Tremendous

An angel investor's take on life and business

  • Why Your Startup Shouldn’t Be an LLC

    Every now and then, I see the unthinkable: an LLC trying to raise venture capital.

    You want to give your startup every chance of success. So don’t shut yourself out from venture capital with this rookie mistake!

    Repeat this mantra every night before bed: “investors want a Delaware C Corp.”

    Why Don’t Investors Like LLC’s?

    Here are a few reasons:

    1) Issuing stock options to employees is difficult and expensive.

    Almost all startups use options to recruit and retain employees. You don’t want your legal structure to make that nigh impossible.

    2) Investor taxes become a nightmare.

    3) The venture fund’s own investors won’t have it.

    These limited partners (LP’s) who put their money in the venture fund don’t want to deal with the tax complexity of LLC’s.

    What’s more, many LP’s are tax exempt foundations and endowments. They don’t want the taxable income an LLC will pass through to them.

    4) LLC’s don’t qualify for a big tax loophole.

    Qualified Small Business Stock (QSBS) can shelter up to $10 million in capital gains from any taxation whatsoever. Pretty sweet, eh?

    But LLC’s don’t qualify. C Corp’s do.

    LLC’s Advantages Are an Illusion

    I know, I know, C corp’s cause double taxation of profits, both at the corporate level and the individual level. But given that most startups make bupkus for years, you don’t need to worry about that.

    And yes, LLC’s are very simple to form. But if you’re issuing options and raising capital, the LLC soon becomes far more complex than the C Corp.

    From Harvard-trained attorney Jose Ancer:

    The amount of tax and legal analysis that has to be done to issue equity compensation and/or raise capital in an LLC is (without exaggerating) 10x that of a corporation.

    What’s the Obsession with Delaware?

    Simply put, it’s the standard. Delaware has well-established corporate case law and investors are used to dealing with Delaware companies.

    Delaware also has some sweet tax advantages.

    What If I Already Screwed Up?

    I’m sending you to bed with no dinner!

    Just kidding. If you initially formed an LLC and now realize you need to be a C corp, it’s okay! Just make sure to convert before raising any money.

    Once you’ve raised money, converting becomes a lot harder and more expensive.

    Here’s Becki DeGraw, a partner at top tech law firm Wilson Sonsini, explaining the conversion process on This Week in Startups:


    How Do I Make a Delaware C Corp?

    You’re in luck! It’s much easier than it once was.

    There are online services that can handle the whole thing for you. Stripe Atlas is one popular choice.

    Another is Capbase, which can not just form the company but manage your cap table (list of company owners) and a lot more. Full disclosure: I’m an investor in Capbase.

    Whichever method of incorporation you choose for your tech startup, just be sure it’s a C Corp registered in Delaware and you’re off to a great start!

    Happy building!

    More on tech:

    Why I Just Invested in Capbase, The Startup in a Box

    How Startups Can Dominate the Elevator Pitch

    The Lean Startup

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 and returns have been great so far.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. 

    Misfits Market

    My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

    Every fruit and vegetable is super fresh and packed with flavor.

    I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $10 on your first order. 

  • What Can The Dropout Teach Investors?

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    I’ve been riveted by The Dropout lately. Amanda Seyfried’s portrayal of the notorious Elizabeth Holmes transfixes me, from the baritone to the awkward dancing.

    I particularly loved the scenes on Sand Hill Road when Holmes is pitching venture capitalists. Luckily for them, most passed.

    Since I invest in startups, I wondered, how do we avoid the next Theranos? And what lessons can this flame out give us about investing in general?

    Here is my current thinking:

    1) If you don’t show it, you don’t have it. Beware any startup founder who won’t show you their tech or disclose financial information.

    They may claim they’re protecting secrets from competitors, but more likely they’re covering up their problems.

    I find the most successful founders are very open with investors. They want to share their awesome progress!

    2) Beware unqualified teams in deep tech. Holmes made much of the fact that she was a college dropout, like Steve Jobs or Mark Zuckerberg.

    But she obscured a critical point: Theranos was not a software company.

    You can learn the basics of coding on your own in a few months. The same isn’t true for biology.

    To pull off a revolution in blood testing, Holmes would’ve likely needed a PhD from a top school like MIT, Harvard, etc.

    3) Don’t let big names on the board influence you. Henry Kissinger and General James Mattis sat on the board of Theranos.

    Both are heavyweights in politics and government, but what’s their expertise in biotech? Uhh, they don’t have any.

    Don’t just ask if the advisors and investors of a company are prominent. Ask if they’re qualified to do this exact job.

    4) Founders who react badly to being challenged are bad founders. Both Holmes and Balwani surrounded themselves with sycophants and came down hard on anyone who questioned them.

