned into other goods like organic fertilizer and natural surface cleaners.  When I funded the company, it was little more than a science project in a garage in Brooklyn and soon, they'll open up a waste processing facility in Newark--one that didn't require tens of millions of dollars to setup and also won't pollute the local neighborhood with odor.  It won't throw off dangerous gases, and yes, the process will make a profit.  

One of the most exciting companies I've ever been involved with is building sustainable tech to save us from being buried alive by our own garbage--in #Newark!

A post shared by Charlie O'Donnell (@ceonyc) on

I was once asked by a potential investor what I thought the exit of this company will be.  The conversation went like this...

"Well, acquisition or IPO."

"You think this company will IPO??"

"Can you prove to me that a company serving a market where every last human being on the face of the earth creates organic waste, which they get paid to process and then paid again for what they turn it into, *won't* IPO?"

That's how I think of this company--a huge problem, bet on early, with a solution exponentially cheaper, faster, safer and more urban friendly than the competition, built by scrappy founders knowledgeable enough to be dangerous but not so experienced as to get held up by old paradigms.

You give me 30 opportunities to make that bet at pre-seed valuations and I'll give you a winning portfolio, and a very very interesting set of companies to work with and be proud of.

BBQing with biomass pellets created by @industrialorganic.

A post shared by Charlie O'Donnell (@ceonyc) on

Also, very excited to once again be investing with Nisha and Susan at BBG Ventures in our fourth investment together (goTenna, The Wing, Ringly being the others), as well as Newark Venture Partners, 3G Investments, and several angel investors who are LPs in Brooklyn Bridge Ventures.  

 

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My Least Favorite Part of Venture Capital

Tue, 03 Oct 2017 14:00:16 +0000

I'm a lead investor.

That means I'm usually the first person to put down a price on what your company is worth--a dollar value on months, if not years, worth of your work, blood, sweat, tears, stress, etc.  

"Here's a piece of paper that says how much I think your dreams are worth."

The reality is, any price that I put down at the stage that I invest isn't going to feel like enough--and if it doesn't feel like enough, I'm probably grossly overpaying.  But, you don't feel like that as the founder.  

Your company is special, which, I 100% agree with.

That's why, out of the 2,000 opportunities I saw this year, you and your company are one of the 8-10 I gave a term sheet to.  So, congrats!  All the reasons why you think you should get a much higher price for this round are the very reasons you made it past the 1,992 other companies.  

But, at this stage, starting from a Powerpoint, prototype, or even a demo product, you probably have just as much chance of going under as any other company.  It's sooo early in the life of the company that it's nearly impossible to determine if, in 7 or 8 years, whether or not you have a better chance at success than anyone.  

If picking out the winners were so easy at this stage, VCs would be a lot better at it.  

Really, the biggest determinant of price is supply and demand--and so, more so than a qualitative judgement on your worth as a human being, consider this bid a data point.  This is where I think the market is for this company right now.

That other company, I can't speak to what happened there and why they got a $10mm pre-money.  I passed on that deal.  Maybe those investors were smarter than me.  

What they aren't, however, is harder working--and I have to say, it really bugs me when I invest in someone super early and then the next round comes in and the price isn't that much higher than what I paid for it.  It's like, "Why did I take all this risk at this stage if the next round is going to be a $3mm round on a price of $12mm?"  

Makes my $7mm pre seem not really worth the risk in the grand scheme of things.

But back to us.

Look, we're just not aligned here.  I'm just trying to get the best price possible for my investors, and you're just trying to take the least dilution.  

I hope we can meet somewhere in the middle, but yeah, this part is kind of going to suck.  The only thing I can really do is tell you how I came to this price, what other deals I closed with similar pricing, and show a willingness to be flexible if it turns out we underpriced it and the round is oversubscribed.  

Besides, the only thing that matters is how big it gets in the end, and how self-sufficient we can make this company over time.  A million dollars on the pre-money now pales in comparison to the dilution of having to take a few more rounds down the line.

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Not Just Any Given Sunday #takeaknee

