Investors Have More Than Money to Offer Entrepreneurs
12 JUN 2019| by Julia Austin
Running a startup means solving an endless list of
problems, and entrepreneurs can be quickly
overwhelmed. Where to turn for advice? Julia
Austin says look to your investors.
Entrepreneurs have an incredible backstop of management experience and
wisdom available to them that, too often, they ignore. Why don’t startup
founders make more use of their investors?
Many entrepreneurs are hesitant to ask advice from funders. Would doing so,
they wonder, signal weakness? Conversely, I’ve heard investors say they wish
the leaders of their portfolio companies would be more transparent about
challenges they are facing and ask for help. As one investor said to me, “They
already sold me on the business and have our money. It’s now our firm’s job
to help them succeed.”
In an informal Twitter pollI recently conducted, 56 percent of entrepreneurs
who responded said their most common ask of their investors is for hiring
help. Second to that (31 percent) are asks for introductions to potential
partners or customers, and a small percentage (13 percent) tap their investors
for financial management advice. But startups often run into issues outside
those categories, everything from what to ask potential hires in a job interview
to analyzing sales funnels. Experienced investors have likely run into those
issues many times over and are happy to share what they’ve learned.
“GOOD ENTREPRENEURS ARE LEARNING
MACHINES, SO THEY’RE ALWAYS ASKING FOR
ADVICE AND GUIDANCE FROM MULTIPLE
SOURCES OF EXPERTISE, INCLUDING THEIR
INVESTORS. IN FACT, THE BEST FOUNDERS ARE
OUTSTANDING AT SQUEEZING EVERY BIT OF
INSIGHT, ADVICE, AND CONTACTS FROM THEIR
NETWORK OF INVESTORS AND ADVISERS.” JEFF
BUSSGANG, GENERAL PARTNER, FLYBRIDGE
CAPITAL
Do you know how to get the most from your investors? Below, I have outlined
the basic asks (table stakes) as well as suggestions for deeper asks.
What to ask for
Hiring
Table stakes:
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Referrals and warm introductions
Posting job links on their websites
Invitations to recruiting events
Beyond the basics:
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Seek examples of job descriptions (JDs) and critiques of those you’ve
written. Most investors were operators once and have a good sense
of how to write a good JD. Investors may also have a recruiting arm
at their firm who can counsel you on specific searches. [See point on
compensation in Financials, below]
New to hiring? Practice interviewing candidates with investors or their
associates before bringing actual candidates in for the real interview.
Resume screening can be an easy ask and a quick job for someone
who’s seen 100’s if not 1000’s of resumes. Experienced eyes can
point out immediate red flags and give you specific areas you may
want to probe for a particular candidate.
Invite an investor to help diversify an otherwise homogeneous
interview team. This can be a game changer for a candidate who
may otherwise feel like they are a token hire. Knowing the extended
team around the business is diverse, can allay these concerns.
Ask your investors to help sell the business to prospective
candidates. This can be especially critical if you’re trying to hire a
senior team member or a start-up first-timer.
Investors can offer insights on how your company is perceived as a
workplace from their own perspective or from feedback they’ve
garnered in the market.
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Finally, but very carefully, investors may be able to help you get
backdoor references on potential hires. I wrote more about this
particular topic here. Backdoor references can be helpful, but only if
done correctly.
“THIS IS SOMETHING WE CONTINUE TO DO, EVEN
WITH MID-LEVEL HIRES IN MID-STAGE COMPANIES
WHEN THE FOUNDER FEELS LIKE A HIGHLY
DESIRABLE CANDIDATE COULD USE AN EXTRA
PUSH. IT’S NOT A HUGE BURDEN ON OUR SIDE,
BUT CAN HAVE A VERY STRONG POSITIVE
IMPRESSION ON THE CANDIDATE WHO PROBABLY
FEELS LIKE GETTING BOARD/INVESTOR VISIBILITY
IS A STRONG POSITIVE IN THEIR CAREER
DEVELOPMENT." —ROB GO, PARTNER, NEXTVIEW
VENTURES
Marketing, sales & partnerships
Table stakes:
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Introductions to potential customers and/or partners
Putting your company logo on their website; putting their firm’s
logo/board member on your website
Invitations to marketing and sales events
Tapping their social media presence for sharing news and events
Beyond the basics:
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Investors look at markets all day, every day, and have an objective
perspective on not just current market forces, but patterns over time
and how markets move and customers buy. They may not know your
specific market details or the intimate buying patterns of your target
customer, but as Bob Mason, managing partner of Project11 says,
“We often ask the right questions informed by our opportunity to step
out of the day to day urgency of running the business. We have
enough knowledge to understand the big market forces, see patterns
from other businesses, and can help drive an engaged dialogue. For
the engineering-centric founders, you can think about this as
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‘debugging’ an issue. When coding, you might bang your head for
hours trying to find the root cause of a hard bug. But you bring over a
colleague and talk through the situation and often a solution will
appear. They didn’t tell you the answer, but the process of
conversation brought insight to your mind.”