    They refused to hear about problems, so the problems only got worse.

    If a founder can’t handle you or their team challenging them, they have no business in the job.

    5) No FOMO. Holmes expertly used the fear of missing out to close investors and customers like Walgreens.

    After all, we can’t let CVS have it first, can we?

    Frauds from Adam Neumann of WeWork to Bernie Madoff were experts at leveraging this fear to override people’s better judgment.

    Don’t give into it. You don’t have to hit every great investment opportunity to be a success.

    In fact, you only have to hit one.

    More on tech and finance:

    The True Story Behind WeCrashed

    The Lean Startup

    FOMO: Investors’ Worst Enemy

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    Photo: “Fortune Global Forum 2015” by fortuneglobalforum is marked with CC BY-NC-ND 2.0.

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 and returns have been great so far.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. 

    Misfits Market

    My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

    Every fruit and vegetable is super fresh and packed with flavor.

    I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $10 on your first order. 

  • Find Code Faster Than Ever

    I have something really cool to share with you guys before you head off for the weekend!🕺🎉

    An amazing new tool called Snipt.dev launched yesterday. It makes searching for code to re-use easier than ever.

    Snipt.dev is a project by Codiga, an awesome “Grammarly for code” tool in which I’m an investor.

    I briefly introduced you to Snipt.dev yesterday, but today I’m turning the blog over to creator Julien Delenge to explain what makes this tool so special:

    Snipt: Search Engine for Code Snippets

    We are excited to announce the release of snipt.dev, a search engine to help engineers find safe and reliable code patterns. Code Snippets are very popular for developers but the ecosystem of tools is very fragmented and not unified. Developers are often looking for snippets to use and spend hours searching on Google, StackOverflow or Sourcegraph.

    To help developers find the right code snippet, we built snipt.dev: a one-stop shop for searching for code you can reuse.

    But first, what is a Code Snippet?

    A Code Snippet is a block of code you can share and reuse. By reusing safe and proven code, you not only improve your productivity but you also make sure you always import the correct code and are not missing anything (e.g. missing argument, not checking error code or exceptions).

    By using rock-solid, proven code, you avoid many common pitfalls and mistakes developers already did. You find the correct block of code to reuse to focus on what matters: shipping code and improving a product.

    Why use Code Snippets?

    Writing code is quite complex and requires having a really good knowledge of the language and libraries you are using. Even with languages with lots of abstractions, it is often hard to follow the code path and understand how code actually works! Sharing and using vetted code patterns directly in your IDE maximizes your productivity but also make sure you are using the correct code block for your job!

    So now, what is snipt.dev?

    snipt.dev is a new platform for searching code snippets. It includes a semantic analysis feature that detects what framework, library, or language you are looking for and optimizes the search results based on your criteria. For example, if you look for “react typescript”, the engine will only show snippets related to TypeScript while “react javascript” will show you only snippets related to JavaScript (and obviously, react).

    snipt.dev is built to be blazing fast: a request takes just a few milliseconds to come back to you. As with most search engines, results are suggested as you type, showing you the most relevant snippets for your query.

    Adding your own snippets

    The engine indexes and searches snippets from the Codiga platform. To add your own snippet to snipt.dev, simply add snippets on the Codiga platform: they will be automatically indexed and visible on snipt.dev. Adding snippets is very easy and can be done directly from your IDE using Codiga plugin (see VS Code, JetBrains, or Chrome plugins). You can find more information in the Contribute section of snipt.dev

    Open-Source

    snipt.dev has been designed using popular open-source libraries (NextJs, GraphQL) and it was natural for us to share this project with the community. You can find this project on GitHub. If you have any comments or issues to report, please open an issue on the GitHub project.

    Pretty cool, eh? Have a great weekend everyone! 👋

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 and returns have been great so far.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. 

    Misfits Market

    My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

    Every fruit and vegetable is super fresh and packed with flavor.

    I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $10 on your first order. 

  • Awesome New Code Search Tool Launched Today!

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    Hey guys! 👋

    I don’t usually do 2 posts in a day, but this is too cool not to share with you right away!

    Just this morning, an amazing new search engine for code snippets launched on Product Hunt!

    It’s called Snipt.dev.

    Rather than endless searches on Stackoverflow or Google, you can quickly find the code you need and get back to building.

    This is a project of Codiga, an incredible startup I’m an investor in. It’s basically Grammarly for code and can substantially improve your productivity.

    I plan to have a lot more information on this awesome tool here for you tomorrow, but until then, give Snipt.dev a try and save yourself some valuable time!

