Erm, nope. Unfortunately, I downloaded the iOS app before Apple finally stopped their annoying "growth hack" by introducing a permission for accessing the contact list.
To this day, I still have ex-girlfriends, one-time ridesharing buddies and even some fictuous people "waiting to connect with me" on LinkedIn.
Can relate, I failed at the game of academia as well. In the end, on LinkedIn I gave up and ended up just putting in my college, but without listing a degree. Funnily enough, it looks pretty much like I finished to the uninitiated outsider.
Now that I'm CTO of one of the more successful startups in Berlin, that's actually one of my pet peeves for rejecting job offers when applicable. Microsoft just offered me a very well paid startup CTO position, but I told the recruiter he must be wrong, as I didn't fit their requirements (i.e. a finished degree)...
I take the same approach, listing the (non technical) area of study and years of attendance. People tend to assume this resulted in a BA, which is not the intent. I've struggled with whether this is duplicitous on my part. Generally I feel that listing no education would be a lie of omission and not relay the story of my professional career properly.
Interesting data point. However, we're happily chugging along with 6 co-founders, bootstrapped to currently 30 mln us$ valuation and we've only just begun.
Then again, your point about "visionaries" (with which you probably mean high-ego people needing a lot of approval) rings true to me. We're all pretty low-key hard-working people with a lot of self-reflection and humility - also it helps it's not the usual failing friends, family or uni buddies combo but we're really more of a casting band with a team mixed and matched from industry professionals by our main founder.
In this very setup, it's actually very enjoyable with a lot of pros: Scaling is much faster and easier with invested veterans at the helm, all important departments are headed by founders, also having same-level people in the same company helps enormously with the more difficult decisions and just professional exchange, growing as leaders and 1-1 mentoring. If - and only if - the base of trust is there and continuously honed through communication, this is an amazing way to work and learn.
As someone who actively works researching personality psychology, I can fully attest to this.
There actually seems to be somewhat of a Dunning-Kruger like effect when it comes to people evaluation skills. Generally, those who appear the most confident about their people judgements, also seem to be those who are wildly speculative and inaccurate about what other people are thinking.
'Not knowing what someone else is thinking' - is completely different from 'knowing human nature'.
For example, people tend to be a little lazy, or tend towards 'doing less'. If one could get 100K for sitting on one's butt - most people would take the offer. Some people would rather work, or do something more creative.
This is different from being able to 'read' people.
Yes, but unfortunately people tend to make a lot of critical decisions based around what they interpret other people's motives to be; leaving out that bit of human behavior from the equation can be a big deal.
One ceo may may look at a worker exhibiting stereotypical output of a "lazy" person and decide this person must not care about their work and thus should be fired. Meanwhile another may see this as a symptom of burnout from caring about their work too much and decide the worker should get some time off to relax. Regardless of who's interpretation is correct, it is a decision than can have a big impact on a person.
The behavioural economics approach is definitely worth keeping in mind regardless of people-reading ability, but we should be weary of interpreting such things as being too 'directly applicable' in anything other than very generalized circumstances. Unfortunately, I've seen my fair share of cases like the example I stated above, so it is worth remembering that there is no such thing as "the average person". Not to say there aren't definite patterns of behavior of course, but that's a whole other conversation.
Yeah, I am weary of the slobby fat guy with bad manners being perceived as 'lazy' - those guys can be just as much the opposite of that as any other.
I agree with most of what you say, but I disagree that there isn't such a thing as the 'average person', or rather, we are animals, somewhat predictable, not that unique.
> we are animals, somewhat predictable, not that unique.
Oh I agree completely, didn't mean to give the impression I advocate the "special snowflake" view of the world either. My apologies! My entire field of research is practically based around our predictability ;)
What I meant to say rather, was that while there are definite behavioural patterns, they tend to cluster into discrete groupings, rather than being broad and generally applicable traits that can be used on everyone across the board in aggregate (i.e. a singular "average person"). There are certainly many 'trivial' human traits we all share in common of course, but I've found those to be less helpful in personal decision making situations than more specific correlated traits. But then again, I might be a bit bias given that's my area of expertise :)
You admit you have a main founder. Does this main founder have sorta ultimate authority? Or does he hold the singular original vision from which everyone else's vision/mission/purpose comes from?
What's the equity split like among the 6 of you?
