Tremendous

An angel investor's take on life and business

  • Four Cap Table Red Flags That Can Kill a Deal

    Deep in the bowels of a startup’s data room, there’s a critical document: the cap table. A problem with this document can kill a financing. Let me run you through 4 common cap table problems so you can avoid them.

    1) Dev Shop or Venture Studio on the Cap Table.

    Here’s something you never want to hear: “What’s ACME Ventures and why do they own 40% of the company?”

    Some startups come out of a venture studio. These programs are a lot like accelerators, except they take way more equity.

    A typical accelerator like YC takes about 7% of your company. 40% is outrageous.

    If YC, the best program in the world, gets 7%, why should any other program get 40%

    The problem with a venture studio owning so much of a company is it leaves way less stock for the founders. And they’re the ones actually doing the work.

    Some startups give a huge slug of equity to another group of predators, the dev shops. These agencies help build your product.

    I recommend against using them even if they don’t take equity. But if they take a big slice of your startup, it’s an absolute nonstarter.

    2) No CTO With 10% + Equity. A true founder owns at least 10% of the company at seed stage. When I see a startup that doesn’t have anyone technical at 10% + ownership, I get worried.

    Who will keep building product if this company runs out of money? Hired help will run for the hills.

    Only someone incentivized with a big chunk of stock will keep working even without a salary.

    A lot of startups are hiring a Founding Engineer or Lead Engineer, giving them a couple percentage points of equity, and calling it a day. No bueno.

    I also see an engineer being named “CTO” but without the ownership to back up that title. An engineer with 5% equity isn’t a true CTO.

    3) Departed Co-Founder Owns Too Much Stock. Sometimes, a co-founder decides this whole company building thing isn’t for him. I get it — the late nights, the crappy (nonexistent?) pay, who could blame him?!

    But you don’t want that guy owning a fat slice of your company. You want to reserve that stock for people who are actually contributing day to day.

    You can solve this problem by vesting everyone’s shares over 4 years, as most tech companies do. This way, you don’t reward people for work they haven’t done.

    If you messed this up and a departed co-founder owns a larger chunk, you can still recover. So long as they don’t own over 10%, it’s usually not a problem when you go to raise money.

    4) Founder Equity Too Low. To make a startup a big success, founders will have to work day and night for a decade. If we expect them to do that, they better have appropriate incentives.

    At the early stages, founders should own the large majority of the company. At the close of a seed stage funding round, the cap table might look like this:

    Founders: 60%
    Employees: 20%
    New Investors: 20%

    I’ve seen seed stage companies where the CEO’s equity was 10% or less. That means that after many more funding rounds, the CEO would own next to nothing at IPO.

    You can’t get someone to work 100 hours a week if they don’t own a meaningful piece of the company.

    Wrap-Up

    All these cap table problems come down to founder incentives. We want to assemble the right team and give them strong incentives to succeed.

    This means we need builders, and we need to give them serious ownership. We can’t waste ownership on venture studios, dev shops, or people who don’t work here anymore.

    In the early stages, keep your cap table tight and founder ownership high.

    If you do this, you’ll make more money. You’ll also find it easier to fundraise!

    What cap table problems are you seeing out there?

    More on tech:

    Why You Shouldn’t Raise VC in the Summer

    Remote vs. In Person: What’s Better for Startups?
    Why I Wait for a Lead Investor

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Why I Wait for a Lead Investor

    You love the founder and the company is crushing it. Time to write a check, right? Think again.

    There’s one other little matter that needs to be ironed out before I invest in a startup: finding a lead investor.

    A lead investor sets the price and terms of the round. The lead also does the deepest diligence on the company and will usually join the board if the company has one.

    Why is this lead investor so important to me as an angel? Let me explain…

    Getting to the Next Level

    My $5,000 check is not going to get a company to the next level all on its own. Neither will a $25,000, $50,000, or even $100,000 check.

    For a company to really break through, it’s going to take seven figures. And if you want that kind of cash, you need a lead investor.

    Lead investors generally put $1 to $2 million into a seed round. That’s the kind of cash that allows you to hire more engineers and sales guys and really upshift growth.

    Doing That Pesky Diligence

    Sometimes people ask me, “Francis, how do you diligence a company you’re thinking of investing in?”

    The answer is that as an individual investor, you really can’t. You’re relying on the lead to do the diligence.