Mon, 25 Sep 2017 11:45:00 +0000

Posted this in what used to be my tech newsletter, and what has lately been about more...Yesterday wasn't just any given Sunday, was it?I would imagine most of the NYC-based readers of this newsletter don't take the position that "these athletes should just stick to sports" nor do they feel that way about Jimmy Kimmel and his recent conversations around healthcare.  So, telling you that I support their willingness to share their views and why seems a bit like preaching to the choir.What I will say is that there's no way either side of this conversation is going to "win" unless both sides start asking each other why they feel that way, and actually listening.  No, I don't mean listening to Trump and asking him why he feels the need to call private citizens SOBs.  Honestly, he's got the least important opinion in this whole equation--it's just the wasted noise of an old racist without any character or class.  No, I mean that athletes need to understand and listen to people about what the flag and the anthem means to them--and why they feel offended by the protest, as is their right.And anyone who says anything about these athletes needs to open their ears and listen to their stories.  They need to listen to firsthand accounts of what it means to be black in America.  Go read a book like The New Jim Crow.  Then, feel free to say you disagree with the protest.  But never tell someone they don't have a right to *peacefully* protest--because then you simply don't understand the basis on which this country was even founded.  The Lovett or Leave It podcast recently had Normal Lear on--the creator of All in the Family.  He was saying how "in love" his generation (he's 95 now) was with America.  We had not only won a World War on two fronts, but we were successful in helping to rebuild wartorn Europe and Japan.  We had a lot to be proud of.What strikes me about these protests is what kids and young people likely think about this country today and whose side they're likely to be more sympathetic to.  They see the widening gap between the rich and the poor.  They see our inability to deal with drug addiction and gun violence or our problematic education system--all things other countries seem to have a better handle on.  They see us mired in a war in Afghanistan that, in two years, will start recruiting kids who weren't even born on 9/11.  I have a feeling that the idea that the flag and the anthem is unquestionable in any way isn't something that's going to hit home.One thing Trump got right in the election is that there are a lot of people who feel like America isn't so great anymore--but what I hope he's wrong about is that the people fixing that aren't turning back the clock for answers.  We're not going to regain greatness by waging war or nation building.  We've got to do it by coming together to solve tough problems like inequality of all kinds.  We've got to get healthier and smarter--and that's going to take creativity and courage to change systems full of friction.  People wanted change last November.  They didn't get it.  When a politician doesn't listen, that's not change.  That's more of the same.  When every single NFL game has players protesting in solidarity--that's different.  That's change.  That's going to make an impression that people will notice.  If they ask why and actually listen, Trumpism is done.[...]



Work Like You Mean It: Why I backed Wethos to change the future of work.

Sat, 16 Sep 2017 04:32:33 +0000

If economists tried to measure the cost of the malaise that the election of 2016 left, we'd undoubtedly see billions, if not more, lost in worker productivity. At the same time, I don't think I've ever seen more political engagement in my lifetime--and not just political engagement, but all sorts of action around causes they care about.These two realities are linked.  If you're not doing something to positively affect the world around you, you've likely been overcome by a lack of motivation.  You're realizing that passing your work hours for pay alone, without meaning and impact, just isn't cutting it anymore.  We've seen the move towards more flexible work, but I think it will pale in comparison to the shift towards meaningful work.  The best and brightest are going to need a much better reason to work for your company than the perks and benefits--the work itself is going to have to be meaningful. That meaning isn't going to be something you search for on a traditional job board branded around impact--it's going to be an inherent part of the way you search.  What you care about is going to be a filter as important as geography.That's where Wethos comes in.  I met Rachel Renock a few months ago at a SheWorx pitch event.  I got what she was doing right away.  Starting with freelancers, she was creating a place where impact was the guiding principle by which talented people sought ways to share their professional talent.  It reminded me of when I first heard the pitch for Kickstarter and then witnessed what it would become.  While it may have been the way some bands would start funding their next album, it would go on to affect and inspire a whole generation of not only creative projects, but business plans as well.  Pre-sales would enable companies to exist off the financing of the fans most passionate about their vision for products.  I was reminded of that when I interviewed Rachel's co-founder Kristen about how she hired their first two developers on the Startup Recruiting Podcast.  What struck me was how they were bought into the passion of the team so early on--almost in a way that made it seem all too easy to hire them.  That's going to be the case in the future.  If you're not convincing someone of the impact they can make doing their primary job, you're going to have to overpay to make up for the lack of meaning you're providing.  While they're focused on just freelancers today, still a huge market, I'm convinced they'll not only expand to all meaningful work in the future, but they'll help turn more work meaningful by changing the way companies design roles for their talent.  Eventually, they'll impact how companies design their own goals--because otherwise they'll die from lack of talent.  I look forward to working with the Rachel, Kristen, and Claire, as well as some fantastic co-investors, like Flybridge and Corgin.  Jesse Middleton at Flybridge led their investment--and Jesse knows a fair amount about seeing the future of how people work from his days as the founder of WeWork Labs.  Also joining our round is Fabio Rosati, who was CEO of Upwork/Elance.  Together, we'll help impactful organizations find the talent they need to make a difference--and help talent find work that makes a difference in their lives.[...]