What created that base of trust you describe? Was it everyone agreeing to follow the "main founders" vision, and him being respectful and not ego driven (so that the vision became shared?)
> Was it everyone agreeing to follow the "main founders" vision, and him being respectful and not ego driven (so that the vision became shared?)
Pretty much exactly that plus providing the seed round. In practice, this also definitely had a lot to do with things working out well to have a center piece that's stable, predictable and a little detached, quite the opposite of a show-off. Buying into a main vision and then transferring it into a vision for tech, marketing, sales, product and operations was much easier that way.
Equity split was 50:others by the way.
Now you might argue this isn't a "real" as in "more equal" cofounder dynamic, but giving away 50% of your company before even starting and then treating those people as equals made a lot of difference, including an enormous buy-in at all key builders of the company. After having experienced how well it played out, I'd do it the same way.
What's the salary dispersion among the founders? It sounds like you've solved one of the main issues that prevents good people from leaving their stable jobs to found startups, which is providing actually meaningful equity to a base of qualified and capable people instead of hoarding it between 1-2 founders and investors, leaving only fractions of a percent for the earliest employees.
I'm curious if you also cleared the other huge hurdle: giving up 70% of individual earning power for what is essentially a lottery ticket.
Personally, I think the buck has to stop somewhere, and it's more important to be united in a vision than to be right, or to be struggling for what's right. At the same time, it doesn't work when the person with whome the buck stops is authoritarian. I respect someone who is wrong who at least has a reason for being wrong based on their perspective of the situation. But I can't abide someone who is wrong and who forces the startup to do the wrong thing because they have the authority of position. I find those people are not going to be predictable in the mistakes they make, and more importantly the will not recover from them.
I asked the questions because I think you might be onto something, a way to split things up and have genuine founders without the "everyone gets 1/n of the equity" equality that leads to strife.
Him putting in the seed round and other contributions necessary to give him the weight that makes it a valuable deal for everyone also seems to be a key element in your situation.
> If - and only if - the base of trust is there and continuously honed through communication, this is an amazing way to work and learn.
This is the key, and something narcissist don't do. It's against their nature. They thrive at hugging communication and controlling the flow of information.
Spot on. We're at a 8 digit dollar valuation here after just 2 years of hard work and nobody knows yet - as we don't hang out on shiny conferences or court "prestigious" VCs but simply put the pedal to the metal from day one with a kick-ass team.
Zero financing rounds and not a single name in our Crunchbase entry to date, and we'll come in with a bang one day.
VCs were simply too slow to follow our pace so far (by now we grew out of their typical round size & target multiple) and we'll probably grow profitable without them.
Sociomantic did the very same thing by the way and nobody was any wiser when they did a huge exit from nowhere. Thanks to the environment, it's still pretty easy to bootstrap in Berlin and go after alternative financing sources (it's starting to change though, starting at the rents).
There's still the usual Rocket copycats and some interesting SV-style overhyped BS startups too by now that won't survive - but by and large Berlin has a lot of humble, technically excellent and hard working startups to offer. It's definitely going to survive the down-market to come.
>We're at a 8 digit dollar valuation here after just 2 years of hard work
and
>Zero financing rounds
Are a contradiction. Valuation isn't something you come up with your executive team or your accountant, it's the number that is deduced from an investmenet or an acquisition.
Also, valuation is by no way a measure a success, the real measure of success for a company is the amount of profit.
There's no rule to how to calculate valuation. You can take your profit numbers and run them against a multiplier based on industry. Ex. using an average of the profit to valuation ratio of the next 3 competitors.
That would be a generally fair assessment of valuation, and shows how one can calculate valuation without direct investment by an outside party.
You are right to doubt the valuation - in fact, you would be right to question any valuation, since all parties involved benefit from inflated valuations (to a point).
> How does an investor benefit from overpaying for equity?
It's not overpaying if they know exactly what they are doing and why: they can afford to pay for an inflated valuation. Also, value is subjective. If you go down Sandy Hill doing valuations, you're bound to get wildly different values - which one would you consider "correct" or "overpaying"?
Possible benefits, in no particular order:
* Increases chances of startup accepting their investment.