    Of course, I can meet with the founder, use the product, read the deck and deal memo, research competitors, etc. And I do all that.

    But a good lead investor does a much deeper form of due diligence. They talk to customers, review contracts and bank statements, check on IP assignments, and a lot more.

    Imagine if every single person in the round did that. Customers might be getting 30 calls in the space of a couple weeks!

    That’s unmanageable for them. So angels and smaller VC funds rely on the lead to do that diligence.

    Better Performance

    At one point, I decided to run an experiment. What if I invested in whatever startup I liked, lead or no lead?

    I put a couple of checks into companies that weren’t even raising but were performing well. Fast forward a year or two…

    None of those companies is doing well. Meanwhile, many of the startups that had lead investors are doing great.

    If a startup can’t pull in a big round with a lead VC, there’s probably a reason — even if I couldn’t find it.

    What’s more, the startup that didn’t raise a big round is at a huge disadvantage. Its competitors could be sitting on millions.

    Getting The Round Done

    If I really like a company, I don’t just sit back and hope they get a lead investor. I make intros to VC’s in the hopes of finding them that lead.

    This lets me prove my value to a founder. If I made some great intros, he’ll save me a spot once that round comes together.

    Plus, I just enjoy helping founders I like!

    The One Exception

    There is one exception to the lead investor rule: a party round.

    Party rounds can work, provided enough cash goes into the company. What’s more, the largest single check sometimes does the same diligence a lead VC would anyway.

    I look for 12+ months runway signed and wired. Not “committed.” Not “soft circled.” In the bank.

    You’d be amazed how those commitments can evaporate when it’s time to actually write a check.

    Party rounds can still make great investments. In fact, my most successful investment to date was a party round.

    Wrap-Up

    As an angel, it’s easy to get excited when you meet a great founder. I get excited too!

    But these days, I never jump the gun.

    I want a lead investor before I write a check. This way, I know the company checks out on diligence. I also know they’ll have enough cash to hit the big time.

    Do you look for a lead investor?

    More on tech:

    The Simple Way to Angel Invest

    Why You Shouldn’t Raise VC in the Summer

    Remote vs. In Person: What’s Better for Startups?

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Why You Shouldn’t Raise VC in the Summer

    When I e-mail my friends in VC during the summer, they often take 1-4 weeks to get back to me. Are you sure you want to raise right now?

    Every year, venture fundraising hits two troughs: one in the summer, and another between Thanksgiving and New Year’s. And yet, some founders raise at those times anyway.

    Here’s why I think that’s a mistake…

    Giving Yourself the Best Possible Shot

    Raising millions of dollars is really hard. Why not give yourself the best possible shot?

    Raising at a time when many VC’s are on vacation puts you at a serious disadvantage. And you need every advantage you can get.

    You don’t want your company slowly running out of money while Jim the VC drinks spritzers on the Cote d’Azur. It’s not a serious issue for Jim, but for you, it’s existential.

    Landing at the Bottom of the Inbox

    Let’s say you e-mail Jim today. He doesn’t get back in the office for another 2 weeks.

    When he finally sits down at his desk, you’ll be at the bottom of his inbox. That means you’ll be waiting even longer for a reply — if you get one at all!

    You want to land right at the top. The best way to do that is avoid raising when people are out of the office.

    When to Raise

    If I were a founder, I’d start raising the first Monday after New Year’s or the first Monday after Labor Day. That lets everyone get back from their vacation, get through their e-mail backlog, and be ready to do business.

    A lot of VC’s are lazy. You want to remove any possible excuses. “Oh, I’m just getting back from vacation, blah blah blah.”

    So, the next two ideal dates to start raising would be Monday, September 9 2024 and Monday, January 6th 2025.

    What If You Can’t Wait?

    “But Francis, I’m almost out of runway! I can’t wait till September.”

    I’m sorry, but this is a failure of planning on your part. It’s best to raise from a position of strength, which means being breakeven.

    If you can’t do that, time your cash-out date carefully.

    You want around 9 months runway in the bank when you start raising. Many raises take 6 months these days. You want to still have around 3 months cash in the bank by the time the round is closing.

    Wrap-Up

    Some founders raise successfully in the summer. And not all investors take the season off. In fact, I did 4 deals last August, my most ever in a month.

    But the exceptions don’t matter. We’re talking about giving you the best possible odds of raising money.

