The Art of the Simple Blurb

Every week or so, I get asked by a startup founder to make an intro to an investor. Normally these startups are pre-funding, so the founders are inexperienced about talking about their company. So their descriptions of their companies suck, which makes it really hard to make an intro even if they’re working on something interesting.

This advice is mainly for founders looking for investor intros, but probably works for any kind of business development.

First things first
Mark Suster has great advice in general on the ins and outs of making intros. If you’re requesting an intro from someone, read his posts first:

If there’s one takeaway from Mark, it should be this: People who make intros learn to be very careful who they intro, because their reputation can be negatively affected by too many or too poor quality intros.

Your blurb
If you’re asking for an intro, provide a simple blurb about your company.

The point of the blurb is to give your introducer a piece of text that makes it easy to refer your company to someone else. If you provide a great blurb it’s very easy to make an intro. If you don’t, it’s a pain in the ass for the introducer. They either have to write something themselves or somehow coach you to produce a good piece of writing. Or (like me) they’ll probably just put it off. So write a good blurb and keep it handy. I like sending a “teaser” deck too, which is 3-5 slides, but the point is you shouldn’t rely on the deck — the recipient should be interested enough without opening it.

The blurb should be 3-4 sentences. Any less and it won’t be enough to communicate what you do. Any more and it’s boring and shows you can’t focus.

A bit like the pitch deck, are three things you’re trying to get across with your blurb:

  • Excitement
  • Traction
  • Credibility Signifiers

Excitement means explaining what you do in a way that’s compelling and brief. Traction should be obvious, but it’s revenue or customers or some other real indicator of growth. Unique visits is probably not enough. I often meet people who have no idea how high the threshold to fundraising really is, or over-estimate the power of their company’s traction or team backgrounds. This stuff has to be really really compelling.

Credibility signifiers might include team members backgrounds, existing investors and funding to date, client names. By the way, client names are not as impressive as you might think they are. It’s very easy to have users from a big company but not have a valuable ongoing relationship with recurring revenue. Or to have a small team at a huge company using your SaaS product among five people. So unless there are $ signs attached to the names, they’re not effective with savvy investors.

Here’s an imperfect blurb we used for Gengo a while back:

Gengo is building a scalable platform which completely disrupts the $33bn translation market, offering people-powered translation through an API. The API makes it possible for any website to access the power of over X,XXX translators, and publish content in multiple languages easily. Customers include X, X, X, X, and partnerships to re-sell Gengo’s translation exist with X among others. Current gross revenue is $XXXX/month, with growth of Xx year-on-year. Using our approach, the company can achieve XXX millions of dollars in revenue 3-4 years out. Gengo raised a $XXXX Series X from X in September XXXX.

Lots of Xs, but you get the point. Trust me, the better your blurbs and the better your emails, the more intros you’ll get and the more that will convert.

Grammar Snob? It Isn’t So Simple

Mary Rolf‘s post “Why I Stopped Being a Grammar Snob” did the rounds recently. It certainly received some attention at Gengo, given we’re a language company.

The premise of the article is that:

[...] there are two schools of thought when it comes to how we should use language. One is “prescriptive” and it’s backed by grammar snobs and the kind of people who froth at the mouth over the decline of “the King’s English”. The other is “descriptive” and it’s more about accepting that how people use language is how language works. A prescriptivist believes in the idea of standard English and sees mistakes everywhere. A descriptivist sees many englishes, and none of them are standard.

Ending…

However when it comes to other people I find that what they have to say is more important and interesting than how they say it.

Sounds very hard to disagree with, right? Of course I am more interested in what you say than your choice of spelling. Hurrah! Throw away the dictionary! Silly snobs!

But sorry, life is not so simple.

I’ve spent most of my life surrounded by non-native English speakers, at high school, college, and now in Japan. Especially at Gengo. And there’s a huge difference between someone simply being sloppy, versus culture and proficiency. For instance, consider the following three categories:

Category 1: “I make some errors because I am not a native speaker”
This kind of person probably makes up about 30% of my regular day-to-day contacts. The last thing I would want to do is spend my time correcting their English (even though normally they are hungry to improve). So I, and a lot of others I know, spend a lot of time actively clarifying and confirming to make sure we’re really understood. We work on it.

And that’s 100% fine. Just as I’m fine not writing the Japanese copy for our site, our Japanese staff are happy not writing our final English copy.

