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Startup and the fundraising route
#1
Some people have expressed some interest in this and I was actually planning to write about my experience of starting a "funded" business with a red-pilled lens so I might as well start doing it here. 

A little context before I start:
We're 3 founders with an equal equity split, A sales guy, an Operations guys and an IT/product guy (me)
So far we raised 650k £ and are now nearing to close our second fundraise which is going to be between 1.5 to 2.5 millions £ with the company being valuated for 7 to 10 mil£
My personal background is MBA + a Masters in computer science, worked a couple of years in sales for a big group, 2 years dev freelancer and ran a small internet business for about 4 years that I sold for <10k£. I'm in my early 30s
My co-founders are friends that were also running a small scale internet business without much success. At some point, we recognised our skills were complementary and decided to plot together.

I won't Identify exactly what my business is about but we use AI to streamline decision making for huge slow ineffective organisations

Now let us get into the meat of things: "How do you get a business funded and how did you get the idea?"

My opinion is that most people approach entrepreneurship backwards by focusing on their "IDEA" rather than actual business need. They cling to the idea so desperately that they refuse to confront it to the market by fear of reality crushing their baby. I've been guilty of this for a failed business BTW, I could expand on this one another time since I got funded for it as well (around 50k£). Now that I read Voxdays stuff I realise its a very gamma problem and gammas are very common in early startup life.

My point is: Focus on something painfully fucked up which cost a lot of money. Preferably something ineffective and for which you can calculate the $ value of how much you could save if they sucked 1% less.
The way I chose my target was binge-reading stuff like https://www.mckinsey.com/ and identifying which industry was doing poorly even though it is huge. After some time a target began to stand out te me for being:
-A huge Market (300B+£)
-Incredibly ineffective (filled with "I pretend to work" people)
-Backwards technologically

You now have an identified label for what you do, you are now a Foodtech / Fintech / Healthtech /... / startup
This will help you contextualise what you do to potential investors.

Now you just need to add the main twist to it: how do you solve the problem?

I'll get to it in another post
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#2
(10-24-2019, 12:29 PM)99percentile Wrote: Some people have expressed some interest in this and I was actually planning to write about my experience of starting a "funded" business with a red-pilled lens so I might as well start doing it here. 

A little context before I start:
We're 3 founders with an equal equity split, A sales guy, an Operations guys and an IT/product guy (me)
So far we raised 650k £ and are now nearing to close our second fundraise which is going to be between 1.5 to 2.5 millions £ with the company being valuated for 7 to 10 mil£
My personal background is MBA + a Masters in computer science, worked a couple of years in sales for a big group, 2 years dev freelancer and ran a small internet business for about 4 years that I sold for <10k£. I'm in my early 30s
My co-founders are friends that were also running a small scale internet business without much success. At some point, we recognised our skills were complementary and decided to plot together.

I won't Identify exactly what my business is about but we use AI to streamline decision making for huge slow ineffective organisations

Now let us get into the meat of things: "How do you get a business funded and how did you get the idea?"

My opinion is that most people approach entrepreneurship backwards by focusing on their "IDEA" rather than actual business need. They cling to the idea so desperately that they refuse to confront it to the market by fear of reality crushing their baby. I've been guilty of this for a failed business BTW, I could expand on this one another time since I got funded for it as well (around 50k£). Now that I read Voxdays stuff I realise its a very gamma problem and gammas are very common in early startup life.

My point is: Focus on something painfully fucked up which cost a lot of money. Preferably something ineffective and for which you can calculate the $ value of how much you could save if they sucked 1% less.
The way I chose my target was binge-reading stuff like https://www.mckinsey.com/ and identifying which industry was doing poorly even though it is huge. After some time a target began to stand out te me for being:
-A huge Market (300B+£)
-Incredibly ineffective (filled with "I pretend to work" people)
-Backwards technologically

You now have an identified label for what you do, you are now a Foodtech / Fintech / Healthtech /... / startup
This will help you contextualise what you do to potential investors.

Now you just need to add the main twist to it: how do you solve the problem?

I'll get to it in another post

Food for thought. In my spare time I'll start checking out Mckinsey for ideas. I'm always on the lookout nowadays for new ways of making money.

You know it doesn't sound a million miles from what my old business partner, genius programmer and great friend does - builds large scale automation systems.  Just the application is different.

Just what you have written here is enough to get my brain whirring, so thank you.  When you get together with your bis partner(s) is when the magic starts to happen.
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#3
How do you solve the problem then?

You pick a tech that makes sense and you start pitching to see if that sticks.
This is also something that I lifted from consulting websites like https://fstechadvisory.accenture.com/ 
I choose a solution that was trendy at the time: Fucking blockchains lol
It was supposed to solve issues that were kinda similar in comparable industries so we could use to this for credibility.

