Putting the Cart Before the Horse

April 5, 2023

A founder’s time is the world’s most valuable resource. And every day, I see them waste it.

Let me explain…

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Investable vs. Not Investable

All day every day, I get pitches from ambitious entrepreneurs. I love talking with them — but they usually have the same problem.

Their company isn’t ready for investment yet.

Their product isn’t finished. They have no customers. They have no revenue.

And they all want to raise venture capital.

I get it, we all need money! But consider the investor’s perspective.

Every year, I look at over 2000 deals. I choose around 10, or 0.5%.

At that point, I’m going to pick companies that are launched with some paying customers, right?

It’s an easy way to narrow down the list. Paying customers also show they can build a product people want.

Given the available deals, why would I put money into a company with no product and no customers? It just wouldn’t make sense.

There is the rare investor who wants to invest as early as possible. But they seem to be even more elusive than the unicorn startups we’re all chasing.

Capital Raised Per Hour

Consider your precious time. For every $1 million in capital you raise, how many hours will it take?

If you have a launched product making $20,000/month in revenue, perhaps it takes 200 hours to raise a $2 million seed. That’s $10,000 per hour.

Now, what if you are pre-product?

The odds of raising at all are very slim. Even if you did, it’s likely to be a much smaller pre-seed round of, say, $500,000.

What if that takes up half your time for a year? Perhaps you’re working 70 hour weeks, and spending 35 on fundraising.

That’s just $275/hour, about a 97% lower yield than the founder with some traction.

What Do I Do for Money in the Mean Time?

Accelerators are a great choice. They’re used to working with early stage companies and typically provide $100,000 to $150,000 plus a great network.

But even most of them want to see a finished product. So get that out the door as soon as you can!

But I Need Money to Build the Product!

Time for the hard truth. If your team doesn’t have the technical skill to build an MVP, investors won’t touch it anyway.

You can’t make a software company without people who know how to make software.

But all is not lost!

You can learn coding. And you can also use amazing no-code tools like Bubble to get an MVP out the door.

Wrap-Up

Raising money isn’t the best use of your time at the earliest stages. Especially in a down market, you’ll be beating your head against the wall.

Do you want to have Zoom after Zoom that goes nowhere? Or do you want to build an awesome product and get some paying customers?

Once you have that, we investors will be calling you.

Best of luck!

What are your experiences with fundraising? Leave a comment and let me know!

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More on tech:

Which Accelerator Should You Choose?

Scare the Sh-t Out of VC’s

Ace Your Investor Meeting

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The Pizza Princes of Grimaldi’s

April 4, 2023

Pizza is a religion in New Jersey, ranking just below the Catholic Church. So I observed a moment of silence as I entered the inner sanctum.

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This is Grimaldi’s in Hoboken, NJ. Founded in 2010, Grimaldi’s serves outstanding Neapolitan and New York style pizzas from its 1000 degree coal oven.

After perusing the extensive menu, I decided to order the original: a margherita.

I tried to pay attention to how my friend’s week had gone, but I kept getting distracted. Just feet away, pizzaiolos were shaping dough with the skill of Michelangelo.

Whenever a pizza came out, I eyed it like a hungry dog. Shoot, not mine!

Then, the moment of truth. Our waitress placed my steaming pie in front of me, and I beamed.

Hoisting the first slice, I could tell the crust was crispy but not singed. Perfection.

Time for a bite….

I could almost see the garden where the tomatoes were planted. Fresh basil perfumed the luscious fruits.

This was the best pizza sauce I’ve ever had.

The mozzarella was soft and unctuous. The crust: airy and crisp.

You won’t find a better margherita. I made just one mistake: not ordering the larger size, like my friend did!

Perhaps the reason Grimaldi’s is so good is its attention to detail.

Every pizza is carefully formed. Every drink comes in a frosted glass.

That’s what it takes to be the best.

Grimaldi’s also has mouth-watering entrees like eggplant parm. I have to try it some day — if I can ever turn down the pizza!

Grimaldi’s is conveniently located on Hoboken’s Washington Street. It’s open from 11:30am to 11:00pm, seven days a week, and even delivers.

Stop in for the pie of your life!

What are you favorite pizzerias? Leave a comment and let me know!

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Chocolate Almond Croissant Paradise

April 3, 2023

Strolling down a side street in North Jersey, I popped into a small storefront. Inside: the best almond chocolate croissant I’ve ever had.

This is Petite B French Bakery in West New York, NJ.

In a town that’s historically Cuban, Petite B brings a different flavor. The owners, originally from France, opened in late 2020 to rave reviews.