Category 2: “I’m a native speaker but I didn’t learn the rules growing up”
Like any skill, there are people who had the opportunity but didn’t try, didn’t have the opportunity but did try. I’d like to think I’m pretty sympathetic to the latter group. But to make it sound like a simple decision (e.g. between a great CV with bad spelling, and a crappy one with perfect spelling) is just nonsense.

In my job, I want to make amazing things, and I want to have fun, and I have a fiduciary responsibility too. It’s harsh, but if I have people working for me who can’t communicate externally in a professional way, my company will look sloppy and we won’t achieve those goals. That’s not snobbish, it’s just practical.

Are there hundreds of highly gifted luminaries out there, with world-changing ideas, who are being ignored by grammar elitists? I don’t believe in these unicorns. I’m skeptical because like anything in life, if you don’t take time to learn the rules, you probably aren’t that good at the game. Disregarding the rules because you don’t know them actually slows down communication, muddies thinking, and removes a lot of the fun.

Category 3: “I just didn’t check my work”
Well sheeeeeeeeeeeeeeeiit. We’re going to have a problem.

So yes, enjoy communication, enjoy thoughts, value ideas above all. But don’t believe in unicorns, and take a moment to use the spellchek.

Avoiding Negative Value

A few days ago at TC Disrupt, the following conversation took place…

“Who is the VC who is the most full of shit that you’ve ever heard?” Arrington asked.

“I would be offending too many people,” Khosla retorted. “Maybe some percentage that’s substantially larger than 95 percent of VCs add zero value. I would bet that 70-80 percent add negative value to a startup in their advising.”
He said that most VCs “haven’t done shit” to know what to tell startups going through difficult times.

“I don’t know a startup that hasn’t been through tough times,” he said.
He said that founders should listen politely and just do what they want to do anyway.

Does what Khosla said matter? Should it change your behaviour? What does providing value really mean? How can a startup founder see it from the investor’s point of view? Should you really just what you want to do anyway?

Every Industry is Broken
Surprise surprise, Arrington was clearly trying to be provocative here. And Khosla’s not really saying much, he’s just describing a normal steady-state industry. e.g. I wouldn’t be surprised to hear that:

  • The soft-serve ice cream business is “broken” and 75% of companies suck.
  • The Italian restaurant business is “broken” and 75% of restuarants in it suck.
  • The paperclip industry is “broken”. Etc.

However, it’s not the first time we’ve heard something like this about VCs. Joe Kraus once said to me that he thought 130% of the value a VC provides is the cash. Our friend Dave McClure frequently talks about the problems in VC. If you’ve ever tried to raise money you’ll have met more than one associate who doesn’t know what they are talking about. So it’s clearly something that all good VCs worry about. But my take is that for entrepreneurs, Khosla’s right…

It doesn’t matter anyway

  • If you’re a smart founding team you’ll figure out who are the good VCs.
  • If you have great traction you’ll be able to choose from the good ones.
  • If you don’t have a great business or traction, and you’re running out of cash, you should probably take cash from anyone. I certainly don’t know a founder who would allow their company to die just because they can’t raise from a “triple A” VC.
  • Ergo, if you are smart enough to raise money, you are smart enough to realize whether you’re getting good value, so normally you can ignore bad input and do what you want anyway.

By the way, as Paul Graham says, it’s very very hard for investors to tell the difference between a great business and a shitty one (we hope Gengo’s a great one)! So you may find (as we did) you get interest from very very good VCs and very very shitty ones.

But how big of a difference can a great VC can really make?
In order of importance, and disregarding luck, I think the success factors for a startup are:

  1. Founding team
  2. Problem space & market size
  3. Competitive landscape
  4. Fundraising environment
  5. Assistance from the VC

Assistance from the VC is not top of the list. Can a really hard-working, well-connected, experienced VC make the difference between success and failure of an already-good startup? Yes.

But without a good founding team or a compelling problem space? No.

So as founders, it makes more sense to spend 95% of your time worrying about building a great business, being a great team, and making the most of the VC you have, than thinking hypothetically about “bad” VCs.

