This is the eighth in a PandoDaily weekly series that chronicles the experiences of a young entrepreneur as he bootstraps his startup. Read Part 1, “The less-than-glamorous life of a young entrepreneur,” Part 2, “How to survive co-founding a company with a friend,” Part 3, “Starting a company and having a girlfriend isn’t easy,” Part 4, “Customer validation: from lean startup to craigslist,” Part 5 “Dealing with competitors without turning your product into Mr. Tumnus,” Part 6 “Why I gave up a cushy career as an investment banker to launch a startup,” and Part 7 “The best way to take feedback: Keep quiet.” Come back next Sunday to read the next installment.
Looking through the Treatings folder on my computer, which houses all the files we’ve created related to the business, is like going through the photo albums my Mom loves to spread out when I visit home. Every picture tells a story, many of which are cringe-inducing.
Was I really that awkward? In elementary school, at what point did I decide wearing shorts over sweatpants was appropriate? In my half-hearted defense, it’s cold in Maine.
Sifting through my Treatings files is a good way to look back and get snapshots of what we were working on, and thinking about, since my co-founder Paul and I quit our jobs to build the platform last year. It’s a walk down gawky memory lane. Of course, even today there are things on our site that embarrass us. We’ve tried to embrace the “if you’re happy with your product release, you’ve waited too long” maxim. But if I were to pick one thing from the early days of Treatings that I’m particularly embarrassed about (I’m talking JNCO straight-leg, super-baggy middle school denim type embarrassment) it would be the time we wasted early on worrying about investors.
In preparation for quitting our jobs we’d spoken with an entrepreneur who had recently raised a seed round for his startup. He told us, “Once you raise money, the fun stops.” Of course, this was just one person’s experience, but he said that investors’ money started a ticking clock, where you can be coerced into making a series of bet-the-company gambles in the hopes of reaching stipulated milestones.
After this conversation, and familiarizing ourselves with the Lean Startup Methodology, we were resolved to bootstrap. It wasn’t that we were swearing off venture capital forever. We just felt that at our early stage, when we were still trying to figure out what exactly to build, more money wouldn’t be a determinant of success. If anything, it could be a crutch that could leave us permanently crippled. If we had the resources to hire a team of developers and designers, we wouldn’t have developed the technical skills necessary to build our own prototypes. Additionally, if we had the resources to build polished prototypes, we would have. This would likely have resulted in wasting time and money building beautiful products no one wanted. So, we decided to bootstrap until we found traction and a viable business model.
Well, at least our hearts were in the right place. Although we had decided not to seek funding, that didn’t stop us from preparing as if we were. The “Pitch Deck” folder in my Treatings archives was one of the first I created. I read somewhere that it’s prudent to always have an updated deck to share with investors if they ever approach you. Despite the fact we had no intention of raising money, for months I was running in a PowerPoint hamster wheel, creating and updating slides that never saw the light of day.
I actually have an old excel document entitled “Pitch Deck Outlines.” I found blog posts from a handful of prominent VCs in which they outlined their preferred pitch deck formats. I listed out each slide, in their suggested order, in a column for each VC. Then, I looked across to see where the most overlap was. From this, I had determined the “perfect” (most average) deck format. It went something like this: Introduction>Business Overview>Team>Problem/Solution etc. At this stage we didn’t even have a product. Since our goal was to build a community where you could get career advice from peers over coffee, we were just manually facilitating coffee meetings between individuals. But, that didn’t stop me from updating the slides every time something about our framework changed (which was daily).
As the spotless pitch decks piled up, it became clear this was a waste of time and we eventually stopped the futile calorie burning. What was more insidious was the time I spent early on chasing potential investors in the hopes of forming a relationship as early as possible. I was enamored with Mark Suster’s “Invest in Lines, not Dots” blog post. He advises that entrepreneurs meet potential investors early, before fundraising, to establish a relationship and demonstrate a pattern of good progress. Since we were at point (0,0) on the Treatings graph, I wanted to get that data point on as many investor’s radar as possible, because there was nowhere to go but up, right?
So started the cold email war. It was a quiet war – the main casualties were venture capitalists’ inboxes and my time. There was little strategy involved. I launched meeting requests to the darkest corners of the investor universe hoping to show everyone the earliest iterations of our product. In hindsight, this is an ironic strategy to impress investors: I need to hurry up and flaunt how ugly this prototype is, so in subsequent meetings (because they’ll be eager to track the progress of this eyesore, of course) they’ll be impressed by our progress. It’s like automobile makers parading parents into a room and showing them early safety tests for a minivan, hoping to benchmark poor results to impress them by all the safety improvements they can make.
Showing potential investors early prototypes isn’t bad, but our rationale was. We soon realized that seeking meetings for the sake of showing off an unpolished product was a poor substitute for a strategy. Investors seldom responded to my cold advances. Even when they did, the meetings rarely turned into long-lasting relationships because we weren’t coming in with a clear ask. Investors didn’t have much to say besides “Well, let me know what your users say.”
What finally shook me out of this enthrallment with investors was launching the beta version of Treatings. Once we had a website where people could set up an account and message fellow members, proposing coffee meetings, the feedback started pouring in. I didn’t even have time to adhere to my cold email regimen. It’s obvious to say now, but we realized that there is no substitute for traction and anecdotes of people using Treatings. If and when we do raise money, it won’t be because investors are awarding us with the The Most Improved award.
This isn’t to trivialize the benefit of interacting with potential investors. VCs and angels have been generous with us in providing actionable feedback on Treatings and valuable introductions. What differentiates these relationships is that they spawned organically, either by serendipitous encounters or by our being introduced through mutual connections. When we started thinking about investors as resources, rich with insights from operational and investing experience, rather than a required rung in a startup lifecycle ladder, we were able to be more targeted in our approach to building relationships.
On a totally random note, though, if you happen to have email addresses for Paul Graham, Marc Andreessen or Fred Wilson please send them along. I’ve got ice-cold emails all queued up.
[Image via FastWeb]