Rockies Venture Club

Your Startup Just Cashed its First VC or Angel Check – Now What?

Rockies Venture Club Post-Funding Strategies

After the first angel or VC funding round closes and the checks are cashed, most startups go through a transformation, like from a caterpillar to a butterfly, that makes them fundamentally different than a pre-funding company.  CEOs who fail to realize the changes that need to happen will end up facing challenges they did not expect.

Here are a few changes that need to take place after funding:

  1. Create a budget.

    No – not your proforma with all the optimistic sales projections – this should be a budget with numbers you can commit to.  Many companies feel like having a million dollars in the bank is an unlimited blank check to buy fancy new furniture or hire a dozen new employees. But all those things drain cash faster than you think and having a written plan for minimizing your burn rate and maximizing the runway to your next raise (or hitting break-even) is going to be an important part of your success.  Running out of cash before you hit the milestones needed for the next raise is a death sentence for your startup.

  2. Update the Professionals that Serve Your Business.

    If you’ve had your Aunt Bertha doing your books, it’s probably time to upgrade to a CPA who can provide you with the advice you need to keep from making mistakes.  A CPA is going to be important once you need audits as well.  Your legal team should now include several different legal specialties including securities, Patent and IP, and general business and contracts.  You probably got your legal house cleaned up in order to get funding and now is the time to get the right people on board to keep it that way.  Bankers, insurance, and other advisors are all going to be able to scale with you as you grow.

  3. Communicate with Investors.  

    Investors notice when you stop calling them after the check has cleared.  This is a bad thing for founders – especially those who are going to need to raise another round.  Future investors will contact first round investors during diligence and a good relationship is important – even more so if you hope to have follow-on rounds from your first funders.  Monthly reports including good and bad news, financials and metrics updates are a minimum.  It’s better to stay on top of the investor relationship and by communicating frequently, investors are more on-board with what’s happening.  Use a platform like Reportedly.co that allows you to see who has opened your messages and also allows investors to comment and offer help when needed.

  4. Balance Growth and Resources.

    You’ve been pitching your $100 million top line you expect in five years, but now it’s time to match your resources to your growth targets.  Grow too slowly and you’ll never raise another round (so you’d better hit break-even) and grow too fast and you’ll run out of cash before you hit the benchmarks for Series A and then game-over.  Perfect balance is what you need for venture success.

  5. Update your Exit Strategy (Goals and Contacts)  

    During your pitch everyone wanted to acquire you, but now it’s time to start executing on your Exit Strategy.  You should include the update in every board meeting and monthly update.  Start making contacts with those companies for whom you create value early on.  If they don’t know who you are, you’re not going to get the multiple offers you need for that 5X multiple you were lusting after.

  6. Metrics.

     Ok, you think you’re growing too fast to waste time on shit like metrics.  Fine – go ahead and be mediocre.  The best companies are crystal clear on what success looks like, how to measure it and what their goals are.  Without metrics, your team is mis-aligned, your investors are in the dark, and really – you haven’t got a clue about where you’re going.  You don’t have time not to do this.

  7. Strategic Plan

    It’s not set in stone, but without a roadmap you’re bound to get nowhere fast.  Companies without at least a lightweight two pager plan find themselves going through expensive pivots left and right to try to figure out what they could have done in the first place with a good planning process.  BTW, statistics say that after three pivots you’re out.

  8. Change from Tech Culture to Sales Culture.  

    So far, success has looked like getting your MVP launched.  You are three founders and a dog coding away in a basement somewhere, but now you need to change gears and become a sales and marketing company with a tech foundation.  Too many companies can’t get out of their tech roots and they keep on coding, but never figure out how to sell.  Break out of your comfort zone and start selling.

  9. Speed up.

     You’re on the clock now and capital is the most powerful accelerator out there.  You’ve got to code fast, sell fast, grow fast.  Companies that think they can continue on their old pace don’t get venture capital.  It’s a race against the clock with ROI multiples of 10X in five years, 25X in seven, there’s no time to waste and the slow starters won’t ever get to Series A.

  10. Investors are your partners.

     Now that the deal has closed, and all the negotiations are done, it’s time to tap into your investor base for help, connections and advice.  Keep them in the loop and engage them – they’re worth a lot more than just capital.

 

Good Luck

Post funding transformation is hard and unnatural for most founders.  Pay attention to your successful peers and remember that getting rounds of funding are not what this is all about – work towards creating a great, meaningful company with huge value for your exit partners!

 

 


Peter Adams is the Managing Director of the Rockies Venture Fund, Executive Director of Rockies Venture Club and Co-Author of Venture Capital for Dummies, John Wiley & Sons, August 2013.  Available at Amazon.com, Barnes and Noble and your local bookstore.

What Colorado is Doing to Prevent Sexual Harassment in the Startup Community

Sexual harassment, gender based bias (both intentional and unintentional) have been a big part of Silicon Valley culture for years.  Women have struggled as startup CEOs to get funded, or as investors, to get into the top venture capital firms.  Those that did get in, often regretted it.  Silicon Valley is a cesspool of misogyny and it’s got to stop.