Whether you are building an enterprise product and need access to a
buyer inside a potential large customer or trying to develop
partnerships for your business (B2B or B2C), investors can provide
invaluable insights on what drives particular companies, who the
“real” decision makers are, and how their buy/partnership process
works. Investors can reach out to execs at companies and get an
early feel as to how important such a potential deal or relationship
could be.
Investors are generally good at analyzing marketing or sales funnels.
If they are former marketers or sales people, they should be able to
help you understand the “magic moment,” points of stickiness, drop
off, etc. They also won’t have the biases you likely bring to the table
and can look at the numbers objectively.
Investors can be helpful with developing your company and product
story, as well as speak with folks in the industry to see how the story
resonates.
Beyond offering advice on digital marketing and leveraging social
media, your investors may also be helpful with brand awareness and
offer PR opportunities. Perhaps they are sponsoring an event where
you or a key member of your team can be a speaker. If one of your
investors is a blogger, ask for a mention in their next blog post about
a topic you’ve been discussing, or perhaps even a guest blog spot.
Be creative about how your investors can help shine a light on your
brand, product, and team.
Product
Table stakes:
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If they can use your product as a firm or as individuals, they should.
Whether it’s for testing the MVP or to dogfood the brand, no excuses.
There’s nothing more compelling than an investor who offers you a
cup of coffee made with one of their portfolio company’s new beans
or the investor who has a “powered by” one of their companies on
their website. Have you asked your investors to use your product?
When asked (or not), investors never lack for advice on how your
product can improve. Just remember, you are in it every day, they are
not. So, always weigh that advice against what your team is
discovering with your customers and progress accordingly.
Beyond the basics:
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If your investor is a former operator, especially at an early stage
company, odds are they have built/tested many MVPs. Engage them
in the MVP discussion. Review product priorities and test plans.
Again, their objectivity and experience could give you a fresh
perspective. This will also help them understand the tradeoff
decisions you are making and can be very informative when it comes
to strategic thinking about the company’s product roadmap and long
term direction.
Speaking of roadmaps, if you’ve got a former head of product or VPE
on your investor team, invite them to a planning session. For the
same reasons as above — fresh perspective and added insight when
it comes to bigger picture discussions.
Security and compliance are often overlooked and where investors
can probably draw on their own or other resources to ensure your
company doesn’t get tripped up on a sale or regulatory issue
because an “I” was not dotted or “T” crossed. They may have access
to pen testers or be familiar with compliance requirements for things
like PIA (pdf), HIPAA, or SOX through other portfolio companies’
experiences; even if it’s just asking when to worry about it vs. holding
off on investing in this work.
Tap investors’ technical EiRs and/or network. When I was CTO at
DigitalOcean, it was amazing to have someone like Martin Casado at
a16z, our lead investor, to bounce ideas off of and even help us with
some tricky architecture decisions. Similarly, my friend Jocelyn
Goldfein, managing director of Zetta Venture Partners, said she’s
often tapped by her portfolio companies to help with developing data
strategies and answer questions about data rights. Find out who the
experts are in these firms and they’ll probably love the opportunity to
get into the details with you since it’s no longer their day job.
People
Table stakes:
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If they are involved with financial planning, investors should be
helpful with basic headcount and organizational growth plans (what
roles to fill, how many, and when).
Investors are generally not shy about telling you (sometimes
unsolicited) if they think a key employee they are interacting with is
great, needs coaching, or may not be successful in your organization.
Just remember, if you have a board, other than the CEO, they don’t
make hiring or firing decisions. That’s your job.