    And the best odds aren’t in July when half the industry is eating gelato in Italy.

    When do you think is the best time to raise?

    More on tech:

    Remote vs. In Person: What’s Better for Startups?

    The Easiest Way to Help Founders

    The Startup Pitch Checklist

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    ·

  • Remote vs. In Person: What’s Better for Startups?

    Investors love to argue whether startups should be in person or remote. Wiz is remote-first and just got a $23 billion acquisition offer. Can we end this debate?

    The Game of Outliers

    Time and time again, I hear investors trying to sound all hard core, saying you’ve got to be in the office 5 days a week. But the evidence shows us you can build a great company either way.

    We’re in a business of outliers. Any criterion that could exclude a Wiz has to be dropped.

    Instead, we need to focus on factors that are more relevant.

    Are the founders great entrepreneurs? Is the company growing fast?

    A Peak Into My Portfolio

    In my portfolio, I have great companies operating in person and others that are remote.

    One of my most successful has everyone in an office in Queens 6 days a week. Another top performer is 100% remote — even the CEO works out of a Starbucks.

    Some founders love to be in person. Others like flexibility.

    The key for me as an investor is not to focus on a factor that doesn’t make much difference.

    My Advice to Startups

    If you’re starting a company today, here’s my advice: go remote.

    This lets you recruit anyone, anywhere. The best people are hard to find and hard to win.

    You, a tiny startup, need every advantage you can get. And being remote gives you an advantage in recruiting.

    Of course, it depends on the startup.

    For hardware companies, in person is a must. And for companies that are very sales driven, in person can be better, at least for the sales team. People in sales tend to prefer it — they feed off each other’s energy.

    Wrap-Up

    Wiz is the best case scenario in startupland. And it’s a remote first company.

    So if any of you investors think in person is the only way to build, it’s time to rethink that.

    We investors have only one job: find a Wiz. And we won’t get there by focusing on irrelevant details like whether everyone comes to an office.

    What do you prefer, remote or in person?

    Have a great weekend, everyone!

    More on tech:

    The Easiest Way to Help Founders

    Why I Passed: “3L”

    The Simple Way to Angel Invest

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Kamala’s Extreme Agenda

    Kamala Harris has called for a ban on private health insurance. There’s a word for banning private business: communism.

    Harris has since backpedaled on that statement. But it shows her instincts: anti-capitalist and anti-freedom.

    From healthcare to taxes to border security, Harris is a creature of the extreme left. Where Biden is liberal, Harris is an out-and-out radical.

    Banning Your Health Insurance

    If the old Harris gets her way, hundreds of millions of Americans would lose their health insurance. Ironically, that includes millions of people on Obamacare, the Democratic Party’s signature policy win of the 21st century.

    But hey, why shouldn’t the government be in charge of our health? Look what a great job they’ve done with education, the border, and pulling out of Afghanistan!

    Don’t get sick, folks.

    Opening the Floodgates

    I wish that taking away Americans’ insurance was the only extreme policy Harris has advocated for. But unfortunately, there’s a lot more.

    Harris has also called for decriminalizing crossing the border and abolishing the border security agency, ICE. This will result in a new wave of illegal immigration the likes of which we’ve never seen.

    NYC is already going bankrupt under the current influx. How will we survive an even larger wave?

    Bye Bye, 401k

    And if that wasn’t enough, Kamala also has a plan to slash the value of your 401k. She plans to raise the corporate tax from 21% to 35%, a massive increase.

    Even Biden never advocated for more than a 28% rate. If Harris gets her way, companies profits will shrink drastically, along with their stock prices.

    Bye bye, retirement.

    Leftists love to talk about Wall Street as if it has nothing to do with the average person. But most Americans’ retirement is tied to the stock market. Indeed, a majority of Americans own stocks.

    Extremist policies that kill our capital markets won’t just affect the rich. For the majority of middle class Americans, it will push retirement even further into the future.

    Wrap-Up

    We prosper when we’re safe and free.

    Taking away our healthcare and our retirement isn’t freedom. Opening the border doesn’t keep us safe.

    I thought we couldn’t do much worse than Biden. Well, I was wrong.

    Harris is an extremist. Her views are not the views of most Americans.

    And this fall, I expect to see her go down in flames.

    Well, that’s enough politics for this week! Tomorrow, we’re getting back to tech, and another hot debate: what’s better, remote or in person?