What does “providing value” to a startup really mean?
It’s very ambiguous what value you get from each different VC. And it’s often really hard to get a VC to give specific examples when you are pitching. So to get specific, here are some examples of providing value that Gengo has had:

  • Knowing the business well and pointing out upcoming strategic issues proactively at a Board level
  • Introductions to later-stage VCs who made investments
  • Introduction to API partners in different regions
  • Hiring introductions and interviews
  • Introduction to partners & clients in the US and the EU
  • Suggestions of KPIs and measurement techniques
  • Introductions to corporate development departments

So what should you expect?
From “Best” to worst, investors fall into the following buckets:

  1. Powerhouse: Aggressively sourcing good deals, making introductions, helping with hiring along a high quality agreed strategy. As a Board Member, 100% on top of things and experienced enough to help company learn from their past mistakes.
    e.g. as a Board member, are there things going on that you think no one has realized, fundamental problems that no one is discussing, warning signs that no one has picked up. A Powerhouse will force a Board conversation that ensures they really understand the problems of the business.
  2. Good: Course-correcting when necessary, board making good-quality decisions, making good intros.
  3. OK to bounce ideas off when needed, makes some intros
  4. Neutral/Positive: Say and do nothing
  5. Neutral/Negative: A little bit annoying but easy to deal with.
  6. Distracting: Will ask the startup to provide excessive detail, will want tactical updates on minor issues, will suggest non-strategic initiatives.
  7. Destructive: Actively trying to insert/remove management or pivot in unnecessary circumstances or antagonistic to founders.

Of course the vast majority fall between 2-5. At Gengo we’ve certainly never experienced Distracting or Distructive, and we have a couple of Powerhouses. Thank goodness :)

Like any group dynamic, you probably don’t want too many “Powerhouse” types either, because this is where personalities can really clash. Like, having a Khosla and a Cuban and a Graham might be… interesting. Having a few investors who have good cultural fit, love the idea, OK with your foibles, same-size exit expectations, but don’t say much, is great too.

Tip: It’s actually very hard to provide value
If you want to know how hard it is to provide value without stepping over the line, try being an investor. We made a very small investment in a seed-stage startup, and now get regular updates on their progress. It is very tempting to give them a huge amount of feedback and to dig into their operations, trying to push your personal style on things.

Instead, we try to give one or two pieces of feedback each time we get an update, and just ask if there are any ways we can help. At our level of investment that’s hopefully the right mix. Certainly if we were investing a lot more and were full-time professional investors, we would probably be more involved, but ideally still in positive ways. So we’re probably a “3″ on the scale.

Do what you want anyway, but give the relationship a chance
So another way of looking at Khosla’s statement is, “you need to setup your startup to be immune to bad VCs” — which I could easily agree with.

  • It’s unrealistic to expect all VCs to be great
  • So there will always be mediocre VCs
  • Competition will dictate who gets access to the best VCs
  • And having the best VC is not a guarantee of success
  • Even good VCs can be destructive with poor Board governance
  • Companies who raise money from “bad” VCs can still succeed
  • But only if they are smart and govern their Board well

As CEO, I usually say to Gengons, “Don’t bring me a problem without having a set of options.“ I try to have the same philosophy with our Board. If I bring them a bunch of problems without a solution, I’m not doing my job. Because if you bring people problems, you’re just going to get advice (or worse, orders), and that won’t be doing what you want. That’s the kind of situation where a “bad” VC can really kill your business.

So you shouldn’t expect your investors/your Board to be the ones to set the route for the company. Instead they should be helping you execute your vision. Which means that if they give you advice that isn’t great, or feels “off” from the vision, it could be because you haven’t communicated that vision well, or it could be they “just don’t get it”.

So how do you maximize immunity to bad VCs?

  1. Build a great business, hire well, don’t be too afraid of dilution, and you have the best chance of working with great VCs.
  2. Put in place a good Board, regular Board communication, with regular external input that stops you from tunnel vision (like talking to non-investor VCs).
  3. Ideally create a mix of proactive investors and neutral ones.
  4. Make sure you have some kind of devil’s advocate on the board or in the company, to test that Kool-Aid every so often.

The real reasons to found a startup

It’s often hard to put your finger on why you want to start a company. Maybe you just want to tinker with a product. Maybe you’re inspired by seeing what others have managed to achieve. Maybe you want to change the world.