Looking back on it now it barely made sense, but it gave us our main pitching fodder:

If we use blockchain to solve this specific issue that industry X has then we can improve their performance by 2%.
2% performance of industry X means 30 Billion $ since it's huge, let's say we charge 30% of these savings and we'd be making 10 Billion a year 

Now you have enough to make investors listen to you and the punch line to hold their interest.

So, pick a placeholder name, build a powerpoint on google slides because you're too cheap to buy stuff from Microsoft 

And Build your team
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#4
So unlike Steve's friend, I'm actually quite an average developer. 
I can, however, learn and prototype a basic implementation of anything very fast.

What you need for your core team is to find people that have 2 characteristics:

-Hunger
-Complimentary skills to yours

Hunger is the most important part as skills can be developed but hunger seems to be an inherent quality.
I failed two other businesses by convincing people with complementary skills to become an entrepreneur.
It doesn't work, they'll get back to safety as soon as it gets tough or they will drag their feet along the way and you'll split up.

What you want are guys who would do their own thing whether it's with you or not, guys for who working for someone and not get paid a % cut is actually painful.
Sales guys, devs with equity, freelancers etc...

Also, I said Guys for a reason. Never start a business with a woman unless she can bring a very clear unfair advantage (starting a Jewellery biz with a girl that will inherit diamond mines for example). The ones in the startup game are not there for the same reason as you are. All the women I met are in it for attention. They will chase grants, events, women in a tech interviews, incubator acceptance and so on instead of building a money-making machine. And let's be clear you make a company to make money as you get into game have more and better lays.
I say this from experience as I failed a business when partnered with a woman and worked for one that failed with a woman CEO for these same reasons. It's a common thing, look at what happened to Yahoo or to Theranos

For the skill stack, my opinion is that you cannot do without:
-Sales skill
Meaning being able to hustle for leads, setup meetings, pitch and convert to a close. 
You need the guy who will send 200 emails a day or make 50 calls that is well organised enough to put all this in a pipeline and followup on leads to the point of being a borderline hassler.
You need him to improve and adjust the pitch from the dynamic feedback he's getting
You need him to close 

-Product and marketing
Meaning being able to tailor what you're selling to market demand based on research and actual customer feedback.
You need the guy who spends most of his time reading business stuff for pleasure and who can assimilate complicated subjects quickly.
You need the guy who when you tell him his product sucks can defend it effectively but at the same time is taking notes.
You need to effectively convey the value and iterate.

-Tech/doer 
Meaning being able to code, build, craft, write the demo.
You need someone that can do the very basic version of what you're trying to sell so you can be sure it can be done.
You need to be able to SHOW something and non-tech people need to understand it (a log on command line won't do it). I actually advise faking the display version
You need to produce and display a minimal version

-Admin/finance
Meaning managing the company creation, hire accountants and legal help, get a payment system, create and follow the business plan, pay the employees and so on. All the boring necessary stuff. 
You do not need all of this when you raise, only the business plan 
You need to start from a good professional template and go as detailed as you can for the costs. Go in details in your revenue structure as well. I might post a specific about this at some point if there's some interest.
You need support 

Then you need a backup team, the "who you will hire when you get actual money one day".
Preferably pick someone with a pedigree (good school, Phd or well-regarded company) or very relevant experience and embellish the hell out of them. It makes you look like a safer bet
Make them engaged by making them do something for you for free: code a module, do some introduction, give insider business information etc...
You want a couple of days of work you couldn't really do by yourself from them not much more is needed. Don't try to exploit your friends, it is about them having skin in the game and be engaged in what you're doing when you come for advice. Have several of them as a backup because when you actually et money most of them won't actually convert as employees. Most were just happy to help or didn't want to take the early risk (or the pay cut).

Now you have the base to start pitching.

But to who? I don't know any investors!
Neither did we, I'll expand to finding investors and the failing forward dynamic next post
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#5
(10-25-2019, 01:59 PM)99percentile Wrote: So unlike Steve's friend, I'm actually quite an average developer. 
I can, however, learn and prototype a basic implementation of anything very fast.

What you need for your core team is to find people that have 2 characteristics:

-Hunger
-Complimentary skills to yours

Hunger is the most important part as skills can be developed but hunger seems to be an inherent quality.
I failed two other businesses by convincing people with complementary skills to become an entrepreneur.
It doesn't work, they'll get back to safety as soon as it gets tough or they will drag their feet along the way and you'll split up.

What you want are guys who would do their own thing whether it's with you or not, guys for who working for someone and not get paid a % cut is actually painful.
Sales guys, devs with equity, freelancers etc...