I feasted my eyes on baguettes, lemon tarts, and madeleines. But I was here for one reason, and one reason only.

A chocolate almond croissant.

This is the granddaddy of French pastry. You get everything wonderful at once: buttery layers of pastry, smooth almond cream, and rich chocolate.

I ordered, paid, and scampered off like a mouse with a treat. Standing on the sidewalk, I gingerly removed the pastry from the bag, not wanting to lose a single almond.

I bit down through crunchy layers of pastry and nuts into the gooey interior. Perfection.

A good almond croissant is moist without being soggy. Its outside is crisp, its inside yielding.

Petite B does it better than anywhere I’ve ever been, even in France.

Petite B also has excellent prices. A cannelé is just 50 cents, the lowest I’ve ever seen.

This sunny bakery offers a lot more than pastry. Savory dishes like quiche and croque monsieur round out the menu, along with a wide assortment of La Colombe coffees.

There’s even a spacious outdoor seating area in the warmer months!

I used to have to go to New York City to get some of my favorite French foods. Not anymore!

Petite B is open every day but Monday. Closing time varies throughout the week, so be sure to check the hours before your visit.

I hope you enjoy this taste of France as much as I did!

What are your favorite bakeries? Leave a comment and let us know!

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Ace Your Investor Meeting

March 31, 2023

You dial into Zoom, palms sweating. This is your big moment.

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What should you say in a meeting with investors? How do you impress them?

After meeting hundreds of founders, here are my top tips:

Time Management

First, manage the time effectively.

You want to present for 1/3 of the time and save 2/3rds for questions. If you have a 30 minute meeting, you can take them through the deck for 10 minutes, then take questions for 20.

Some investors prefer to jump straight to questions. Be prepared for that as well.

The biggest mistake I see founders make in meetings is not leaving time for questions.

Every investor has objections. You have to overcome them to get a check.

But how can you overcome them when you don’t even know what they are? That’s why taking questions is so important.

How to Answer Questions

Each answer should take about as long as the question did. Here’s a good example:

Investor: “What’s your current ARR?”

Founder: “We’re at a $1 million ARR run rate.”

And here’s a bad one:

Investor: “What’s your current ARR?”

Founder: “The down market has been really crazy, right? We started off 2022 with some amazing traction, but we ran into some headwinds in Q4. Customers were reducing their SaaS budgets and really battening down the hatches. But we managed to get a great new sales guy and revenue is up! We’re also working on a pivot to enterprise. I think we’re going to have an awesome Q2. This can only last so long right?”

You won’t believe how often this happens. Investors get long, meandering responses that never answer their question in the first place.

We’re left to assume the news isn’t good.

Answer questions directly and concisely. It gives investors the info they need and respects everyone’s time.

Qualify the Investor!

You have to sell the investor. But never forget that you’re going on a 10 year journey with this person.

Why does this person belong on your cap table?

Feel very free to ask investors how they engage with portfolio companies. How do they like to add value?

You’re also well within your right to ask for founder references. Any solid investor should be able to provide them.

Wrap-Up

These meetings can be the difference between banking millions for your startup or coming away empty-handed. If you manage time well, answer questions directly, and get the right investors involved, your chances of success skyrocket.

Best of luck!

What challenges have you seen in founder-investor meetings? Leave a comment and let us know!

Have a great weekend everyone!

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More on tech:

Which Accelerator Should You Choose?

Scare the Sh-t Out of VC’s

“How Can I Be Helpful?” Gets Put to the Test

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Which Accelerator Should You Choose?

March 30, 2023

If your startup has a couple of customers, you’re at a crucial point. Your product is beginning to catch on, but fundraising is still tough.

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Your best path may be an accelerator. But which one?

Let’s run through a few great options:

Y Combinator

This is the granddaddy of accelerators.

Founded in 2005, it’s been around longer than anyone. Its track record is amazing, having produced companies like Airbnb, Stripe, DoorDash and Instacart.

YC invests $500,000, more than most accelerators except perhaps LAUNCH (more on that below).

YC’s only real downside can be a lack of individual attention.

There are 268 companies in the current YC batch. That’s way more than many other accelerators, who often have fewer than 10.

There’s a big difference between being one of 7 companies and one of nearly 300.

That said, YC produces amazing startups regularly. My last two investments have been YC companies.

LAUNCH Accelerator

This is my personal favorite. I’ve invested in 6 LAUNCH Accelerator companies, by far the most of any accelerator.