But many people think these things will motivate them to keep growing a company…

  • Getting funding (Stressful, time-consuming, and takes way longer than you’d like)
  • Revenue (Nice but always needs to grow!)
  • TV and media (Fun but temporary, often inaccurate)
  • Product launches (Exciting but stressful)
  • Exits (Have never heard anyone say it was “the best thing ever!”)
  • Panels and conferences (Fun but self-interested)

They won’t. The things above are, at best, brief pleasures. But the good news is, there’s a bunch of other stuff that is extremely motivating and good. Things that provide long-term happiness, as opposed to temporary pleasure. Joi Ito wrote a post in 2007 where he explained the difference:

“We often [try] to decide which decision will make us happier. We often mistake pleasure for happiness and make the choice that may be more pleasurable instead of the choice that would provide more long-term happiness. [...] It often takes self-control or will to choose happiness over pleasure. “

But when you’re just starting out, you don’t always have the experience to know what the happiness-inducing stuff will be. And I think we (as a community of startups) don’t talk about the gratifying things enough. We talk about funding, and events, and exits, and founders committing suicide instead. So I made a list of the things I’m most grateful for, the things that make me glad I decided to start a startup. Most of these I had no idea about when I began working on Gengo.

Learning
The gap between how much I learned as an employee and how much I’ve learned as a founder is vast. As a founder, there are so many areas that you just have to pick up (marketing, sales, legal, management, finance, fundraising etc) that you can’t help but learn a huge amount by default. And if you throw yourself into that challenge, you’ll learn even more. It’s extremely gratifying.

I’m not saying that it’s not valuable to work for a company. It shapes the way you think, often in great and positive ways. For instance, having a good manager at a larger company can set you up to be a great manager in the future. And it’s useful to know how large companies operate, if you want to be able to work with them. But there is nothing like running your own company to force you to learn.

Seeing the company grow up
It’s very gratifying to peek into a meeting and realize you are not needed, or to go on vacation and come back without worrying that you should have been there. Even better when people are coming up with great ideas and great work without even needing to talk to you. That’s truly pleasurable, to create something that has gone beyond you.

Watching individual staff grow up and develop
This is probably the most fun thing. My favourite example is when we’ve hired someone as an intern, and they’ve become a full-time staff member, and then gone on to get more and more responsibility because they are great. It’s awesome because you can so easily compare where they were to where they are now, and because they know the company inside and out. Maybe even better than you do.

While it’s sad when people leave, if they’ve grown hugely at your company, you’ll get pleasure from seeing them succeed elsewhere, and hopefully stay a part of their lives for a long time. That’s amazing.

Failing and recovering
I don’t want to dwell on this because I think Silicon Valley has such a massive erotic passion for “failing” that the word is overused more than “The Cloud”. However the kind of failing that I want to talk about is not about having your company die, it’s about making non-fatal mistakes (which are the nicest and friendliest kind). If you do things “right” and preserve enough runway, you perhaps get two chances to fail in a big way, per funding round, and recover.

I know after our Series A we massively failed in a product we tried to build. There were a number of really interesting after-effects of this. Firstly it made me realize viscerally that I could never let that particular mistake happen again. Secondly the company “learned” that too, and we put in place a bunch of new ideas to fix things. It’s the kind of thing you simply cannot learn in college, you cannot really learn in a big company unless you’re very near the top. And best of all it didn’t kill us. Nice.

Changing your perspective and technique over time
There was this interesting discussion on Reddit recently about why you should watch movies more than once, which boiled down to the fact that as you change as a person, you notice new things. I think that change of perspective applies to startups in two big ways.

Firstly, as you learn as a person, you look at the same problems in different ways, and can evolve your solution with your experience. It kind of gives you the chance to have another go, and use your bigger brain to solve the problem in a better way. For example, staff performance issues are a lot easier to deal with after you’ve experienced them a couple of times. Small crises get put into perspective. You know your own strengths better.

The other way is that the company changes. So the first time you have a problem (like sales slow down) you have limited resources and limited knowledge. Whereas the second time it comes up, maybe you have new team members, or some new technology, or new contacts, and you can be a lot more creative and resourceful. I’m always thankful and gratified when we’re able to do this.

Office culture
I don’t ever want to work somewhere where there’s not at least some element of joking around in the office. You can make laughter a near-certainty if it’s your own company. That is very compelling to me. I don’t mean slacking off or being a dumbass, I just mean having a good laugh at silly stuff every so often. That’s a nice life.

Seeing teams emerge with complementary and competing needs 
There’s a sort of delicious moment in the evolution of a company where teams know what they are doing, and have motivations that are very clear (and beneficial) and unique. I don’t mean a kind of Game Of Thrones-style disingenuous wargame going on. I just mean that it’s gratifying to create an ecosystem where teams believe in their own needs, and have high motivation to make sure they get the resources of the company to do cool stuff. Creative conflict is massively productive and exciting.