Beyond the basics:
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Whether they were former operators, or have just seen a large
number of companies operate, investors can give helpful insight
around people and culture. You can ask how to work through team
challenges, enhance your company culture, or even how to make
remote teams work. If they’re not the experts in these areas, they
likely have companies in their portfolios that are doing creative things
or learned from mistakes and are willing to share tips and tricks to
avoid pitfalls as you scale.
While it may make you feel vulnerable, asking your investors for
guidance around your own personal development demonstrates your
willingness to grow — especially if you are a first-time CEO, or other
member of the C-suite. I’ve seen investors coach leaders on
everything from how to lead their teams and handle challenging
employees to how to run a great board meeting. I’ve also seen
investors support and sometimes even pay for executive coaches
and training programs for high-potential leaders.
Beyond headcount and budgets, investors with experience leading
teams at scale can be very helpful with how to think about
organizational design through various stages of growth. Investors can
also have a really good sense of leveling across organizations and
have seen a lot of creative approaches used across companies.
“DROP YOUR SHIELDS. IF YOU THINK ASKING FOR
ADVICE OR HELP FROM YOUR INVESTORS IS
SHOWING SIGNS OF WEAKNESS, YOU HAVE IT ALL
WRONG. YOUR INVESTORS ARE BY DEFINITION
ALREADY ON YOUR SIDE AND ANY PROBLEM YOU
ARE FACING OR ANY AREA OF GROWTH WHERE
YOU THINK THEY MAY BE ABLE TO CONTRIBUTE
TO OR CONNECT YOU TO SOMEONE WHO CAN BE
HELPFUL, GO FOR IT. I WANT LEADERS TO ASK ME
‘WHAT AM I DOING WRONG, WHERE CAN I LEVEL
UP?’” —REED STURTEVANT, GENERAL
PARTNER, THE ENGINE
Financials
Table stakes:
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Investment checks
Future rounds—financing strategy, valuation, etc.
Beyond the basics:
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It’s never too soon to get “budget religion,” especially if you have a
capital-intensive business where you need to figure out working
capital, financing with manufacturing, etc. Ask for guidance on how
best to manage your funds and how to track, burn, and prepare data
for future financing to make the diligence process easier for new
investors. They may even have models or frameworks that other
portfolio companies use that you can borrow.
Not sure whether your compensation packages are competitive or
fair? Or how to think about equity vs. salary splits? Comping your
sales team? Your investors have probably seen many different
configurations and can help you get creative if you’re trying to land a
key hire or to retain and motivate your current team.
Other financial areas where investors can be helpful are ways to think
about marketing spend as a ratio of investment in engineering or
sales/revenue, pricing models, and tax considerations.
In all of the above cases, if your investors can’t help you directly, odds are
very high that they know someone who can. Good investors won’t expect you,
especially if you are a first-time founder, to figure it out all by yourself. I always
appreciate the humility that comes from anyone who knows what they don’t
know and asks for help. It is impossible for anyone to know everything.
How to ask
There are three ways every founder should interact with their investors outside
of board meetings (if you have them).
1. Investor update emails are always a good vehicle for asks. If you’re
not sure if anyone on the investment team can be helpful, be specific:
“Looking for advice on digital marketing strategies” or “Would love to
talk with someone in your network who can advise my team on
HIPPA compliance.”
2. Routine one on one calls or meetings are a must. This establishes a
good touchpoint with investors to create a rapport and catch up
informally instead of waiting for a crisis or issue to arise as a reason
for a call. I suggest you always have at least one ask for these
meetings and always follow up with a quick email with that ask in
writing.
3. Identify at least one domain area where each investor may serve you
best (e.g., I am usually the go-to person for product & engineering or
organizational planning for my angel investments and advisees).
When the needs arise, set up face-time to dig into that specific topic
with that investor.
Remember, your investors are not just here to provide cash. They are
invested in you and your company’s success. As Jason Seats, CIO of
TechStars says, when in doubt, “pretend that they are not an investor and
figure out what you’d ask them. If you can’t come up with anything, they may
not be a good investor for you.” This can also be a nice hack around targeting
the right investors from the start.
1. Do you have other examples of ways your investors have been helpful
beyond their funds?
