Investor

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What are the Pros and Cons of Startup Crowdfunding?

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What are the Pros and Cons of Startup Crowdfunding?

This week we got an update email from a Kickstarter project we backed in December 2016 – yes, three years and we are still waiting for the rewards. It was update #37 and here is what it said: “Until the last few weeks, we thought we were more likely than not to make product xyz (we blinded the product to protect its owner).  This is no longer the case.  There’s still a small chance we can do it, but we are less confident about that now.” So we thought we ought to address the pros and cons of crowdfunding campaigns…

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Right-sizing Startup Funding

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Right-sizing Startup Funding

In 2013, Fred Wilson (AVC) of Union Square (US) Ventures asserted, based on their portfolio’s data, that “the amount of money a startup raised in seed and Series A funding was inversely correlated with success. “ That is, the more money a startup raises, the more likely it is to fail. Or the less money it raises, the more likely it is to succeed. At least, that’s the pattern supported by US Ventures’ data at the time. 

CBInsights tested this assertion with their own data in 2013. They found “no relationship between the amount of money raised and success.” In other words, funding levels were not related to venture success or failure.

Many people assume that raising more money is better and that more success will follow raising more money. These studies suggest that it’s not about the total amount of money raised. It’s interesting that neither dataset supports the idea that more money = more success. It will take more time and data to know which is correct. 

We would argue that the strategic question is not how much you can raise - it’s about raising the right money at the right time. Start with the questions: “Do you raise money at all?  If so, how much and when?” Here are 3 tips for right-sizing your funding:

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Startup Sales: Up and To the Right?

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Startup Sales: Up and To the Right?

Every startup pitch has a slide that shows a future revenue or sales forecast. Can you guess what the overall shape of that revenue growth looks like? If you thought “hockey stick,” then ding, ding, ding – you are right! For those that don’t know what a hockey stick sales growth chart looks like, check out the figure below. But, is that shape of the sales growth curve realistic for startups? It could be.

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For Startups at the Scaling Stage - What are the Biggest Icebergs?

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For Startups at the Scaling Stage - What are the Biggest Icebergs?

In our last blogpost, we discussed the biggest debtbergs in the Growth stage. This blogpost is focused on the Scaling stage. The startup is selling something. It is moving to a growing venture in terms of products, customers, and employees. It may have the opportunity to get more significant funding through angel groups, and perhaps even A-round funding with venture capital investors. Significant investments in product development and support, marketing, and sales may follow. It likely now has a board of directors as well as one or more advisory boards. It is trying to accomplish extraordinary growth, or become a “Gazelle” (check the glossary in the book to find out more). Scaling requires moving from experiments to having known processes to escalate sales. Once again, the biggest challenges change across our Oceans of debtbergs…

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The Many Shades of “Proof of Concept,” your PoC

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The Many Shades of “Proof of Concept,” your PoC

In a prior blog, we discussed the difference between PoPs (Points of Parity) and PoDs (Points of Differentiation). Now it is time to talk about PoC—Proof of Concept. While this seems relatively straight forward, there are actually many nuances to and perspectives on what constitutes “Proof of Concept.” Understanding how to frame and set expectations about PoC is an important discussion for the budding startup.

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What to Look For in Startup Advisors

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What to Look For in Startup Advisors

It’s clear that startups cannot “go it alone.” First, a founder needs to be coachable - learn more about coachability at our previous blogpost on Foundersplaining. They need supporters to help them get connected to employees, customers and investors. If you want to understand more about how and why supporters (we call them venture advocates) help startups, check out our academic article – Venture Advocate Behaviors and the Emerging Enterprise.