    More from the blog:

    Sacks at the RNC

    114 Days

    The Coming M&A Wave

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Llama 3.1 vs. ChatGPT: Battle Royale

    Yesterday, a sun kissed and fluffy haired Zuck introduced his ChatGPT killer: Llama 3.1. The latest open source model from Meta beats ChatGPT 4o on most benchmarks. But how would it perform in the real world?

    Today, I did a head-to-head test with 3 identical questions to find out.

    Question #1: Help Me Shop

    Last evening, I was thinking about buying a webcam so I can look a little snazzier on my Zoom meetings. But which one should I get?

    Instead of spending half the night browsing product listings, I figured I’d ask my new AI friends…

    Here’s ChatGPT…

    And here’s Llama 3.1:

    ChatGPT did great, giving me a list of well known brands at great prices. Llama’s answer, however, wasn’t helpful. It didn’t tell me a key piece of data — each camera’s cost!

    ChatGPT takes this round.

    Question #2: Scouting Startups

    Next, I used the AI’s to help me solve the biggest business problem I have: finding great startups. Specifically, I wanted to know which startups I should check out in the current YC batch.

    First, let’s try ChatGPT:

    Now, we’ll try Llama 3.1:

    ChatGPT was totally wrong. it pulled companies in the prior batch, W24. That’s not useful to me because they’ve already raised seed funding, and I like to invest at seed.

    Llama 3.1 makes the same mistake, also giving me companies from the prior batch.

    This one is a tie.

    Question #2 shows how hard it is to use LLM’s for mission critical tasks. They’re just not reliable enough yet.

    Question #3: Market Research

    One of the main things I use LLM’s for is to research unfamiliar markets.

    One minute, I’m looking at a consumer social company. The next, it’s a SaaS platform for oil refineries.

    LLM’s are super helpful in getting me up to speed on those unfamiliar corners of the economy. So I asked the dueling AI’s about manufacturing SaaS.

    First, we’ll go to ChatGPT:

    Now, let’s try Llama:

    ChatGPT gave a good and thorough response, calling out 11 different platforms. It wisely listed Excel first. Never underestimate how widely Excel is used to pull off complex tasks!

    Llama 3.1 gave almost the exact same response. It mentioned many of the same tools like Oracle and SAP, along with Excel.

    I’m calling this one a tie as well.

    Wrap-Up

    Overall, ChatGPT is still the reigning champion, winning 1 question and tying the other two. Nice try, Meta, but you’ve still got a ways to go!

    What do you think of the new Llama?

    More on tech:

    The Easiest Way to Help Founders

    Why I Passed: “3L”

    Retool’s YC Demo Day Pitch

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • The Easiest Way to Help Founders

    “What’s the best way to help founders you’ve invested in?” Last fall, I posed this question to one of the top early stage investors. His answer surprised me.

    “Share their posts on social media,” he said.

    “That’s it?” I thought. “Anyone can do that!”

    Yes, anyone can. But hardly anyone does.

    Clearing a Very Low Bar

    Take one of my most successful startups. Twitter is their main customer acquisition channel.

    I try to retweet everything they put out there. And despite the long list of names on their cap table, I’m usually the only investor doing this!

    Whenever I see that no one else has bothered to help, I shake my head and mutter. But I also crack a little grin.

    “I just beat the competition,” I think to myself.

    Just like founding a startup, investing in startups is a competition. You have to be better than the next available investor.

    Fortunately, it doesn’t take much! Most aren’t willing to do even the simplest tasks to help the company.

    Hacking the Algorithm

    The more people like, comment, and share a post, the greater its reach. If even 5 investors all take the time to share a company update, that update could go viral.

    A single viral post can bring in dozens or hundreds of leads for a company. So believe it or not, those little likes and shares can translate into serious cash.

    As one post after another goes viral, the startup builds a huge social presence.

    This is absolute gold. A giant social following means you can get in front of tons of potential customers whenever you want, absolutely free.

    Going for Extra Credit

    Sharing a company’s social posts pushes them up the timeline on Twitter or LinkedIn. But I have another little trick to nudge them up another critical ranking — the Google search results.

    I announce every investment I make in a blog post — with the founder’s permission, of course. I love telling you guys what I’m investing in. But I also have an ulterior motive…

    My post pushes them up the Google results. I do this by linking to their website, which builds their domain authority.