2. What is the relation between economic growth and investment activity?
Startup or Established
Company? Which Is Best for
You?
by Julia B. Austin
What are the tradeoffs between going to a startup
versus joining a mature company? Julia Austin, who has
worked on both sides of the house, has some advice.
What are the tradeoffs between going to a startup versus joining a mature
company? Having done both, several times, I get this question all the time.
There are many things to consider and lots of “it depends” when it comes to
where you are in your career, where you live, and many other factors. Here’s
my perspective on the tradeoffs.
Putting aside for a moment industry preferences and how you feel about the
products the company is building (both of which are very important!), most of
the differences between a startup and mature company are pretty obvious. In
a mature company, you will likely have more role models to learn from and
stronger teams to collaborate with, a clear direction, and a mature board. The
role you consider may have a narrow scope, but could offer deeper learning
and of course great benefits, compensation, and the like. You’ll also receive
exposure to what good (or bad) looks like at scale and possibly a nice brand
for your resume.
Startups can offer a chance to do all the things that can be either a blessing or
a curse depending on your interests. You may miss out on having peers to
collaborate with, be forced to look outside your company for mentors and role
models, or have limited budget to get work done. But you may earn high-value
equity in exchange for lower-than-market-level pay. If you want to dig more
into deciding which startup to join, I suggest Jeff Bussgang’s book Entering
StartUpLand, which goes deep on the different roles at startups and how to
get your foot in the door.
(c) 2018 Julia B. Austin
Leadership
One thing often overlooked when considering a new job is the leadership of
your prospective company. Serial entrepreneurs will have a very different
approach than someone who has limited real-world experience. And mature
company executive teams can be world class or “legacy” leaders who can’t
move with the times. There are many tradeoffs when factoring leadership into
the decision process of startup versus mature.
Startup founded by serial entrepreneurs. This can often be the best case
scenario if you want to learn from those who have "seen this movie before."
They likely had no issue raising money and were selective on who their
investors were and who sits on their board. They will know how to get the
flywheel moving incited by past mistakes or failures.
“When I started my fifth company I knew exactly how I wanted to build the
team. So, on day one I hired a head of recruiting to get things off to a strong
start. I also knew market adoption would be critical to fundraising so (we)
focused on growth very early on—before we even had a product!” – David
Cancel, CEO and co-founder, Drift
Serial entrepreneurs may also try to overcorrect in areas where they failed the
first time, such as overanalyzing or delaying decisions, being too conservative
on cash flow, or focusing too much on scalability too early in the productdevelopment process. If you’re interviewing with a serial entrepreneur, it’s
always good to ask what lessons they learned in their last startup and how
they’re bringing those lessons into their new venture.
“I joined Drift in part because I wanted to learn from the experience of the cofounders. They’ve seen it before so they anticipate issues, they know when
(and how) to hire experts to level up the team, and they know what’s “normal”
for a hypergrowth company. It’s the best of both worlds: you get the
rollercoaster startup experience with some of the more measured leadership
and strategic characteristics of a bigger company.” – Maggie Crowley, Product
Manager, Drift
(c) 2018 Julia B. Austin
Industry veterans doing their first startup. Founders coming from mature
companies with no startup experience can have big company confidence, be
great at hiring and leading teams, but lack scrappiness to get a Minimum
Viable Product (MVP) out the door and work toward product market fit.
“At our first startup after a series of roles at large enterprise software
companies, we tried to force a big company perspective on how we did
employee feedback and reviews. We were too structured with this initially and
quickly cut back to a more loose feedback and review process with our team.”
Izzy Azeri & Dan Belcher, co-founders, Mabl
They may also be too used to having teams of people and systems in place to
cover the more mundane duties of running a company and don’t want to get
their hands dirty. On the flip side, they often know how to implement those
processes and know the people to hire to run them so once the flywheel is
moving and cash is in hand, they can get momentum quickly.
“Earlier in my career, I hired a small team within a large corporation that was
scrappy and had entrepreneurial mentality. At my startup, I quickly realized
the benefit of once having a corporation behind me when things weren’t
working out. The impact of a bad decision or process was much greater with
no safety net.” – Karen Young, CEO and founder, Oui Shave
Startup with limited leadership experience. Working with a skilled group of
founders leading teams for the first time can be tons of fun. If you bring some
experience to the table, it can be very gratifying to not only work from the
ground up, but also work alongside these founders as they grow. However, it
can be frustrating if you find yourself figuring out things on your own because
there’s no one in the company to mentor you. These situations can be very
rewarding if you’re patient and you can always get outside mentors and
advisors if they’re not available at this type of startup.