* Halo-effect on their investment. If $STARTUP is worth $X billion, then surely "they are onto something big". This in turn increases the chance of the startup succeeding
* Prestige/profit. If you were publicly buying a painting for ap speculation/resale, surely you can afford to pay 10% extra if it increases the painting's percieved value by 30%. Now you own a painting that's worth 30% more than it's "real" value (had you not paid more)
> I humbly suggest that the wildly varying values you get on Sand Hill is from varying beliefs, not a conspiracy or a scam.
I wasn't suggesting conspiracy, my point is there is no "one true valuation" so answering the original question "valuation according to whom?" doesn't provide useful information.
Although we have a rather nonstandard business area (not the usual ecommerce/saas/social/gaming stuff) and have no direct competitors, we could get a good grip at it by going down several routes: talking to industry experts, comparing indirect competitors' valuations and also by extrapolating from usual relevant business metrics such as current and projected revenue, traffic, margins, growth rates, and market size.
We also talked to quite some VCs who confirmed our range to be pretty spot on in initial negotiations.
Can't disclose for obvious reasons, but the potential isn't that hard to understand actually.
Still, the first big unexpected hurdle was that VCs were totally "blinded" by their previous expertise. They tried to apply numbers from their well-known business areas (social / saas / ecommerce) to our model, which simply didn't fit our business case. So we went out and built the product and sold it to large clients anyway.
Thing is: Our product by now outperforms the next best option for our clients by 100% with no alternatives or competitors in sight (it's a little niche-y, but still a multiple billion dollar market).
With a product like that, the second thing that we didn't expect was that we tripped the "too good to be true" sensor everywhere, raising doubts.
And when we were over it, VCs seemed to have an ego problem with being "too late", us not wanting to do a particularly large round, them not reaching their target multiple to save the fund, us being "too expensive already" or them always wanting to "advise" a team of industry veterans and second-time entrepreneurs that demonstrably knew better than them - instead of simply putting in their money and help with PR and their networks instead.
Thing is: All investors say they want a great team, stellar culture, demonstrated product-market fit, fast execution, great technology and hockeystick growth.
We brought it all to them and found out that if you know you have it and are asking a fair price for it, 99% of them are too scared to jump on board of a train that's already full steam ahead. They'd rather be the one discovering it.
What I took from it is that awesome VCs are just as hard to find as awesome start-ups.
"We brought it all to them and found out that if you know you have it and are asking a fair price for it, 99% of them are too scared to jump on board of a train that's already full steam ahead. They'd rather be the one discovering it." --
Interesting. Have you tried to reach out to non-German VCs as well?
you've given a lot of hard data but fail to draw the obvious correct conclusions, that the reason you haven't raised financing is because you're not located in Silicon Valley and don't have an office there.
>We're at a 8 digit dollar valuation here
What do you mean by this, given your next sentence that there are 0 financing rounds - then how do you have a valuation? I'd like to know what you meant by 'we're at an 8 digit dollar valuation'.
>Zero financing rounds and not a single name in our Crunchbase entry to date
>VCs were simply too slow to follow our pace so far (by now we grew out of their typical round size & target multiple) and we'll probably grow profitable without them.
>Still, the first big unexpected hurdle was that VCs were totally "blinded" by their previous expertise.
all of this is completely standard. you wouldn't have experienced it if you had been in silicon valley.
your story kind of proves that VC funding is not an option in Europe.
>Our product by now outperforms the next best option for our clients by 100% with no alternatives or competitors in sight
this is a typical case in which a European company can't raise money at a normal valuation.
Another typical case is if its product outperforms the next best option by 500%. Yet another case is if it has no competition and 100% monthly growth. None of these things would let a European company close a normal round, nor would cash flow do the same.
>With a product like that, the second thing that we didn't expect was that we tripped the "too good to be true" sensor everywhere, raising doubts.
I do expect that. No European company will get an investment at a reasonable valuation for this.
>We brought it all to them and found out that if you know you have it and are asking a fair price for it, 99% of them are too scared to jump on board of a train that's already full steam ahead. They'd rather be the one discovering it.
Slight correction: 100%, not 99%. If it were 99% you'd just need to talk to a hundred investors, which you could do in about 2 weeks (10 workdays * 10 investor relationsihps per day = 100 investors.) So it's not 99%, it's 100%.
>What I took from it is that awesome VCs are just as hard to find as awesome start-ups.
Awesome VC's don't exist in Europe. Awesome startups do.