Introducing Petal, Providing Access to Credit to Thin File Consumers

Fri, 08 Sep 2017 18:14:36 +0000

One of the biggest fears about the future of data is that everyone will turn into a number--that algorithms will turn everyone's personal experience into a single score that will decide whether or not you get what you want, a job, a house, a car, financing for a new business etc. or whether you get shut out.Actually, you don't have to wait for that to happen.  Consumers have been living this reality since 1956.  That's when a company called Fair Issac, or what we now today as FICO, started selling consumer credit data to lenders.  A four billion dollar publicly traded company basically decides who gets credit and who doesn't--and if you don't already have credit and you're invisible to FICO, you're going to get financially left behind.  As they say, it costs money to make money, and without access to credit at key moments in your life, you're going to wind up on the wrong side of the growing gap between the rich and the poor.Just because you're invisible to FICO doesn't mean you haven't been doing anything financially.  You've been paying your bills on time, socking some money away for savings--you just never had a credit card or took out a loan.  Maybe you immigrated from another country.  Either way, this shouldn't stop you from being able to get credit when you need it. That's what I believe and that's what Petal believes as well.  Brooklyn Bridge Ventures led their seed round last winter.  Petal is a simple, no fee credit card that looks at the money you make and the bills you already pay to help you qualify instantly. That means you can get a great credit card and start building your credit history, even if Petal is your first credit card.  You can sign up to be one of their first customers here.   It's not only about building up a score--it's about learning how and where to use credit appropriately.  Petal provides transparency to consumers through their technology to help them make smart credit decisions.  What card do you know tells you how much you'll pay in interest *next month* based on what you pay now?I first got introduced to them by my friend Kevin Marshall back in March of 2016 when they were Creditbridge (Petal is to Creditbridge what Frogger is to Highway Crossing Frog, I suppose).  He sent me a pitch and I didn't quite understand the issue, so I passed.  Undeterred, they kept plugging away, working on the brand and the message.  They got mentioned to me again by Nan Li at Obvious as an interesting team he had just met.  When you start to hear of a team multiple times from multiple people (which is the same thing that happened to me with Canary and The Wing), you take notice.  I don't mind cold intros, but market buzz helps push things over the line to at least take a meeting.  In our first meeting, which was theoretically scheduled for 45 minutes, I sat down with co-founders Jason and David for more than two hours.  What sold me was their fluency in this market.  It was obvious that they had spent most of the year becoming the smartest possible founders they could in their space--and talking to every founder who had done anything adjacent.  That's important for a VC.  You don't want to be able to be smarter than your founder about a pitch after an hour of Googlin[...]



Not Interested: How to know whether you've actually got an investor on the hook.

Thu, 24 Aug 2017 13:56:00 +0000

I don't think there's ever a time when I feel more like I'm raining on parades as when founders tell me how interested other VC firms are in investing.  I've seen it time and time again where founders, understandably apprehensive about fundraising, read too much into their engagement with investors--especially non-partners at firms.The founders will say things like the following--and then comes my splash of cold water, which is honest, but also makes me feel like the bad guy, or not enthusiastic about the company.  In reality, I just don't want the founder spinning their wheels and wasting their valuable time."They're interested, but it's too early."There are tons of examples of later stage venture firms not only placing seed bets, but also skipping right to Series A with huge "seed" rounds right out of the gate.  If Mark Zuckerberg was going to start a new company tomorrow, do you think he'd be too early for anyone?  No.  There are also lots of examples of companies who get funded by later stage firms that don't have the metrics that we've been told you need--$150k in MRR, a million users, whatever. "Too early" is a pass.  You might take enough risk off the table for them in the future and they might come in at a later right, sure... but if they're not writing a check now, they're passing.  When you get a pass, move on, don't keep your hopes up, and go back to work."They're very interested if you can get a lead."There are some firms that, as a policy, don't lead.  That's fine, but saying you're interested pending a lead is not saying you're committed.  Committing is saying "If you find a lead, we'd like to come in for $200k, assuming standard terms and the price isn't anything more than X."  Even better is when that firm reaches out to firms that do lead and says, "We've committed, but we need a lead."  Those people are basically in, and everyone else is just sitting on the sidelines with their thumbs in their butts wasting your time.  Many of those people are assuming you won't get a lead, and they're just being polite, and if you do get one, it's a good way to cover themselves in case they missed something.  This way, they try to guarantee that if someone else jumps in, they get a second look.  It's a free option, so why ever give a definitive no?"[Non-partner] is really excited about it and is going to bring it to their partner meeting."Listen analysts and associates...  I've been in your shoes.  I've been the junior person around the table trying to get partners excited about a deal.  The absolute worst thing you can do is fail to be transparent with a founder as to where your team is on a deal, and to lack the firm awareness to realize whether you have any internal traction.  It wastes founders' time and ruins your credibility.  So, when you know that founders are going to hinge on every little indication of interest, you should be straight with them about your process and who gets to make the decisions.Unfortunately, even when you are transparent, the words "partner meeting" make founders think they are just a week away from a term sheet when, in reality, they're one of many line items likely to be passed over. What you really need is partner interest.  Even when you've got a principal, like I was at First Round, who can do deals, you still need partner interest to get the check approved.  So, realistically, unless you've got partners showing up to meetings with you, staying the whole time, and engaging with you after, taking multiple meetings, [...]