“When we started, we got a lot of advice like: stay focused, don’t expand too
quickly, be careful that experienced hires match your culture. All good advice,
but we discovered there’s no real substitute for learning the hard way. The
lesson just doesn’t sink in until you feel the pain of doing it wrong.” Wombi
Rose, CEO and co-founder, LovePop
Mature company with inexperienced leadership. If they made it this far, they
are either wicked smart, lucky or both! More likely they also have surrounded
themselves with strong, experienced leaders, investors and/or board
members. You can learn a lot from joining a company like this, but they are
very, very rare! When companies scale too fast, they can also suffer from
having people in roles that have outgrown their experience. Read more about
the impact of Hypergrowth situations written by my friend at Reboot, Khalid
Halim, for First Round.
Mature companies with experienced leadership. These organizations have all
the standard things you’d expect. Probably more politics and process than
you’d ever find at a startup, but the benefit of exposure to great role models
and best practices can be invaluable. Sometimes, these bigger companies
can also expose you to the “dark side” of leadership and processes which are
also great learnings on what not to do in your next job or company you may
start yourself.
Which comes first in your journey?
For those doing early career path planning and knowing they want to do both
a startup and a mature company at some point, there’s always the question of
which should come first. Hiring managers at early stage companies can get
“spooked” when they see someone with too much time (five-plus years) at
mature companies, since they can question whether the candidate will be able
to transition to startup life. Not that it’s impossible, but it’s something to
consider. For these candidates, I suggest highlighting any scrappy “ground
zero” work they may have done at their companies to demonstrate they can
handle ambiguity and take risks. I am also a huge (and very biased) fan of
people who’ve joined companies early and scaled with them. They have
learned a TON from those experiences and can often start scrappy, but know
how to operate at scale. Win-win.
Conversely, someone with a lot of startup experience may have a hard time
adjusting to a mature company. A hiring manager at a mature company may
question whether a candidate with only startup experience can handle a
slower pace or won’t know how to navigate a complex organizational structure
that requires political and communication savvy. You may have to sacrifice
title and maybe some salary to get a foot into larger institutions who may view
your past role, which may have been very senior at a startup, to being pretty
junior if those around you have decades more experience. However, I always
find those with startup experience can be invaluable to a team that needs to
be shaken up, take more risks, or explore new ground. Often, those who
sacrifice title and pay when they joined, make it up fast as they move up the
chain in a larger organization.
There’s no right or wrong place to start. A lot depends on how you define your
skills and how willing and patient you are in either case to adjust. Much can
depend on who hires you and their management philosophy. I’ve seen some
people bounce between both types of situations over and over, some that just
can’t handle startup life, and others who have startups in their DNA and
should just stick with that world.
“At a startup, every job matters and you can see almost daily that you are
creating something that wasn’t there before. You have the ability to learn
quickly and have a fast feedback loop to let you know how you’re doing. It’s
very different working at an established company vs a startup, but you can
learn a lot at both – you’ll just learn very different things.” – Rebecca Liebman,
CEO and co-founder, LearnLux
Questions To Ask
Regardless of whether you are a seasoned veteran or fresh out of school, as
you ponder whether you want to join a startup or a mature company here are
some final things to consider:
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What tools do you want to add to your toolbox? Will the role allow you
to hone skills you already have or add new ones?
Who do you want to learn from, and how do you want to learn? You
can learn from experienced colleagues and mentors, but having bad
role models can also teach you a lot about what not to do. Similarly, if
you are an experienced hire coming into a company started by
inexperienced founders, you may want to learn by mentoring or
teaching these young leaders. Taking the skills you’ve developed
over your career and applying them to a new situation in itself can be
a very enlightening experience.
Who do you want to work with? How important is the size and culture
of the team you’ll work with? Remember, you’ll probably spend more
waking hours of the day with these people than anyone else in your
life – regardless of the size and nature of the company you join.
What do you value? At the end of the day, love what you do and
decide what role will allow you to maintain the integrity of who you
are and who you aspire to be!
1. Do you have other tips on how to decide whether to join a startup vs. a
mature company? Please share your ideas