    More on tech:

    Codiga: Grammarly for Code

    The True Story Behind WeCrashed

    How to Ace a 3 Minute Pitch

    Never miss a post…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 and returns have been great so far.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. 

    Misfits Market

    My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

    Every fruit and vegetable is super fresh and packed with flavor.

    I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $10 on your first order. 

  • Retail Buys $5B In a Week As Meme Stocks Soar

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    As meme stocks like GameStop Corp. and AMC Entertainment Holdings Inc. have soared in recent weeks, retail investors are flooding the market with cash.

    Individuals bought $5 billion worth of stocks and ETFs last week, about 50% above average, according to a new Reuters report.

    Meme stocks have been a major target, with retail investors buying $48.1 million of AMC shares on Monday alone, according to Bloomberg. GameStop also saw inflows in the millions.

    Heavy activity in call options on GameStop and AMC shows just how bullish retail is. AMC call options (bets the price will rise) outnumber put options (bets it will fall) by nearly 2:1, the highest since May 2021.

    Behind this torrent of cash are strong household finances. The personal savings rate is 6.3%, on the high side compared to recent decades. Household net worth sits at an all-time high of $142 trillion.

    Investors also have fewer viable options besides stocks. Rates on bonds are below inflation, which means guaranteed losses.

    Strong retail interest in meme stocks plus flush balance sheets should caution short sellers away from these volatile stocks.

    But like moths to the flame, short sellers continue to pile on bets against GameStop and AMC. Both have about 20% of their shares sold short.

    Perhaps they’ll have to get burned for billions again before they learn their lesson.

    More on markets:

    NYSE Investigating Citadel Trades

    FBI Raids Short Sellers

    Mass Firings at Citadel Right Before Federal Probe

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    Photo: “Retail GameStop” by ccPixs.com is licensed under CC BY 2.0

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 and returns have been great so far.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. 

    Misfits Market

    My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

    Every fruit and vegetable is super fresh and packed with flavor.

    I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $10 on your first order. 

  • The Lean Startup

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    “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.”

    Peter Drucker

    You’ve written a 92 page business plan. For three years, you hunched over your laptop coding, sustained by Red Bull and Cheetos

    At last, launch day is here! You press the button and…

    Nothing happens.

    You keep refreshing the page, but no one is signing up. You try one marketing channel after another, convinced that massive growth is right around the corner.

    But the hard truth is, no one wants what you’ve built.

    That is a hard moment for anyone. And it’s why Eric Ries wrote the seminal book The Lean Startup, which I just finished this morning.

    The Lean Startup framework involves creating a Minimum Viable Product (MVP) and getting it to customers ASAP. Then, by seeing how customers use it, you make changes to the product (“iterate”) to see if you can serve customers better.

    Build-Measure-Learn is the loop you want to go through as frequently as you can. Build something you think customers need, measure how it does with customers, and learn how to do a better job meeting those needs in your next version.

    “The question is not ‘Can this product be built?’ In the modern economy, almost any product that can be imagined can be built. The more pertinent questions are ‘Should this product be built?’ and ‘Can we build a sustainable business around this set of products and services?’”

    Eric Ries

    Ries gives some incredible examples of just how minimal that MVP can be.

    Nick Swinmurn started Zappos by taking pictures of shoes in nearby stores. He put those pictures on his website and if anyone ordered a pair, he went to the store, bought and shipped them.

    “But that doesn’t scale!”

    Sure it doesn’t! But in 1999 when Swinmurn founded the company, no one knew if people would buy shoes on the internet.

    Starting with a mostly manual process was a lot better than Swinmurn spending months if not years and untold sums building infrastructure to accomplish what no one wanted in the first place.

    Early stage startups have limited capital and only so much time to prove their business can work. By getting through as many cycles of Build-Measure-Learn as possible, founders give themselves the best chance at finding a viable business before the clock runs out.

    In just 11 years, Ries’ ideas have gone from unusual to being the accepted way to run a startup. His book, while at times a slog, is essential reading for both founders and investors.

    I’ll leave you with the quote that struck me most. It’s one I aim to live by:

    ““…if you cannot fail, you cannot learn.”

    Eric Ries

    More on tech:

    The High Growth Handbook: Scaling Startups from 10 to 10,000 People

    How Startups Can Dominate the Elevator Pitch

    What I Look For in Startups

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    Photo: “Eric Ries – The Lean Startup, London Edition” by betsyweber is marked with CC BY 2.0.

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 and returns have been great so far.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. 

    Misfits Market

    My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

    Every fruit and vegetable is super fresh and packed with flavor.

    I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $10 on your first order. 

