Lately I’ve been obsessed with learning as much as I can about startups and business. As such, I came across a fantastic video from Google I/O 2011 titled: How to Get Your Startup Idea Funded by Venture Capitalists. It’s a great ~1 hour talk with a panel including a venture capitalist from YC, a VC from Google Ventures, and a recent founder who raised funding. Here are the primary tips:
An audience member asked how he should find motivation and a panelist gave unorthodox but brilliant advice: find motivation by making everything else less interesting. Personally I’ve found this works really well. For instance, I used to play video games quite a bit but I’ve cut back, which gives me time to work on my ideas and projects.
Focus on an idea you’re passionate about
One member of the audience mentioned he was an “idea factory” and didn’t know how to select an idea. The panel advised him to select an idea he would be excited to work on after waking up every morning for 5+ years.
Another panelist even mentioned that “idea factory” founders are not ideal personalities for entrepreneurship since VCs look for people with focus; he suggested this person should find a cofounder to provide balance. This conflicted a bit with Mark Zuckerburg’s talk at Startup School 2011 when he advised startups to experiment and do things differently; echoing Facebook’s famous “move fast and break things” philosophy.
Personally I love change and believe that “idea factory” personalities are essential for innovation. However, I can see how this may be a turn off for VCs especially if a company has too many unfocused, unspecialized products. For example, Apple has had great success with its very high quality, yet focused product lines.
Overall, maybe the lesson is that there should be balance between focus and exploring ideas but the end result needs to be a great focused product.
Try to have 2-3 cofounders
VCs like to see more than one founder because it shows validation of an idea, especially when a founder can convince another person to leave their job and join them. There has been data showing that 2-3 cofounders are the ideal size; there isn’t enough data for teams > 3 and solo founders are rare.
Have multiple offers
An audience member asked how a startup should be valued. One VC panelist mentioned that there are valuations based on numerous metrics but generally if a number is pitched by the founder it creates an anchor / floor valuation; even better: if a startup has other VCs interested in it, VCs tend to be more afraid of missing out on great deals than possibly overpaying.
However, a VC also cautioned that if an initial VC does not do a follow-up round then it can be a red flag.
This is a theme I’ve heard over and over. Startups can be exhausting and it’s easy to forget about diet, health, relationships, other interests, etc. I’ve often heard that you can only select a startup and one of the other categories. One takeway is never to let your startup dominate your life such that you risk your future health.
Don’t create a business plan
Apparently VCs from Y combinator and Google Ventures don’t really care about business plans because they generally are not useful for unpredictable tech companies. Instead they care more about users, traction, passion, and the team.