User delight
This is one of the more obviously pleasurable aspects. Seeing a user comment that’s glowing with positivity is just unquestionably great. What surprised me is how far they’ll go.

I think before you start a company you never expect someone to say “X is awesome!!!!!!!!!, I love you guys, I want to work there!” but people do say that kind of crazy stuff about good products and good companies.

On top of that, at Gengo we’re lucky enough to provide thousands of translators with income, and they tell us about the trips they’ve been able to make, or the family security that’s improved, with that money. That’s amazing and humbling and eternally motivating.

Making cool things
Successful production of design and technology is an inherently fragile and ephemeral process. Even good teams rarely get it right. You only have to read the mountains of literature on design and product management to realize that even good teams struggle constantly with this stuff. It’s very hard to attain.

So it’s extremely pleasurable to be part of that when it works, and have the chance occasionally to work on the 10% or so of projects that go smoothly and produce great results. For me this is the most beautiful thing, to work with great people and have moments where we’re producing outstanding work that’s exciting and innovative and cool.

I think if you are only focused on the results, you never get to enjoy this process, those precious moments when the wind is perfect and it’s sunny and you’re balanced and sailing.

People building technology on top of your technology
There’s this huge amount of trust that is displayed when a company decides to build on your API. Especially if they build something with the assumption that you exist. Like, we build on AWS because we assume they’ll be around for as long as we need.

It’s a big leap, especially for a small company, to say “I trust this enough to make a bet on it”. And it’s exciting, because people often build cool things that you’d never thought of. So seeing the first signs of that is immensely cool.

The icing on the cake for us is when an investor asks us “Have you heard of company X? I think they are a competitor” and you can tell them they are actually operating on top of your API. Nice.

Becoming “obvious”
There’s this really nice moment that happens (and it’s easiest to observe over Twitter) where someone will ask “How do I do X” and someone — who you have no idea even existed — will reply “I use Gengo”. To the point where it’s an “obvious” answer to a question. This is just an all-round great feeling, because you’ve become part of the fabric of the web. Probably the next iteration is where people don’t even need to ask, because it’s so obvious. Maybe we’ll get there.

Anyway, the point of this post is mainly to say this: The interesting stuff, the stuff that will make you happy, is not the stuff that you’ll read in a press article or see on TV. It’s the simple good feeling of working on something interesting with good people. That’s it.

Enterprise Sales in Japan for Your Startup

As a US startup, beginning enterprise sales in Japan is tough.

I was talking last night to one such US-based startup. They are exploring the idea of opening a Japanese office, in order to capitalize on some initial interest and a promising first partnership with a Japanese customer. I wanted to capture some of the advice we gave them. I wrote a post called “Big in Japan” a while ago about some of these ideas — but specifically for enterprise sales in Japan, I had four main pieces of advice.

None of these things will guarantee success. But ignoring them will guarantee failure.

Be careful of market-entry specialists. For a startup, it can be tempting to work with someone who tells you they can bridge the gap between the US and Japan. They might speak great English and “get” your business. But it’s rare for these people to be the best ones to actually go out and sell your product, because they’re not the Japanese people on the ground with the relationships, track record and skills of enterprise sales. I’d recommend instead to use a good, boutique, local recruiter to find a first employee or contractor. These people are out there, who are great enterprise sales people but with good enough English to work with you. You can set a really easy milestone for that person, in that when they close their first deal (or a $ amount) you start to increase the team.

Figure out the basics of the landscape. Partnerships in places like Japan can be an important way to scale. But if you don’t know the market well, it’s hard to make good choices. For instance you might be approached by (say) SoftBank. A local would instinctively start to sniff out the interests of NTT, KDDI etc in order to get the best deal. A US native probably won’t think to do that. You don’t need to be an expert, you just need to have a sense of what you don’t know, and research it. Don’t expect to make good strategic decisions without this attitude.

View from Hikarie

Don’t get distracted by the small things. See the big picture. There’s a tendency for people to overestimate the importance of etiquette, language and style when they find themselves in a foreign culture. These things are visible, so you’ll easily get distracted by your failings. What’s much more important in the long term is your ability to learn the market, to use information to your advantage, and to make good strategic choices. Handing over your meishi is something anyone can learn quickly, but choosing a solid first hire in Japan is a true skill. Worry more about the latter.