I've never heard of an even acceptable European VC.
The next time one of them wastes your time, ask them this:
"I'm afraid I don't talk with European VC's until they've proven that they're qualified buyers, since it is a waste of my time. So, I'd like to ask you a hypothetical qualifying question. Suppose you were wanting to invest in a company that had the following statistics: firstly, it received $600K in European Union funds as a grant to develop a technology, this was free money and did not need to be repaid. Second, suppose they were successful in developing their technology using this money and applied for and were granted strong international patents on their fundamental innovation, including a U.S. and EU patent. Third, suppose they've sold 1,000 products in the first 9 months, generating $1 million in sales from their first run, which they did not book a profit from. Due to strong international patents, suppose that at this stage they have a protected market and are targeting 70% margin (30% of the sales price is their cost of goods + other fixed amortized costs). Having sat down and done the calculation, you give them a discounted future earnings of $10M, based on your most conservative (lowest) targets of the number of orders that they ship, and based on nothing more than multiplying the number they have already shipped with slow single-digit growth for 5 years and then a drop to 0 because you do not model farther ahead than that. The basis for the growth is the products they've shipped in the past 9 months, and their lack of competition, their protection, and so on. For a company that had all of these assumptions, what might be a fair valuation (or range) for a $400K investment?"
Watch them not answer that question, at which point you terminate the conversation and stop wasting your time.
I came up with this example because it's the closest thing I could think of to validated, free money.
I would never talk to a European investor. If they gave me an acceptable answer to the above, I would ask for a reference. If the reference were to a successful European startup they've funded, I would send them a pitch deck and ask for a non-refundable earnest money deposit if they want to talk to me about it (something small, like a few k $.)
if they wanted to talk and did so, I would answer all their questions and tell them what terms I would accept and ask for a term sheet if they are interested.
if they offered terms I would sign it and get their money. if they didn't i'd stop giving them my time.
There is zero chance any European VC will get to the stage where they are giving you money under reasonable terms, though. what happens is you just cut them out.
Next time, just spend 3 days opening an office in silicon valley. you can fly out and have your money in a few weeks, rather than waste months on unqualified European VC"s.
would you talk to a mcdonald's cashier about selling your ferrari to him? Maybe for a minute.
A former boss of mine had Strong Opinions on this subject, risk aversion. His opinion was that the UK, and Europe generally, is still somewhere where you have to know the right people to get ahead. Success or failure is too much dependent on social position, not hard work or the quality of your ideas. Indeed, having good ideas as an "outsider" is likely to count against you due to being a disruptive threat to the social order.
Part of this affects the banking culture; it doesn't matter so much whether you lose or gain money as whether you did so following the conventional wisdom. If you lose money doing something unconventional, it's social and career death. If you lose it in something conventional like real estate speculation, that's fine, and you can keep drinking with the Right People who've also lost money in real estate.
they don't know what they're doing. For example, why would anyone filter out things that are too good to be true? that's what due dilligence is for.
If I'm a VC and someone sends me, "hey, I pitched you xyz two years ago, you didn't invest. but I remember you know materials science and had worked as a trader. I'm introducing my friend, he's a chemist at MIT and he has just come up with a way to make a material that sells for $87,000/kg in any quantity for $1/kg + his proprietary sauce. he also doesn't want to destroy the market for it. I know it's a stretch but if you still have that materials science interest I think you would find after DD that he really does have the goods. I'm attaching his pitch deck which doesn't contain a lot of information. I've known him since grade school, when he was 9 he did the blades for the first wireless quad copter that streamed HD video, I don't remember the details but the alloys had a bunch of constraints and he ended up using a special plastic normally used in medical applications. Anyway he then concentrated heavily into materials science, would need some measure of coaching but is very coachable, and we talked about his project at an alumni dinner a few days ago. he casually dropped that he's doing 100k in trading sales without revealing to his buyers that he's making the stuff in his kitchen rather than trading it. I don't believe he ran a business and is a sole founder. let me know if you would like an introduction."
so what do you do?
you get that introduction, you read the pitch deck, and if it's too good to be true you fucking do due dilligence.
what does a european vc do, "oh no, this seems like free money to me. That's not what we're really about here."
To this day, I still have ex-girlfriends, one-time ridesharing buddies and even some fictuous people "waiting to connect with me" on LinkedIn.