Also, I said Guys for a reason. Never start a business with a woman unless she can bring a very clear unfair advantage (starting a Jewellery biz with a girl that will inherit diamond mines for example). The ones in the startup game are not there for the same reason as you are. All the women I met are in it for attention. They will chase grants, events, women in a tech interviews, incubator acceptance and so on instead of building a money-making machine. And let's be clear you make a company to make money as you get into game have more and better lays.
I say this from experience as I failed a business when partnered with a woman and worked for one that failed with a woman CEO for these same reasons. It's a common thing, look at what happened to Yahoo or to Theranos

For the skill stack, my opinion is that you cannot do without:
-Sales skill
Meaning being able to hustle for leads, setup meetings, pitch and convert to a close. 
You need the guy who will send 200 emails a day or make 50 calls that is well organised enough to put all this in a pipeline and followup on leads to the point of being a borderline hassler.
You need him to improve and adjust the pitch from the dynamic feedback he's getting
You need him to close 

-Product and marketing
Meaning being able to tailor what you're selling to market demand based on research and actual customer feedback.
You need the guy who spends most of his time reading business stuff for pleasure and who can assimilate complicated subjects quickly.
You need the guy who when you tell him his product sucks can defend it effectively but at the same time is taking notes.
You need to effectively convey the value and iterate.

-Tech/doer 
Meaning being able to code, build, craft, write the demo.
You need someone that can do the very basic version of what you're trying to sell so you can be sure it can be done.
You need to be able to SHOW something and non-tech people need to understand it (a log on command line won't do it). I actually advise faking the display version
You need to produce and display a minimal version

-Admin/finance
Meaning managing the company creation, hire accountants and legal help, get a payment system, create and follow the business plan, pay the employees and so on. All the boring necessary stuff. 
You do not need all of this when you raise, only the business plan 
You need to start from a good professional template and go as detailed as you can for the costs. Go in details in your revenue structure as well. I might post a specific about this at some point if there's some interest.
You need support 

Then you need a backup team, the "who you will hire when you get actual money one day".
Preferably pick someone with a pedigree (good school, Phd or well-regarded company) or very relevant experience and embellish the hell out of them. It makes you look like a safer bet
Make them engaged by making them do something for you for free: code a module, do some introduction, give insider business information etc...
You want a couple of days of work you couldn't really do by yourself from them not much more is needed. Don't try to exploit your friends, it is about them having skin in the game and be engaged in what you're doing when you come for advice. Have several of them as a backup because when you actually et money most of them won't actually convert as employees. Most were just happy to help or didn't want to take the early risk (or the pay cut).

Now you have the base to start pitching.

But to who? I don't know any investors!
Neither did we, I'll expand to finding investors and the failing forward dynamic next post

Thanks so much for your expertise, time and knowledge.  Really appreciated.

This is fascinating stuff and has the ring of authenticity to it.  

Would you say picking the right team, partners, is something that's natural to some people? Or something anyone can develop?

I know I can read people lighting fast but I don't think it translates to managerial and delegation expertise.  What you say about picking a fellow entrepreneur rings true.  Hardly anyone has the nuts to put it on the line and go do it.

But these are rare people.  Where did you meet them? You mentioned "not exploiting your friends" for the backup team.  You also mentioned you were doing a similar thing to what I am doing now before...So how?

Looks like I made the right choice in building this forum.  Do you agree that a forum like this can have surprising utility for networking? Because, you know - my "job" is a great way of meeting guys like yourself who you might one day do business with.   Smile
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Check it out
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#6
(10-25-2019, 08:14 PM)SteveJabba Wrote: Thanks so much for your expertise, time and knowledge.  Really appreciated.

This is fascinating stuff and has the ring of authenticity to it.  

Would you say picking the right team, partners, is something that's natural to some people? Or something anyone can develop?

I know I can read people lighting fast but I don't think it translates to managerial and delegation expertise.  What you say about picking a fellow entrepreneur rings true.  Hardly anyone has the nuts to put it on the line and go do it.

But these are rare people.  Where did you meet them? You mentioned "not exploiting your friends" for the backup team.  You also mentioned you were doing a similar thing to what I am doing now before...So how?

Looks like I made the right choice in building this forum.  Do you agree that a forum like this can have surprising utility for networking? Because, you know - my "job" is a great way of meeting guys like yourself who you might one day do business with.   Smile


On picking the right team I'd say its a bit of both, if you can properly vet your friends you're halfway there.
I had to make mistakes along the way in order to learn the hard way what to avoid though. I attempted two other business with the wrong people before this one:
One where the guy tried to rip me off and one with the woman I mentioned in the other post.
Both had huge red flags in hindsight but I was so happy to have someone to start something with that I ignored it.

