By Andrew Trader (W’91/WG’99), Serial Internet and Software Entrepreneur & Venture Partner, Maveron
What keeps you up at night? It’s a question I ask many entrepreneurs. When I ask it as an investor, I’m really asking it as one entrepreneur to another. Especially in early stage companies, there’s a lot that will keep you up at night.
Unfortunately, the answer often comes back that it’s fundraising. What I’d rather hear from the team is that product development, product/market fit, user issues, customer acquisition, competition, hiring, or something else related to company building are the culprits. Of course fundraising is critical. A start up dies without it. However, fundraising is a successful outcome of addressing and resolving the big issues and opportunities, also known as execution.
My belief about what makes a great company and investment opportunity is very consistent with my firm’s approach and values (Maveron). We heavily overweight the people component. We want to have great confidence that the team will be agile and decisive, intensely focused and flexible given new information.
So in the same way that I offer advice about the company’s product roadmap, I also advise on what to look for in a great investor. Too many times I hear from entrepreneurs that they have an advisor who knows a guy that has a friend at a Sand Hill Road venture firm. Hopefully they get a meeting! You don’t leave anything to chance in your business, so why would you do that for fundraising?!
Rather than treating the process like a high school mixer and hope someone picks you, turn that approach on its head. Just as you would every other aspect of your company, review all your options and pursue the smartest alternative with urgency and tenacity.
Here’s what I tell entrepreneurs about what I believe is important in an investor:
Willingness and ability to help. Investors must roll up their sleeves and dig in to the important areas of the business. An investor with one, but not the other, is a liability.
Operating experience. There’s no substitute for experience. An operator understands what the team is going through, can help see around corners, and empathizes about the level of effort and energy required to hit milestones and achieve results.
Domain knowledge. Product matters, especially in my world of consumer tech. Investors who rely on their experience and instincts will help you get to better answers faster.
Equity preservation. Any investor who tells you not to worry about valuation or dilution, isn’t telling the truth. Entrepreneurs must preserve equity because you never get it back. The balance is raising capital in a way that enables the company to win without risking the company.
No maintenance. It’s the team’s company. When they don’t need your help, you have to be comfortable and confident not getting in the way. No ego!
Mutual trust and respect. Being direct and transparent is the best approach for a successful long-term relationship. I’ve been part of startups where we had to look over our shoulder and translate every conversation. That’s a terrible use of time and energy.
Super supportive. The investor must be with you in good times and bad. Talk to the companies in the portfolio, but also talk to the companies where things didn’t work out. You will learn a different side of the investor when things get tough.
Funny thing…having been on both sides of the table, as an entrepreneur and as an investor, it all comes down to great people. So what keeps me up at night? Finding more great people!
A.T. is a serial Internet and software entrepreneur. He’s currently a Venture Partner at Maveron, an early stage consumer technology venture capital firm. In 2010, he joined Maveron’s San Francisco office as an Entrepreneur-in-Residence. (http://www.maveron.com/)
Zynga: In 2007, A.T. was part of the founding team at Zynga and helped create the social gaming industry. At Zynga, he built and managed all business operations, including revenue management, marketing/user acquisition, business development, and strategic partners. A.T.’s work was instrumental in driving Zynga to over 60 million daily users and to $500m revenue run rate. (http://company.zynga.com/news/fact-sheet)
Tribe.net: Before helping start Zynga, A.T. was the CEO of Utah Street Networks, operator of Tribe.net, one of the first social networking sites. He led the sale of Utah Street Networks to Cisco in 2007.
Coremetrics: A.T. was also the co-founder of Coremetrics, a leader in website marketing, and served as the company’s VP of business development, growing the company to over 100 employees and raising $65 million in invested capital. Coremetrics was acquired by IBM for $277m. (http://www-01.ibm.com/software/marketing-solutions/coremetrics/)
He holds both a BSE (W’91) and an MBA (Wh’99) from the Wharton School at the University of Pennsylvania.