LAUNCH invests $100,000 for 6% of your company. It usually puts another $500,000 or so in when you raise your seed round.

In all, LAUNCH likely provides the most money of any accelerator.

It also provides individual attention. There are just 7 companies per batch and the LAUNCH team works intensively with them.

Founders I know who have gone through the program met everyone — Sequoia, Craft Ventures, you name it.

The only downside is it’s not as big of a name as YC. It’s much newer, but it already has 1 unicorn in GRIN.

In all, LAUNCH is an excellent choice.

Entrepreneur’s Roundtable Accelerator

I started paying attention to these guys when I invested in an ERA company, Rilla. It quickly became one of my top performers.

ERA invests $150,000 for 6% of your company. Like LAUNCH, the batch size is small — just 15 companies.

Although ERA is newer than YC, it already boasts 4 unicorns.

The people who work there are serious and focused. That’s who I’d want on my side.

I’m looking forward to investing in more of ERA’s awesome companies!

Techstars

Techstars is another longstanding accelerator with a great track record. Founded the year after YC, it has produced 11 unicorns so far.

Techstars is in person, but it has programs all over the world.

I’ve invested in one Techstars company so far, with more sure to come.

Wrap-Up

I think accelerators are the best path for most pre-seed companies. Top accelerators provide a built in network, great mentorship, and a brand name that can help with fundraising and recruiting.

But don’t go just anywhere.

Avoid accelerators with no name recognition. Also avoid any accelerator that doesn’t actually invest.

The right program can take you to the next level. But the wrong program can waste your time and space on your cap table.

Best of luck building the great companies of the future!

What has your experience been with accelerators? Leave a comment and let us know!

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More on tech:

Scare the Sh-t Out of VC’s

“How Can I Be Helpful?” Gets Put to the Test

Where Should Startups Put Their Money Now?

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From Fries to Pastry, Lafayette Shines

March 29, 2023

It was ice cold and the pancakes in front of me were driving me nuts. Why can’t I eat them?

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The first time I went to Lafayette, I was only pretending to have brunch.

I was an extra on the Netflix show Kaleidoscope, filming on the patio in November. Why did they have to pick a restaurant with food so hard to resist!

As the scene finished, I asked a Production Assistant if I could finally eat the pancakes. She took mercy on me and looked the other way. 😁

Even stone cold, they were delicious.

So I had to come back and try Lafayette for real!

On a recent Wednesday, I wound my way down the stairs to the private dining room. I’d barely sat down when first rate bread and butter hit the table.

When you try the bread, you know how good a restaurant will be. At an excellent place, bread is never an afterthought.

Next: an inventive frisee salad with bacon and poached egg. If you hate salad, this is the one for you!

The smoothness of the egg white and oozing yolk tantalize. The crispy greens and unctuous lardons bring it home.

Think shrimp cocktails are over? Then you haven’t tried Lafayette’s!

I have never seen shrimp steamed so perfectly. Every time I come, they’re just right — neither underdone nor turgid.

Out comes a rich mushroom risotto. The mushrooms’ earthly flavor suffuses the rice.

To think we were only halfway through! Now, the main event.

First, a giant platter of fries…err, frites. Then, a steak bigger than your head, a poivre.

And just to make us look respectable, we also got some lovely cod.

The fries were the highlight for me. How do potatoes always manage to steal the show?

These taters were crisp and heavily seasoned, the way I like them. You can’t make a good fry without a pound of salt.

“Who was the first guy who’s like ’That was a good meal we just had. I’m full. Are you full? You wanna eat a cake?’”
Jim Gaffigan

No one needs dessert. But what’s life without it?

So I cracked the shell of a beautiful torte and watched the chocolate ooze out. Awesome.

I needed all my concentration to construct the perfect bite. A little cake, a little ice cream, scoop up some of the chocolate — chef’s kiss.

But perhaps the best thing I ate that night was the almond pastry. It was flaky, nutty and moist.

Lafayette is above all a bakery. And though they turn out a lovely dinner spread, pastry is where they truly shine.

Lafayette Grand Cafe & Bakery is located in NoHo just east of Washington Square Park. Open for breakfast, lunch and dinner 7 days a week, Lafayette also has a lovely outdoor patio.

Give it a shot!

What are you favorite restaurants in New York? Leave a comment and let us know!

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Scare the Sh-t Out of VC’s

March 28, 2023

Pitching investors can be nerve-wracking. But what if you flip the script and scare the sh-t out of them?

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Last week, I sat down to coffee with an aspiring entrepreneur. As we brainstormed together, he came up with a great concept for a startup.

