#vc's

Andreessen Is Not at All 'Techno-Optimistic' About This Particular AI Scenario

In the meantime, however, its evident that Snapchat’s spectacular valuation rise is not about how to discount the potential value stream from monetizing dirty pictures. Instead, it reflects the crazy dynamics of late stage financial bubbles. And on that score, Wolf Richter has hit the nail squarely on the head, as usual.

As he explains in today’s post, Snapchat’s spectacular valuation run-up is just a new and more sophisticated form of “pump and dump”. In this instance, the venture capital firms involved have apparently invested trivial amounts of chump change in the two recent funding rounds in order to peg dramatically higher paper valuations in preparation for an imminent IPO. In numeric terms they have invested less than $30 million since last November, meaning that they have been able to leverage an $8 billion valuation gain at a ratio of 266:1.

Shortly after Kathryn Tucker started RedRover, an app that showcases local events for kids, she pitched the idea to an angel investor at a New York tech event. But it didn’t go over well. When she finished her pitch, the investor said he didn’t invest in women. When she asked why, he told her. “I don’t like the way women think,” he said. “They haven’t mastered linear thinking.” To prove his point, he explained that his wife could never prioritize her to-do lists properly. And then, as if he was trying to compliment her, he told Tucker she was different. “You’re more male,” he said. Tucker didn’t need to hear any more. “I said, ‘Thanks very much,’ walked out, and never spoke to him again,” she recalled earlier this year, as part of a panel discussion on “fundraising while female” at the annual Internet Week conference in New York. It was one of many stories shared during a panel that painted the tech world as a place that—for all its efforts to push into the future with apps and gadgets and online services—is still very much stuck in the past when it comes to attitudes involving gender. Rachel Sklar, founder of Change the Ratio, an advocacy group for women in tech, shared the story of an investor who said he doesn’t invest in women he doesn’t find attractive. Another gave women in the audience a tip for pitching VCs: “Wear a wedding ring.”

The approach convinced VCs who gave $62 million to help fund the startup.

If you want to raise venture capital, the first thing you must do is see your startup through the eyes of potential investors. Here are five tips that will help you connect with those investors:

1. Identify the right audience because each investor has different likes and dislikes. You should research potential investors before you talk with them so that your company fits the stage -- early, middle or late -- and the industry that the investor prefers.

2. Get an introduction through a trusted source. You should seek an introduction through the CEO of a potential investor's current or former portfolio companies.

3. Have a brief PowerPoint deck that tells a story in non-technical terms. Your deck should address your venture's team, market opportunity, need for the product and its value to the customer, its position relative to the competition, how much capital you'll need to build the company, and a financial plan.

4. Be intellectually honest rather than answer every question. You should quickly admit you don't know rather than try to bluff.

5. Adapt to feedback. You should listen to feedback, absorb its intent and revise your pitch accordingly.

In order for this flurry of activity to have meaning, you will have to answer two fundamental questions the right way: Are you a great startup CEO? VCs spend time with a few dozen entrepreneurs who display the right characteristics. If you are energetic, inspirational, smart, hardworking, honest and magnetic, meaning people want to help you, then you have some of the right characteristics. 

But you also need to be tireless in pursuit of market share. Great startup CEOs are driven, relentless, have a vision and want to disrupt a market.

Before you ask them to write you a check, spend enough time with potential investors to show them -- based on your experiences in college, sports or family life -- that you have all these traits.

How do you plan to disrupt a big market? If you can prove to an investor that you are a great CEO, you're about half way there. Your next challenge is to make the case that you can build a startup that will get big fast so they can generate a return on their investment.

To do that, you will need to convince a VC that your venture targets a strong market with a valuable product. It follows logically, that a combination of these two factors could mean your product will gain share rapidly in a fast-growing market -- and that would give the VC a return on investment.

What is a strong market? It is big and growing fast or ready for a new product that will generate a rapid spike in demand. Doing that means finding customers that have a history of adopting new technologies quickly who your startup can reach without spending too much money.

And like Rethink Robotics demonstrates, a valuable product is based on unique insight, difficult for competitors to replicate, maintains intellectual property rights and delivers clear value to the customer.

To assess whether your venture has what it takes, ask yourself whether you have a vision for how your startup's market will evolve. If you can convince the investor that the answer to both questions is yes, they will be eager to invest.

Casually chatted with members of a VC firm earlier. This is the founders' breakdown analysis afterwards... 

me:  lol we are "broke entrepreneurs"

 Sent at 11:39 PM on Monday

 [founder-name-witheld]:  lol

gotta get some cash from [vc-firm-name-withheld] you know

or the "top dogs"

 me:  ok turns out the guy who really liked me is "only" a principal

Sent at 11:57 PM on Monday

 me:  lol. "and then he wrote me a check on the spot..."

 Sent at 11:58 PM on Monday

 [founder-name-witheld]:  legends

 Sent at 11:59 PM on Monday

 me:  we will have a story like that some day

 Sent at 12:09 AM on Tuesday

 [founder-name-witheld]:  we'd be the ones writing the check