Simply criticizing the situation is going to get us nowhere.  While Silicon Valley is mired in inaction, the Colorado Startup Community is going strong in supporting women in venture capital and the revelation of Silicon Valley’s mis-steps, while distasteful, may finally lead to productive change.

There are four principles that Silicon Valley just doesn’t get, and Colorado venture community is going strong (but still with room for improvement).

Be Transparent

While the recent stories of Silicon Valley misogyny are disturbing, it’s important that these stories are daylighted to expose inappropriate behaviors and to punish those organizations that condone or acquiesce to them.  Colorado’s Foundry Group has published a Zero Tolerance Pledge on sexual harassment which represents a great commitment from a leading Venture Capital firm.  Transparency is the first step to change, but much more than awareness is needed to effect change.

Be Proactive

Massive cultural change supported by generations of beliefs, actions and misconceptions doesn’t happen all by itself.  Communities need to be proactive in causing change.  As an example, the Rockies Venture Club in Denver has consistently invested in about 50% women led companies, far more than the national average of just 13%.  The organization recognized that while its investments were gender balanced, its investor community was not and that just 12% of its 200+ investors were women.  Rockies Venture Club proactively founded the Women’s Investor Network, led by Barbara Bauer, in order to recruit, educate and engage women in angel investing.  In just a few months more than a dozen women had made their first angel investment.  RVC found that the way to make change happen was to be proactive and intentional in its actions, rather than just wishing for diversity.

Why aren’t female-founded businesses getting more VC money? For Julie Wainwright, founder and CEO of consignment website The RealReal, it comes down to the lack of female VCs. “When you have different businesses that aren’t proven that may appeal more to a female [customer], a female investor is going to be able to evaluate that” better than a male investor could, she says. “I think in general, most VCs are trying to do their jobs, but there are a lot of unconscious biases.”   (Fortune Most Powerful Women, 2017)

Start at the Foundation

Cultural change happens much more slowly than any of us would like.  Organizations like NCWIT have done an excellent job of showing how unconscious biases that are based on years of social conditioning can impact our decisions without our even knowing about them.  One way to combat those biases is to start at the foundation and create education programs for young entrepreneurs that create new ways of thinking about gender and leadership.  The BizGirls program is a CEO Accelerator for high school age girls that is designed to create empowerment and confidence in girls by providing them with leadership and entrepreneurship experiences that help to remove unconscious biases and empower girls to take on whatever challenges that their passions may lead them to.

Work on the Top – Board Representation

Corporate boards are slow to change and according to a Credit Suisse Report only 14.7% of corporate board seats are held by women.  This is a fairly astounding figure since it is well known that corporate boards with gender diversity outperform those populated by white males.  Colorado has begun an intentional process to increase the number of women on corporate boards led by the Women’s Chamber of Commerce and it’s Women’s Leadership Foundation’s Board Bound program.  The Women’s Investor Network in Colorado has also begun to create an on-line resource to connect women with opportunities to serve on angel and venture backed company boards, thus providing them with a stepping stone to public board service.

  Colorado’s collaborative and inclusive community leads to the kind of discussion and active participation that leads to continuous improvement.  Here in Colorado we hope that Silicon Valley can learn from us and begin to create a positive environment of inclusion and gender balance that will help lead companies and communities to success.

 

Can Women be Angel Investors?

Women make up the fastest growing community of angel investors and it’s changing the face of Angel Capital for the better.

Angel groups like Rockies Venture Club have been beating national averages for investing in women and minority led companies with 54% of our portfolio consisting of women and minority led companies vs a national average of just 14%.  But in order to balance the ecosystem it’s important not just to invest in women led companies, but to engage women angels who can help mentor startups and who can gain experience serving on the board of directors of some of the startups they invest in, thus paving the way for increasing the number of women on corporate boards at all levels.

Research shows that companies with women on boards out perform those with no or few women.  Companies wit

RVC Women Investor Network

h the highest percentages of women on their boards outperform their less diverse peers by 66%.  We have certainly seen these trends in our portfolio companies and are committed to developing further diversity in our community.

We have launched the RVC Women’s Investors Network  (WIN), led by Barbara Bauer.  The network has had several well-attended events that focus on angel education and making connections.  The group is based on four principles that play on women’s strengths:

Engagement: Programs that allow people to work together and share wisdom of crowds to make good decisions and great investments.

Give Back: WIN members have years of business experience and they want to be more than just a check – they like to mentor and coach up and coming companies.

Act From Knowledge: Women like to understand the landscape before they jump in and invest.  No more “fake it until you make it” – that can cost thousands for new angel investors!

Education: Classes, workshops and “get to know an angel” events provide deep venture capital knowledge to get WIN members up and going quickly and confidently.

