Sustainable drive (the goose and the golden egg 2.0)

The trade-off between production and maintaining productive capacity is a universal phenomenon that has effected companies and individuals for all of time. Still, the hi-tech version of this has some unique twists.

To succeed, a startup must defy the odds by creating a brand new offering, building a company around it and getting to market before someone else does the same thing. Speed is a key success factor, not just in go to market but in driving your investors’ Internal Rate of Return (IRR) – a key metric of fund success. Speed, of course, does not lend itself to optimized work-life balance.

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Too much value?

It is a common criticism from startup entrepreneurs: Every VC says they add value, but in reality many don’t. What do you do when the opposite is true – when your VC is too involved and adding “too much value”?

I recently heard about a startup CEO who spends 2 – 3 hours every Sunday night with his lead investor. This is a significant commitment from both sides. I wonder what impact it has on the business (not to mention the CEO’s family…).

In some respects, this is a governance issue. How much involvement is appropriate for VCs who are also on the board? My view is that ultimately, management is accountable for results and building shareholder value. If management does not agree with the counsel of its investors, management must find a way to get everyone onside or be judged by the consequences when it comes to reporting results.

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The “B” Round

While no round of venture capital is ever easy to raise, the “B” or 2nd round is by far the hardest.

On your “A” round, you have a story and some interesting core technology. The World is full of possibilities and your future is all ahead of you.

In later rounds, you have proven commercial metrics and results to back up your technical foundation.

However, at the time of the “B” round, you’re in transition and it’s the period of greatest risk for operators and investors alike.

At this time, you likely have a 1st product, you’ve maybe even made some sales or gotten some beta customers. But you don’t have:

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The (dreaded) demo

It’s a classic move in the startup playbook: Rapidly prototype your product. Get something out there as quickly as possible. Don’t worry if there is a gap between the story and the actual product.

I accept this as a given and recognize that if we waited until the product was completely six sigma solid, we’d be last to market. Still, it’s always nerve-wracking when we unveil the product in its early stages.

In our case, these demos are for potential investors in a space that already has lots of competition. So the product needs to be really solid.

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