Your reputation must be nurtured, grown and protected. In the US, startups are cool, sexy, and everyone wants to hang out with you. In Japan you’re like a teenager… untrustworthy, naive, poorly-connected. Over time you can improve this reputation by being reliable, achieving traction, making money, and showing that you’re here to stay. But you’ll only be able to do this by continually focusing on, and planning how to improve your reputation. One way is to convince very credible and experienced people to represent you. Another is a solid partnership. Another is to make a ton of money. But none of those things will save you if your business acts like an ass.

Are you entertained? Tell everyone on Hacker News.

Surviving Regular Long-Haul Startup Travel

Many startups based outside Silicon Valley have to cope with regular travel between multiple offices. This can easily screw up your life by making you permanently jet-lagged, poor, disoriented and unhappy.

But regular long-distance travel can actually be survivable.

Gengo has offices in Tokyo and San Mateo. Flying NRT-SFO is 9h there, 11h back (here’s why). I did that trip 8 times last year, 80% of the time in economy class. This year I’ll do it once a month. I know some people who do it even more frequently. A lotta this:

wingBut now I’m a master at it. And it’s kind of fun. You can make it work too:

1. Always have a goal
My goal is normally like this:

  1. Be there for 5 work days.
  2. Get x or y important meeting done.
  3. Have a day to recover on return.
  4. Minimize days away.
  5. Minimize cost.

You know the flight search tools that allow you to check +/- 3 days of your chosen date, to find better prices? It’s very tempting to use these in scrappy startup mode, because you’re used to optimizing the pennies. Danger danger.

You should optimize for your plan, not the cheapest flight. Every day and night you stay, you incur hotel, food, transport costs. So the savings you make on a flight that’s $500 cheaper two days later will be lost on hotel, car and food.

But more importantly, for morale and your business, sacrificing days of rest for the sake of a slightly cheaper deal is usually a false economy. So stick to the plan.

2. Always have a routine
This is the most important thing of all!

When you travel, it’s very very easy to waste a lot of time orienting yourself. Different airline, Different flight time, Different hotel, Different rental car company, Different car, Different route to the office, Different day of the week. Especially if you chase “hot” deals on Expedia to save yourself $50.

Not having a routine screws up your brain because all throughout your trip you have to worry, or remember, or figure out new things. My brain can only hold about one thing at once. So you end up thinking all about travel details, and not interesting or cool or important things. No!

Instead, I have a routine which I try very very hard never to change.

  1. ANA or United (Star Alliance)
  2. NRT<>SFO direct
  3. Arrive Monday morning leave Saturday midday
  4. Narita Express from Shinjuku
  5. Dollar Rent-a-car at SFO straight to office
  6. San Mateo Hilton (AirBnB is thus a no-go for me most of the time.)

nex

This means I know exactly what’s going to happen, and I can go on autopilot. This means I can be thinking about Gengo or at least enjoying myself. Instead of wondering about inane rubbish like where the Hertz car counter is at the hotel or whether there’s a gym or if the parking is free or how to get to the office from here… Have a routine, it works.

3. Don’t order room service
Room service might seem convenient and easy after a long day. But it means you stay indoors. It means you eat alone, probably watching TV — studies show this means you’ll probably eat more — what’s more depressing than that? It means you have no sense of the surrounding area.

I always try to at least walk down the road and pick up something or, much better, eat out with co-workers instead. Healthier, happier, more fun. Better view, too!

burrito

I actually have a lot of fun on my trips meeting friends in the Bay Area on Fridays and the weekend, for which I count myself lucky.

4. Say “yes” to drugs
I take a sleeping pill on the plane with one of those mini-airplane bottles of wine. So sue me. It lets me sleep, even in a bad seat. By the way, the plane is for sleeping; not movies or work or anything else. Hope you knew that.

Screen Shot 2013-01-20 at 4.24.27 PM

But the biggest improvement to my jet-lag recovery is this: Melatonin — I take two of these before I go to sleep for the first 3 nights after landing. It means you sleep the whole night and wake up non-groggy.

Learned this from someone who used to fly 100+ times a year, and it’s a life-saver.
This fasting trick also works (I’ve done it successfully a couple of times) but normally I’m to weak-willed to do it in the food-is-everywhere surroundings of hotels and planes.