If you’re interested in engaging with the group, volunteering, or just learning more, consider attending the WIN Luncheon at the Angel Capital Summit, Tuesday March 21 on the DU Campus.

Click HERE to register

If you’re interested in learning more about Angel Investing and Venture Capital, you should definitely attend the full Angel Capital Summit.  Tuesday-Wednesday March 21-22 in Denver.

Click HERE for more information and to sign up.

Want to learn more about Rockies Venture Club?  Check us out at www.rockiesventureclub.org

Five Things to Remember About Angels

Getting angels to invest in a project can be difficult. They’re risk adverse, conscious of market trends and often work in groups. Yet, these are some of the things that make angel investors so valuable. Typically an angel investment is $25,000 to $100,000 a company, though this can go higher. Read more

Benefits of Syndication

Syndication has numerous benefits. It stimulates angel investment and empowers angel investors to build and maintain a portfolio of investments. It also benefits startups, as it streamlines the funding process for the entrepreneur. The collective group of investors have a higher net worth and a larger network than angels working on their own. They are able to finance startups at earlier stages than most VCs. Syndicates also have a more diversified portfolio and a greater ability to pool resources. These resources include skills, contacts and experts. Due to the nature of syndicate groups, investors can often develop more due diligence.  Read more

HyperAccelerator Cohort #3

Venture Capital Isn’t Actually Like it is on TV

When many of us think about venture capital, Shark Tank may be the first thing that sparks to mind. Here at Rockies Venture Club, we joke about Shark Tank because we know that it’s not an accurate depiction of how venture deals work. Here are some of the reasons why we call it “venturetainment”.  Read more

Top-10 Twitter Action Tips – Don’t Read If You Don’t Get Twitter or Care To

Written by Tom Cross @techtionary

I gave a talk on Twitter at Rockies Venture Club Hyperaccelerator. This is a week-long effort to help startups understand everything they need to do to not fail or at least not fail as fast. I do the Twitter for @rockiesventure which topped 10K (click on image to follow RVC) this week. The reaction from the audience went from skeptical to being annoyed at even the idea. Now I can’t change their hearts and minds about Twitter but maybe, just maybe get them to understand marketing in terms that most of them were male – sports. Coaches of nearly all sports use “playbooks” to guide their team hopefully to victory. There are hundreds of plays like marketing plans, coaches and marketing leaders try as many as they can. Some work though many don’t because the other team (like customers) change their mind, are fickle or just don’t play the way you want them to play. In addition, sports teams like customers change every year or even everyday with new ones being added and old ones retiring changing the game landscape (marketing) in ways no one can understand. One must also realize that any playbook or marketing plan needs to change as often as customers do. In the end, my class was successful from my perspective as like President Trump is doing with Twitter allowing companies to connect directly to their customers and supporters.

easy

not easy

Here is the summary of the slides below –

  • If you still ask “why” Twitter, the answer is both easy and hard.
  • The easy answer is – it is the new way to connect with your customers and provide customer service as they don’t complain by just calling you they increasingly complain via Twitter with the famous hashtag #fail which can go viral.
  • If you think it is just for promoting your corporate blogs and blather, you are likely missing out on how customers really feel about you, this is the hard answer because customers just buy from someone else.

Toms’ Top-10

Use as a guideline but the must-haves are 1-strong thought leadership, 2-stronger calls-to-action and 3-persistent constant delivery.

1 – #1 it is a social network, not a broadcast network, people want to feel listened to not just talked down to.

2 – Write compelling customer-centric “thought leadership” guiding them on ways to improves their lives, not just about your solutions or views.

3 – Write compelling CTA-calls to action to get them to not just listen but act.

4 – Engage-engage and engage more with others not just post your own “selfies” though as often or always add a pic, gif, or video to your post.

5 – Like exercise do it daily and it’s a marathon, not a sprint – no just once and done and certainly not use tools. While stair master can help with exercise, you still have to walk-the-walk yourself.

6 – Lift all boats, helping others helps you.

7 – Cross post on other platforms – realize your customer may be elsewhere.

9 – Integrate all website content and have an overall thoughtful content in all formats and platforms.

9 – Use an EDCAL-editorial calendar to manage and coordinate content over the year.

10 – Remember followers also have followers and so engaged with all.

I don’t pretend to have all the answers or know-it-all. My mom gave me a business card a long time ago and it said, “if you think you know what’s going on, you’re probably full of sh–.” Alas, I do help clients grow their Twitter presence and believe it works it if you work it right like above. Thought leadership, CTA-call-to-action and constant promotion works for Starbucks, McDonald’s and others. Even Google is advertising now as they want to expand their own piece of the swamp.

Here are a few slides from the presentation and click on any for the complete presentation. If you like I will walk you through it or at least answer any question if you email me and we can setup a time to talk on the tele or Skype. I have proven clients and references or if you prefer you can also contact @evankirstel he can help you as well.

rvc2

rvc