The online business I was doing before was not doing very well, mainly because of its inherent limitations and the fact I could make more money as a freelancer.
I met my current partners through mutual friends that introduced us because they were also doing online business. We bonded around entrepreneurship and started meeting every 2/3 weeks to share our startup woes. That's the thing, most entrepreneurs love talking about what they do. Then it's just about sorting the wantrepreneurs from the actual doers, usually its as simple as checking if they confronted the market yet.

And yes for the forum, I expect that people that make a good attempt at game in the way you present it are bound to be self-starters and have the balls to confront direct feedback and learn from it. I still have to do this part myself though
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#7
[b]Finding and getting to talk to investors.[/b]

There's no straightforward way to do it, you have to look for where investors gather.
We started with the little network we had: The co-working space I used to work at and the startup club from our schools.
We didn't really get introductions or anything, we just started contacting them via the emails we could gather from past events, we applied via the contact boxes you can find on VC and angel investor websites. We also paid for a premium Linkedin subscription and cold contacted people from the industry we were targeting, evaluated by how relevant their network was. We were sending something along the line of :
(Hello we're an early-stage startup aiming to solve problem X in industry Y using blockchain would you have time to talk about "Specific problem/question/partnership"?)
I must add that I was not the one doing this outreach, my partners did 99% of it.

The response rate was quite low but since we were targeting investors advertising expertise in the field we were aiming at, we did get some meetings.
That’s the thing: if you’re saying to an investor specialised in industry X “hey we got something for industry X using tech Y” there’s a good chance he will meet you and hear you out if you look presentable. Mainly because a big part of an investor’s job is understanding his startup scene and understanding the trends within it. He has very little way to know your level of advancement, so go for it even if all you have is a half baked idea and a powerpoint.

We didn’t ask for money straight up, we were asking for specific advice on how to navigate the fundraising in industry X or how to go about using tech Y for our business. 
It looks a lot like the indirect-direct game Steve advocates in some aspects. They know you want their money because of the nature of your relationship but you ease in with getting advice from them, then you quickly make your intentions clear.


They will politely meet you for a 10-20mn coffee at their office or next to it.

The sales guy and the product guy has to attend, as this is where your product starts to be created.


Next time we’ll talk about the pitch itself.

Writing about that part makes me realise I have some gaps in the outreach steps so I'll probably come back to edit this post
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#8
(10-29-2019, 12:22 PM)99percentile Wrote:
(10-25-2019, 08:14 PM)SteveJabba Wrote: Thanks so much for your expertise, time and knowledge.  Really appreciated.

This is fascinating stuff and has the ring of authenticity to it.  

Would you say picking the right team, partners, is something that's natural to some people? Or something anyone can develop?

I know I can read people lighting fast but I don't think it translates to managerial and delegation expertise.  What you say about picking a fellow entrepreneur rings true.  Hardly anyone has the nuts to put it on the line and go do it.

But these are rare people.  Where did you meet them? You mentioned "not exploiting your friends" for the backup team.  You also mentioned you were doing a similar thing to what I am doing now before...So how?

Looks like I made the right choice in building this forum.  Do you agree that a forum like this can have surprising utility for networking? Because, you know - my "job" is a great way of meeting guys like yourself who you might one day do business with.   Smile


On picking the right team I'd say its a bit of both, if you can properly vet your friends you're halfway there.
I had to make mistakes along the way in order to learn the hard way what to avoid though. I attempted two other business with the wrong people before this one:
One where the guy tried to rip me off and one with the woman I mentioned in the other post.
Both had huge red flags in hindsight but I was so happy to have someone to start something with that I ignored it.

The online business I was doing before was not doing very well, mainly because of its inherent limitations and the fact I could make more money as a freelancer.
I met my current partners through mutual friends that introduced us because they were also doing online business. We bonded around entrepreneurship and started meeting every 2/3 weeks to share our startup woes. That's the thing, most entrepreneurs love talking about what they do. Then it's just about sorting the wantrepreneurs from the actual doers, usually its as simple as checking if they confronted the market yet.

And yes for the forum, I expect that people that make a good attempt at game in the way you present it are bound to be self-starters and have the balls to confront direct feedback and learn from it. I still have to do this part myself though
hehe.. On your last sentence..I suspected who you are after your first post on this subject...Checked your email address just now and sure enough it's you!  I have emailed you about our first chat on the 6 month transformation programme.  Good to see you taking it seriously.

Cheers!
Do you actually want to make progress with your goals : aesthetic, business, women, fitness?  Check out the Secret Society VIP Members Club.
Check it out
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