4. Put up with working a few double-timezone days
Let’s face it, you’re not going to have any work-life balance on your trip.

When I’m in San Mateo I’ll get up at 7am, clear out a bunch of emails from Japan time, go into the office/meetings/whatever until maybe 6pm, then do dinner with staff. If I get back to the hotel at 9pm, then there’s a whole new heap of people online ready to talk on Skype. In a sort of utopia I would be able to avoid working two timezones, but this is real life. So I normally end up finishing with Tokyo-related things at about 12pm.

I decided a while ago not to stress about this too much, and instead just put up with it for Monday-to-Thursday. Friday’s nice in San Mateo because it’s already the weekend in Japan. So it’s normally a chance to relax.

5. Get a company credit card that earns frequent flyer miles
One of the best things we did was to get a credit card which earns miles. We got one with points you can transfer to United (Star Alliance) or BA (OneWorld). We put a lot of online expenses on it, which really rack up the miles you can earn.

In tight times, I use the miles for flights. In slightly less tight times, for upgrades etc. It makes a big difference, and it’s like free money. So do it.

Got any tips of your own? Share them here or on Hacker News.

Pitching a Post-Seed-Stage Startup: 10 Pointers

I don’t know if you believe the Series A/B Crunch or not. I think you should.

If you want a chance of getting through it, realize this: Things change when you start pitching VCs instead of angels. When you start pitching a startup that’s been around for a few years. Things get a bit more serious. Maybe a bit more boring. Definitely more time-consuming and more difficult.

While I’ve successfully done it a couple of times now, of course I’ve made my own mistakes at Gengo, done some things poorly. So take my advice with a handful of salt.

Some things never change. You still need traction, an interesting market, a quality team. Investors still either “like” the business or they don’t, and no amount of convincing, explaining, will change that.

Some things are completely different. Raising the next round is harder. VCs see 1000s of pitches from companies with real revenue, good teams, good products. So even companies on good growth trajectories are not necessarily interesting. And there’s a lot of you now. Yes, you there with your 12-month-old-seed-funded-startup. And your 12-months-out-of-date shiny demo-day product videos… j/k. Maybe. So listen…

1. There’s no pleasant gradual progress. In the fun of the angel round you have a telethon-like thermometer gradually bubbling up to your target. Pitching VC is a binary condition. Pre-term-sheet and post-term-sheet. Until you have a term sheet you’re, uh, screwed. After you have it you’re kind of set.

At seed stage, every angel you meet is a potential connector as well as being an investor. So you can quickly multiply your contacts by virtue of a good pitch. VCs rarely do this. It’s not OK to talk about all the other VCs you’re pitching to. It’s not possible to bootstrap your round by implying existing interest.

2. It’s an individual slog. At seed stage, you and your co-founders are barely decided on who’s CEO. Because it doesn’t really matter. So pitching can be 50/50. It’s fun, it keeps everyone feeling involved, and it’s not that time-consuming. Anyone can spare a couple of weeks. At Series A you can’t afford to have 3 of your management team schlepping around the Bay Area pitching together. So it’s one of you. By the way, if it’s not your CEO pitching, you’re a weird company and you need to fix that now.

A seed transaction is simple because you don’t have complex legal requirements, you probably don’t have much revenue. A convertible note is very easy. So the deal can be completed in a couple of weeks. From Series A onwards it gets more serious, more distracting, and more opaque to everyone else in the company. So managing expectations, deciding what to say internally and when, gets a lot more tricky.

3. You gotta get serious. You could describe the progression from incubator to seed to A/B/C rounds as “the degradation of wonder and joy”. Investors aren’t swayed by emotion and “what ifs” so much. Your hopes and dreams about a business either become solidified, or tempered, or disappear. Normally somewhere in the middle.

So the product demo that’s so important for attracting angels doesn’t matter. There is no such thing as a demo day. Having your iPhone App “featured” by Apple doesn’t matter. What does matter starts to be the same kind of things you see on the public markets. Revenue. Margins. Revenue Reliability. Market Size. Defensibility Not drop-shadows.

4. Traction is everything. If you double revenue year-on-year, you’re doing great by regular company standards. But for Series A, yeah, not interesting enough. The only numbers that are going to make people really interested are in the real hockey-stick range. And even in that range, your business is only going to be interesting to a few investors.