On No Sides...

Mon, 21 Aug 2017 12:54:00 +0000

On no sides is genocide an ok thing to promote with your free speech or to organize a group around.On no sides is the Confederacy, the sole purpose of which was to defend the institution of slavery, a thing to be admired.On no sides is the eradication of Nazis and the KKK a slippery slope to the end of free speech in our country.  It is perfectly right and acceptable for a society to draw lines--to point to levels of despicable behavior and say "No--in no uncertain terms.  No way.  Not here."  We certainly do this around the abuse of children.  These things do not belong in any kind of healthy, functioning society.  They have no more right to be here than anyone would suggest that cancer cells are a living part of your body that deserve a home.  I'm perfectly ok if a corporation decides that they don't want to be in the business of working with the Daily Stormer--and no, telling a Jewish software developer that they don't have to work for a company protecting Nazi websites is in no way anywhere near the same as saying it's ok for a florist not to do the flowers at a gay wedding.  If you think that a hate site promoting genocide is on the same level as two people who come together because they love each other, I'm at a loss for words for you.Millions of patriots have already lost their lives in our history fighting these kinds of cancers--cancers that grew or persisted far too long because we didn't draw the kinds of lines that a healthy society should draw.  They didn't die on the beaches at Normandy to allow Nazis to march on our streets here.  They didn't die at Gettysburg to see Confederate soldiers memorialized in our parks.  To argue that removing these groups and movements is desecrating history would be to desecrate the memories of all those who made the ultimate sacrifice protecting us from them.  Let's talk for a moment about false equivalency and the agenda of the right.  There is a narrative that stretches as far back as slavery itself that blacks are angry, savage, and need to be checked.  Even when the law said we were all equal, our society went down a path of "Yeah, but let's keep them over here."  The country needed a savage narrative to justify that--and it persists today.  Countless media studies have proven that the images we see of people of color in the media are disproportionately skewed.  "Whites represented 43% of homicide victims in the local news, but only 13% of homicide victims in crime reports. And while only 10% of victims in crime reports were whites who had been victimized by blacks, these crimes made up 42% of televised cases."  When someone tells you that Black Lives Matter is a hate group and uses police shootings in Dallas as their proof, get smart about their agenda and the facts: 1) First, the Dallas police shooter was not associated with Black Lives Matter.  He interacted with other extremist groups on social media, but not BLM.  2) Second, the BLM movement has been quick to denounce racially charged violence, unlike the hate groups protesting in Charlottesville where *leaders* of these groups have, on multiple occasions, supported or praised the death of Heather Heyer.  3) Third, just look at the reasons why these groups exist.  Black Lives Matter started after the acquittal of a man charged with killing an innocent black teen. It was *in response* to violence against black people.  There's no equivalent origin story around white supremacy--of whites being oppressed or being unfair[...]



Turns Out I Wasn't Crazy: Tinkergarten Raises $5.4 million

Tue, 08 Aug 2017 12:01:00 +0000

I send out a monthly mailer of deals that I'm investing in that I'm looking for co-investors for.  Because I'm investing so early, a lot of times these companies are not only pre-revenue, but they might also be pre-product.  I also invest in a really wide range of opportunities, so many of them don't look like you're typical venture deals.

Tinkergarten is one such company.  At the end of 2015, I backed a husband and wife team expecting their third kid to build a network of outdoor kids classes--not an Uber for kids classes, Classpass for kids classes or Airbnb for kids classes.  Actual kids classes: finding teachers, vetting them, training them, creating content--all of the unscalable things you'd never want your tech startup doing.  They barely had any tech and I think they had maybe three teachers at the time I backed them.  I couldn't even get the round closed and had to send a second, slightly desperate note to my co-investor list:

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We did eventually get the round closed and today, I'm excited to announce that they've raised a $5.4 million Series A led by Owl Ventures.  This year, they'll reach 1000 leaders and they're currently in 48 US states.  They have an amazing tech platform managing the whole process, from recruitment to class management to parent communications.

There are a lot of models out there that investors would think is unscalable that I'd say if you actually figured out a way to do economically, just means you've built a better moat.  When you actually offer a service or product you built and own your customers directly, loyalty goes up, brand value goes up, and you can be your own platform to launch a lot of different opportunities--if you can do it well.

These days, while you'd maybe rather be Classpass than you're average, run of the mill cycling studio or a faceless big box gym, I'd argue that you'd rather be Soul Cycle than Classpass.  Same goes for Shake Shack, Seamless and your average deli.  If you're not a special brand, you'd rather be software, and if you're software, you're always fighting to hang on to your network advantage as tech likes to disrupt networks and middlemen.   

Excited to see Tinkergarten get recognized as a special brand.  

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