What about a platform to make finding wellness providers like acupuncturists easy?

I liked it — but encouraged him to go further. He could start with a few wellness providers, but what about taking on medicine as a whole?

We all hate doctors’ high costs and opaque pricing. What about a marketplace where you always knew up front what you’d pay?

In time, rather than supplementing insurance companies, he could replace them.

This could be an awesome business. And there’s another cool benefit…

It’s a big idea. And if there’s anything that scares the hell out of venture capitalists, it’s missing the next “big thing.”

VC’s always want to identify and ride a trend before everyone else.

It’s how they make money. But perhaps even more importantly, it’s how they say “I told you so!”

And what if they miss that next big thing?

Their fund languishes and they become irrelevant. And more than anything, angels and VC’s fear being irrelevant.

Otherwise, why would they constantly promote themselves on Twitter, podcasts, and blogs like mine?

Back to our young entrepreneur.

He could present investors with a nice platform for booking acupuncture. They’d smile politely and thank him for his time.

And he probably wouldn’t get a check.

But what if he shows them the exact same thing with a very different vision? Today acupuncture, tomorrow Prenuvo scans, and eventually all of medicine?

That’s a trillion dollar company. And that’s what VC’s want to invest in.

If this business fails, the VC’s downside is minimal. But what if they miss another Google?

The biggest opportunity in that investor’s professional life goes up in smoke.

Paint a compelling vision of how your company can be another Google, Uber, or Airbnb. It is never a straight line and you won’t get there tomorrow.

But show up with a big idea. And make that investor terrified he’s going to miss it.

That’s how you get a big check. It’s also how you change the world.

How do you pitch investors? Leave a comment and let me know!

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More on tech:

AI: Capital Bonfire?

Where Should Startups Put Their Money Now?

“How Can I Be Helpful?” Gets Put to the Test

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What Meditation Does for Me

March 27, 2023

It was March 2020 and the world was shutting down. It was the perfect time to try something new: meditation.

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Countless people tell you to meditate. But how the heck do you even do it, and why bother?

Here’s how I meditate every day, and the benefits I’ve gained.

How I Meditate

Every morning after breakfast, I sit down in this red armchair. I keep my back straight and feet flat on the floor.

I breathe in and out. I either focus on my breath or repeat a word.

You can use whatever word (or “mantra”) you like. Swami Rama suggests a few: om, amen, or shalom.

I usually go with om. Sometimes I say it out loud, other times just in my head.

Using a word can make meditation easier. For most people, it’s easier to concentrate on a word than their breath.

I continue doing this for 10 or 20 minutes. I seldom exceed 30.

Choosing Your Thoughts

Most of us inhabit our thoughts. All too often, so do I!

If we’re mad, we’re mad with our entire being. If a negative thought pops into our head, it repeats endlessly.

But increasingly, I’m able to spot that thought and stop it.

I tell myself “I don’t have to think about that.”

Then I ask myself, “What would I like to think about?” And I think of something nice, like a great dinner with friends or a cute squirrel I saw.

Your life is a lot more pleasant when you can, at least sometimes, pick what you think about!

Improved Sleep

When I can’t fall asleep, it’s often because of some repetitive thought. Perhaps I’m worried about something.

Being able to spot that looping thought and realize “I don’t have to think about that” is so freeing!

In turn, good sleep helps your brain work even better!

Relaxation

We live in a world of nonstop inputs. Information flies at us whenever we’re awake.

Meditation is an opportunity to stop all that. You won’t believe how nice that can feel, even if it’s awkward at first!

Success vs. Failure

A friend once told me he was struggling to sleep. “Have you tried meditation?” I asked?

“Yeah, I suck at it!”

The thing is, we all suck!

Mostly, we get distracted and don’t actually focus on our breath or our mantra. Instead of feeling inner peace, we think about how we forgot to buy paper towels.

But that’s okay!

This isn’t about being awesome. Just do it regularly and you’ll benefit.

I hope that even once during a meditation, I can spot my distraction and redirect myself. If I can do that, that’s wonderful!

That’s the skill we’re trying to build. We want to spot what’s in our mind and be able to redirect it.

Try It!

At first, I wasn’t sure I was getting anything from meditation. But the benefits crept up on me.

Soon enough, I found myself spotting unhelpful thoughts without even trying. When I stop them and redirect myself, it’s a wonderful feeling!

This practice has given me so much in just three years. See what it can give you!

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Deutsche Bank Under Fire

March 24, 2023

Is Deutsche Bank the next Credit Suisse? Traders think so today as they dump the stock and rush to protect bond holdings.