    My site has been around for almost four years. That’s longer than many of the startups I invest in.

    A link from a well-established site like that provides an especially strong push up the Google rankings. Every little bit helps!

    Wrap-Up

    Retweeting a post or shouting out a startup on my blog isn’t exactly moving mountains. It’s ridiculously easy and only takes a few minutes.

    But that’s exactly my point. Most investors won’t help, even in these very low effort ways.

    If you will, you have a big advantage in winning the best deals.

    Plus, it’s fun! You’re part of a secret cabal trying to get that startup in front of as many eyes as possible.

    Startups need all the help they can get. A few investors shouting them out online just might put them over the top!

    How do you help startups you invest in?

    More on tech:

    Meet My Latest Investment: North

    Why I Passed: “3L”

    Retool’s YC Demo Day Pitch

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Why I Passed: “3L”

    They were raising $8 million at a $35 million post-money valuation. Despite a great founder and some blue chip customers, I passed. Here’s why…

    “3L” is a tool for law firms to recruit new attorneys coming out of law school. ”3L” is a composite, not a real startup, and the name is made up. But it shows why slow growth and outsourced development make it hard to raise money.

    The Good

    In just 2 years, “3L” had signed up some impressive customers. Many top law firms were using the platform to find new attorneys.

    The founder, “Tim,” knew his market inside and out. He had been a Biglaw attorney before starting “3L” and he knew what these blue chip firms wanted.

    When he demoed “3L,” I was impressed by how easy it was to browse the profiles of new law school grads. If you want a new associate who’s done a lot of coursework in securities law, you can find one in just a few clicks!

    The Bad

    “3L” had an awesome platform. But they were having a hard time finding new customers.

    Revenue had been flat for the last 6 months. Rapid growth in prior years had slowed down to a crawl.

    The founders had a plan to hire more salesmen and pump up those numbers. But whether that plan would succeed was anyone’s guess.

    “3L” also relied on a team from Bulgaria to write most of the code. This may have slowed them down — collaborating across time zones and language barriers isn’t easy.

    Decision Time

    Looking at the “3L” deal, I asked myself: “What am I buying here?”

    We’ve got a business that isn’t growing. The team doesn’t have the technical skills in-house to make a better product that would sell faster.

    Remember, “3L” is one of 100-200 deals a month I see. Many of those are highly technical teams with fast growing businesses.

    As much as I liked “Tim,” I couldn’t justify investing in “3L” over all those other companies. I passed.

    Wrap-Up

    Lots of companies are like “3L” — strong initial growth that quickly peters out. In a situation like that, fundraising is tough.

    The best solution is to get to break even, find some ways to grow a little, and then raise from a position of strength.

    For investors, we have to focus on backing technical teams that are growing fast. In an industry rife with failure, they are our best chance of success.

    Would you have invested in “3L”?

    More on tech:
    Why I Passed: “ProductPreview”

    A Peek Into My Founder Meetings

    Retool’s YC Demo Day Pitch

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • A Peek Into My Founder Meetings

    Here are some questions I asked founders at actual meetings this week. Draft some answers to these, and you’ll be better prepared for your investor meetings!

    1) “What’s your vision for [Startup]?” This is the first question I ask every founder. I put it first because it’s the most important.

    I want to hear not just about where the company is, but where it’s going. Here’s an example:

    “My vision for Uber is to make it easy for anyone to get a ride anywhere, anytime.”

    That’s ambitious. That has the potential to be a world-changing company. That’s what I want to back.

    You want to get the vision down to a single, clear sentence with zero jargon.

    2) “What made you want to start this business?” I’m gauging how deeply interested the founder is in the problem they’re solving.

    Building a startup is so hard and pays so poorly that only a nutjob would do it. A nutjob who’s obsessed with a problem they just have to solve.

    My job is to find those nutjobs and give them money.

    3) “Tell me about your team.” I’ve already done some research on this before the meeting. But I want to hear from the founder why he assembled this team and why they’re the right people to take on this problem.

    I’m especially interested in learning about his co-founders. How do they know each other? Why are these the right people to partner with?

    4) “Who writes the code for this startup?” I want at least half the founders writing code.

    It’s pretty hard to create a software company if you don’t have anyone who can build software. This is a core capacity that we cannot outsource.

    If the company runs short on cash, that hired help will be gone. Can the founders keep building and getting closer to product-market fit?