So where do you fit?

fundraising_statuses

My advice below is most relevant if you’re in the “It Depends” category. If you’re in the “Yes. Now” category, you don’t need help. If you’re in the “No” category, you need to make some serious changes to your business before you can expect to raise more money. So I can’t help. But “It Depends” is fixable…

5. Time-scales are much longer. In an incubator, your business can change radically within a few weeks. In a 2-year-old startup it usually takes months or quarters to see significant change. “Pivoting” will be a huge nightmare with a team of 15. Let that sink in a bit. If you have trouble pitching in January, it might be March before you can really see a big difference.

Some people describe progress as measured in “value events”. A value event early on might be a major hire, a major customer win, a major revenue milestone. Real life is rarely so precise. But a 15% ARPU increase isn’t that interesting. A 100% increase is. So be conscious of the visibility of your progress.

6. Timing allows you to course-correct and solve “Yellow Flags”. If you’re in the “It Depends” category, you probably can have 1-2 “Yellow Flags” before the deal’s a no-go. A Yellow Flag might be your location, your gross margin, a competitor in your space, some poor PR. These are the things that you can fix in the 2-3 months before fundraising with specific efforts. Most Yellow Flags from respectable investors are reasonable things, but of course don’t start running around trying to please everybody.

A Red Flag (like your revenue is dropping), well, that’s a lot harder.

So you want to figure out what those smaller things are, well before you need to raise cash. I’m talking 6-9 months before. Having experienced investors on your board will help spot potential blockers in advance. But pitching to real future potential investors is the only way to really figure this out.

During our Series A we had what I’d call a yellow flag due to our lack of senior sales talent. So we spent a significant amount of time to hire Kenji Yamamoto, previously VP Sales at Apple Japan. We had a lot of questions about market size, so we spent some cash on some really solid market analysis. We had questions about being able to really scale enterprise-level operations so we hired someone with extensive experience.

7. Don’t forget to continually simplify your business. Startups get more complicated over time. You add products, add customer types, market in many different ways, add price points. You add people. If you’re not careful, a 10-slide pitch can turn into 60 slides. But your job is to make all that complexity simple to understand. Being able to simply explain your business shows you understand it.

I always do a one-slide “summary up front” now… What you do / KPIs /Market definition & size /Team, Location /Investment to Date …because it’s a lot more helpful for an investor new to your business. And it allows you to skip sections if they’re already familiar.

8. Enter the exciting world of extensive backup slides. I believe in being able to answer any reasonable question about my business within a few seconds. It’s the difference between a fluid conversation and an awkward stammering mess. By now, this stuff should be in your head, or if it’s really detailed, accessible by flicking to a backup slide. Presenter View in PowerPoint or Presenter Display in Keynote let you do that instantly rather than having to frantically stab your arrow keys. We probably have 30-40 of these now, plus specific presentations on deeper topics.

backup_slides

These slides include a bunch of standard stuff, such as Org chart / KPIs not already in your main deck / Patents or other IP / Product roadmap / Sales pipeline (for enterprise businesses) / Conversion rates but there’s a lot more stuff that’s very specific to your business (e.g. Gengo):

  • How will your translator pool will scale to handle 100x the volume you have now?
  • Growth rate of different translation market segments, regions, related services
  • How specifically does your product increase the productivity of translators?
  • Can you provide comparables for IPO or acquisition?
  • Can you tell us about any large customers who have left? Why did they leave?
  • How has quality improved over time?
  • Can you compare your service in detail to a hyped pre-revenue startup with zero customers and quite a different value proposition? (I have been asked this…)

During your DD process you’ll spend a lot of time on these kinds of slides. It’s my least favorite part of my job.

9. It’s much harder to get a “no” than a “maybe”. Angels tend to be pretty quick with their decisions, and for a $50k investment it doesn’t make sense for them to hem and haw too long. But VCs don’t have a lot of incentive to give you a clear “no”. So don’t be surprised if you have a number of VCs who seem interested. But as you near your funding deadline, a “maybe” becomes increasingly useless. You need to know who’s really interested.

So sometimes I encourage fence-sitters to say no. Like, “by the way, if this isn’t really for you, I’d really appreciate you letting me know. We’re at the stage where we need to know who’s really in.” I have never failed to get a solid response that way.

10. Fix the business, not your pitch. Don’t focus too much on the pitch at this stage. That’s the good and bad news: a great business doesn’t need fancy pitchwork, a so-so business can’t be saved by an amazing pitch.

Seems fair to me.

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