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From a new report in Bloomberg:

Deutsche Bank AG became the latest focus of the banking turmoil in Europe as ongoing concern about the industry amid a slowing economy sent its shares slumping the most in three years and the cost of insuring against default rising.

The bank, which has staged a recovery in recent years after a series of crises, was the biggest loser among large European bank stocks Friday after announcing a plan to repurchase debt, a move normally seen as a sign of strength. Analysts struggled to explain the selloff, which prompted German Chancellor Olaf Scholz to publicly back the lender.

The cost of insuring against a bank’s default is a key stat. Called a Credit Default Swap (CDS), this protection often soars in price when a bank is close to failing.

Old Lehman Lesson from 2008:

Watch the price action on the next “weakest bank” for a lead on “what’s next.”

-Deutsche stock down 13%, CDS at the highs and they are back to reporting on daily moves in credit.

That’s not bullish. pic.twitter.com/XeZ7k3FLFK
— Campbell (@abcampbell) March 24, 2023

One thing in Deutsche Bank’s favor: a big pile of cash. It’s sitting on $179 billion of cash and deposits at central banks, according to its latest annual report.

That means it could pay back 28% of its deposits almost immediately. But the thing is, Credit Suisse had a ton of cash too.

It failed anyway. In the end, no bank can pay back all its depositors right away.

Even US regulators seem concerned. Treasury Secretary Janet Yellen convened a group of top officials this morning in an unscheduled, closed door meeting.

In the end, Germany won’t let Deutsche Bank fail. Neither will the ECB.

Deutsche Bank is the largest bank in Germany by far. It ranks #8 in the entire EU.

Olaf Scholz is not going to let old Granny Durchdenwald lose her life savings.

But that doesn’t mean Deutsche Bank shareholders are safe. Once mighty Credit Suisse is now a penny stock.

I hate bank stocks. Banks often pick up pennies in front of a steamroller, turning in decent profits until they suddenly get crushed.

Perhaps Deutsche Bank will survive as an independent company. Either way, shareholders won’t be sleeping well tonight.

What do you think will happen to Deutsche Bank? Leave a comment and let us know!

Have a great weekend everyone!

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Don’t Wanna Pay 216%? How About a Naked Short?

March 23, 2023

Cost to borrow shares of AMC Entertainment holdings went through the roof today. From a report out just this afternoon on InvestorPlace:

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The cost to borrow (CTB) fee for AMC Entertainment (NYSE:AMC) has skyrocketed to 215.80% today, up by more than 100% from the reading of 101.76% on March 10. Yesterday’s closing CTB fee reading clocked in at 211.41%. Meanwhile, between March 10 and today, AMC stock has fallen more than 10%. What’s going on?

The CTB represents the yearly fee that short sellers must pay to borrow shares. A higher fee could represent increased short seller demand while a lower fee could represent lower demand. A higher fee could also signal a scarcity of available short shares. Still, AMC’s exorbitant CTB fee could actually be seen as a positive for AMC stock shareholders.

Let’s say you want to short AMC. But you don’t want to pay 216% a year interest because…uh…no one does.

But don’t worry! There’s a dandy alternative.

How about a naked short?

With a naked short, you don’t even have to borrow the shares at all! Instead of 216% interest, how about 0%!

Pretty sweet, right?

One small problem. It’s against the law.

There is strong evidence of massive naked shorting in AMC stock. Fails to deliver hit nearly 12 million shares in the latest SEC report.

That’s absolutely staggering, even for AMC. And keep in mind, most stocks have few if any fails to deliver.

Why are tons of trades failing?

To close a short sale, you need to borrow some shares. But it’s kinda hard to do that right now, at 216% interest.

So why not just cut some corners and naked short? It’ll just wind up a fail to deliver and get swept under the rug.

There’s likely a crime here in plain sight. But for it to matter, the SEC needs to act.

But before shorts laugh at the SEC and pop a bottle of Dom, they should think about the risks.

Half of Wall Street is betting that AMC will crash if APE shares convert. This share conversion dilutes AMC stock holders.

But conversion isn’t certain. And even if it happens, AMC shares have jumped after prior dilutions.

In a way, that makes sense.

Yes, you own a smaller piece of the company after dilution. But this heavily indebted company now has far more capital.

That makes the risk of bankruptcy increasingly remote.

I have no idea where AMC or any other stock is going.

But I do know that people don’t like paying 216% interest. And to avoid it, they just might break the law.

After all, what could happen?

Do you think the SEC will act? Leave a comment and let us know!

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