    If not, the startup is dead in the water.

    5) “How do you find customers?” I don’t expect an early stage founder to have his entire sales process worked out. But I do want to see some early success in winning customers.

    I also like seeing how the founder approaches this problem. Do they throw money at it, buying a bunch of ads? Or do they find creative ways to get in front of their users for free, like a Facebook group?

    Those creative, resourceful founders will win.

    6) “What are your early customers telling you?” I’m judging how close the founder is to their customers and how well they listen.

    If you look at any great startup like Mercury, Superhuman, or Intercom, they know their users inside and out. They talk to them constantly. And they continuously ship new features that make those customers happy!

    I want to see the founder doing that. They should know what their first customers like about the product and what they don’t. And they need a plan for addressing the latter.

    7) “Can we run through a demo of your product?” I’m always flabbergasted when an investor doesn’t ask for a demo. How would you know what you’re even discussing when you haven’t seen the product?

    I’m looking for how well it solves a user’s problem. I also want to see how good the design is. Pretty products sell.

    The founder should know every inch of that thing as if it were his own living room.

    Sometimes a founder is unable to give me a demo. Whenever that happens, I start to wonder…

    “They told me this thing is live. Is that really true? Is this vaporware? Or does the founder of the company not even know how to log into their own product?”

    In any case, no demo, no check.

    Wrap-Up

    Try to draft an answer to each of these. The answer should be brief, concise and specific. Take about as much time to answer the question as it takes me to ask it.

    The questions every investor asks you will be a little different. But if you can answer some of these common ones, you’re a lot closer to getting a check!

    What do you ask founders?

    Have a great weekend, everyone!

    More on tech:
    The Question No Founder Asks
    My Top 5 Pitch Deck Pet Peeves

    Meet My Latest Investment: North

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • The Question No Founder Asks

    “How can I make this pitch better?” A founder asked me that this week. It’s something I almost never hear — and something every founder needs to ask.

    When you raise a round of funding, you might meet 100 investors. You have two choices:

    A) Give the same pitch to everyone and wonder why people keep passing.
    B) Improve the pitch each time, making fundraising easier every day.

    At the end of every pitch, ask for feedback. As each investor gives you ideas to make the pitch better, you get closer and closer to a perfect pitch.

    How This Played Out In a Real Meeting

    Let’s go back to my meeting this week.

    On Tuesday, I met with a great SaaS founder. We talked about his vision for the company and the awesome team he’d built. Next, I asked for a demo.

    Instead of taking me into the product itself, he showed me a Figma. I asked if we could see the live system, but he wasn’t able to show me that.

    I furrowed my brow a bit, made a note to myself, and we moved on…

    At the end of the meeting, this canny founder asked, “How can I make this pitch better?” So I told him…

    “I think you guys have a great start. But I’d like to see a demo of the live system. Seeing a Figma isn’t the same. When investors can see the platform in action, it helps them build conviction that you’ve got something awesome here.”

    And let me tell ya, this guy was smart. He didn’t argue with me. He thought about what I said and thanked me for my candid input.

    This is a fella who is going to improve fast.

    Making Those Moneybags Work for You

    I don’t care who you are, most of the investors you meet with are going to pass on your company. So you may as well get something out of the meeting, right?

    At the end, ask them this question, in exactly these words:

    “Can you please give me your most unfiltered feedback on this pitch? I want to step up my game.”

    Even if you ask for feedback, investors will default to polite platitudes. We don’t want to make anyone mad and hurt our reputation.

    By asking the question exactly this way, you’re giving them permission to be brutal. And brutal is what you want.

    Brutal helps you learn.

    Take note of every piece of feedback. Try to work it into your pitch to make it better.

    Wrap-Up

    Lets say you do 100 investor meetings.

    Meeting #1 might suck. But if you keep triangulating toward a better pitch each time, pitch #10 will be a lot better. #50 will be a banger.

    And before you know it, you’ll have millions in the bank.

    It’s hard to hear negative feedback. And for investors, it’s hard to give it.

    But it’s necessary. Happy talk doesn’t help anyone get better.

    Embrace that criticism. Every ounce of it helps you!

    What have you learned from your investor meetings?

    More on tech:

    My Top 5 Pitch Deck Pet Peeves

    Retool’s YC Demo Day Pitch

    Meet My Latest Investment: North

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order.