Connect The Dots, Part II
Michael Madsen is a Quentin Tarantino favorite. And Mr. Madsen loves Quentin Tarantino. I think sparks flew on the Reservoir Dogs set. So when it was time to cast for Tarantino’s new movie, Pulp Fiction, Quentin reached out to Michael Madsen for the star role: Vincent Vega. Madsen wrestled a bit but had to turn it down, you see, he had an opportunity to work with Kevin Costner and play a role in Costner’s new movie “Wyatt Earp.”
The role ultimately went to John Travolta and the rest is history. Madsen still bristles with pain over missing the role of his lifetime but he passed it up because he thought he had the winner. Why? Because of his collaborators, his team. I’m sure the Benchmark guys would love to go back in time and skip Webvan too. But ultimately they saw that Louis Borders was about to change the world, again, and they couldn’t pass it up!
I’m citing these examples to highlight that money goes to where investors see the highest probability of success and the highest probability of success has dots that are easy to connect.
Early on in fundraising for Baby we had a couple of wins that really stand out to me as connecting the dots. One is that we went and struck the deal to buy Baby.com.br (we bought a 90 day option for $6k). Secondly, we secured a soft-commitment for a small investment from someone who was on the board at Diapers.com.
So our pitch contained these two items, “We’re Baby.com.br and we have an investment from a Board Member at Diapers.com.” Sounds nice, right? We have an ultra-premium property and a vote of confidence from the Big Dog in the space; investors can connect those dots to future success.
Now we just need to show them that we’re better than Wyatt Earp!
Connect The Dots, Part I
A good friend of mine has been thinking about customer service ideas for a long time and really feels like he has something to offer the world in helping busy people to get things done. But he’s just a young guy with no previous start-up experience. His last name isn’t Covey and the likelihood of him getting anyones attention on that premise is (I think) low.
So he thought a lot about how he could become attractive to prominent investors. He became interested in generic domains and thought that if there was one word that really encapsulated his mantra it was the word “help.” (I’ve changed this slightly so that I’m not sharing exact details) So he reached out to the guy who owned help.com and over a few months struck a deal (zero cash, just equity).
So now he’s Joe Friend, CEO/Founder at Help.com. Let me ask you, does that catch your eye? I was at a lunch with him and very prominent VC investor, Mr. Big. It was a small group setting and afterwards I was standing there when my friend handed Mr. Big his business card. Mr. Big gave it a quick glance, I think only because that’s polite in the western world, and then he did a double take when he saw the email address. He brought the card to his face and then looked up at my friend who was now infinitely smarter and more capable and all he could muster was “I can’t believe you got this domain.” The observation implied a lot more than that, it was “You are legit. You’re a maker. I think the possibilities of what you can achieve with this property are dazzling. I would like to talk to you more about how we can work together.”
My friend raised a lot of money and turned down even more. In addition he attracted some top talent that he needed to be able to achieve his vision. Money and talent are inseperable. A top recruit can bring the money flowing, top shelf money can bring the talent running. Typically you need to climb the spiral staircase on both sides to draw in increasingly prominent talent and investors.
I actually have a lot of thoughts on the subject and have decided to split this post in to two. It’s such an important thing to internalize as an entrepreneur. Check back on Friday for Part II.
Be an animal
In my first post—ever—I want to begin a series of thoughts on fundraising for startups because I am often being asked about it and it’s relevant both from a personal standpoint because I just raised money earlier this year and in context of the current thinking about the so-called “froth” in startup financing.
Are we in a bubble? Sure, there are always cycles of boom and bust in every industry and there’s always either a trend up or a power-down. At the moment, we’re clearly trending up and regardless of the cycle (though it is better to raise on an up) there are certain principles in fundraising that I think are relevant to any entrepreneur looking to raise money.
First thought that comes to mind when fundraising is to be an animal. When I am asked to review a business plan or hear an elevator pitch, what I am often thinking about is less of what I think of the business itself and more what I think about the guy presenting it to me. I think this phenomenon gets dramatically less attention than it should in fundraising. The question I ask is whether or not the entrepreneur is an animal.
What is an animal? It’s my preferred word to describe a guy who has power over the forces of nature. It’s the force that drives an entrepreneur to solve problems that need to be solved. One example I like to think of is a cornered dog. In the initial moments of a confrontation with a larger aggressor, a dog may act aggressively by growling and showing his teeth, but, as it backs away, the net effect is that it’s acting subserviently. From an outside perspective you may even think “that looks like a mean dog” but the reality is that he continues to back away…until he backs into a corner and the moment of truth arrives. There’s a moment when the dog has to decide what’s going to happen: he can cower and take the beating or he can put it all out on the line. The dog investors want to back senses the nano-second that requires laying everything on the table and going for the jugular of his opponent with seemingly unknown odds and yet, somehow he makes it look natural (“the aggressor was asking for it,” we would think if we saw the drama unfold; and for some reason it would make sense in our minds if the dog won the fight).
The same moment occurs over and over and over in a startup and the question has less to do with planning the actual caloric value of the energy consumed to lunge out or the precise moment that the lunge will occur (think projected financials) and more to do with the natural instincts of the dog. Entrepreneurs who are animals are cornered all the time and lunge with ferocity over and over and over.
In my last business, PoolTables.com (which I draw experiences from often), we had a situation where we wanted to get a retail store opened in the NYC area for Q4. Our initial summer efforts dragged on and by late October we didn’t have a lease signed. We had to be open by Black Friday (the day after Thanksgiving, the biggest shopping day of the year, is huge for pool table sales) to justify the investment; but that gave us less than a month to have a lease signed, inventory on hand and a manager in place. “Impossible” said our real estate agent (remember, this is the guy getting the commission when we sign the deal, one would think he, of anyone, would be the one pushing to get the deal done).
We got crazy; we had the landlord and his attorneys on the phone late at night. We conducted interviews at the local Barnes and Noble because we didn’t have a store or office space. I stopped a UPS truck on a highway at night because we missed the pickup deadline to overnight documents to get a Certificate of Occupancy to open for business. When the smoke cleared and the dust settled, we opened on the morning of Black Friday.
Investors love animals and when they can see one/feel one, they sense opportunity, and, as I’ll write more about, the sense of opportunity is what drives investors to invest. So ask yourself if you’re an animal and if you are, make sure people can see, feel and sense that in your pitch.
*As a disclaimer, this isn’t about being stubborn, never changing course, etc. This has more to do with outlook, creativity, and making things happen in the face of impossibility.