  • NYSE Investigating Shopify Stock Plunge; Citadel Involved

    Update, April 1 2022:

    Shortly after publishing this post on March 29, I received an e-mail from an analyst at TrailRunner International. The firm handles “media, law, finance, and regulatory affairs,” according to its homepage.

    The analyst informed me that the article from New York Magazine on which I’m commenting in this post had had a correction after I published my post. New York Magazine had incorrectly stated that the NYSE was investigating Citadel itself.

    In fact, the NYSE investigation is of the price activity in Shopify shares, rather than of Citadel itself.

    Since the analyst’s request seemed well-founded, I updated the post below to reflect this change to the underlying article.

    I asked the analyst if his firm had been retained by Citadel and, if so, if I could speak to someone there.

    He neither confirmed nor denied that his firm had been retained by Citadel, but said he’d pass the request on to them.

    I can only assume the firm is working for Citadel.

    Whatever any of us may think of Citadel’s business practices, I try to be fair on this blog. Hence the update to this post! 🙂

    The New York Stock Exchange (NYSE) is investigating a sudden spike and crash in Shopify Inc. shares. The unusual price action may be due to trading by Citadel Securities.

    From a new report by New York Magazine:

    On March 18, a weird thing happened at the New York Stock Exchange. It was near the end of trading for the day, one minute before the closing bell had rung, when the price of Shopify’s stock went haywire, shooting up about $100 per share to $780 before immediately crashing down again in post-market trading. There was no sudden revelation about the business that would have caused it to jump.

    Citadel seems to be behind this unusual activity. The firm had bought large blocks of the shares for a client that afternoon, resulting in an imbalance between buy and sell orders.

    Next, rather than trying to bring more sellers into the market to balance it, Citadel appears to have taken advantage of the situation:

    Because the amount of buy orders was so out of whack, Citadel was able to sell into the market — a move that’s allowed by the exchange. Other Wall Street players have said that Citadel could have done more to bring more sellers into the market. Either way, the price of the shares rocketed up about 13 percent in the final minute of trading, before immediately tumbling down in after-hours trading.

    What exactly happened is murky, but early reports suggest Citadel dumped shares to other market participants right before the close. These bag holders quickly took a substantial loss.

    There is no indication that what Citadel did was illegal or even necessarily against NYSE rules. But the function of a market maker like Citadel Securities is to ensure a liquid, functional market, not engineer giant swings in a stock for its own benefit.

    I find it telling that Citadel is finding itself under scrutiny from many directions at once.

    Its Surveyor Capital unit is caught up in a federal probe of short sellers. Citadel Securities faced a lawsuit after its partner, Robinhood Markets Inc, halted trades in meme stocks. (That suit was later dismissed.)

    Now the NYSE is probing Citadel’s trades. If I were Ken Griffin, I’d be concerned that my company is getting too close to the regulatory and legal line.

    What do you think the NYSE will find in its investigation? Leave a comment at the bottom and let me know!

    More on markets:

    Citadel Under Federal Investigation

    Mass Firings at Citadel Right Before Federal Probe

    Short Squeezes Could Get Much Easier Under This New Rule

    Photo: Citadel LLC CEO Kenneth Griffin

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 and returns have been great so far.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. 

    Misfits Market

    My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

    Every fruit and vegetable is super fresh and packed with flavor.

    I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $10 on your first order. 

  • The True Story Behind WeCrashed

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    This weekend, I burrowed into the couch and turned on WeCrashed, the fascinating new series on WeWork’s rise and fall. I’m actually in an upcoming episode as an extra; more on that in another post. 🙂

    Jared Leto’s energy and Anne Hathaway’s icy poise make for great television. But what about the real Adam Neumann?

    I recently finished the book The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion. This entertaining and incisive volume gives a great inside view of the startup’s rise and fall.

    Neumann conjured WeWork out of almost nothing. He convinced the landlord of his baby clothes business to sublease him a floor in a building the landlord owned, a clever strategy to start a company with little capital.

    It took off immediately, filling with young creatives. Not satisfied with his early success, Neumann’s dissembling started early.

    Tours of the offices with investors were faked. If a WeWork floor was empty, employees were told to move there and make it look busy.

    Neumann’s erratic behavior also quickly surfaced. He offered shots of tequila to prospective investors and landlords, even in the morning.

    Still, by 2011, WeWork was growing fast and close to profitability. That year, it raised a series A from Benchmark, one of the world’s best venture capital firms.

    As the company’s success grew, so did Neumann’s avarice. He used some of Benchmark’s money to pay rent in buildings he owned personally, a highly suspect move.

    Neumann also put himself ahead of his employees. He sold shares at better prices than they could. And after he banned meat in the company cafeteria, he was frequently seen eating it.

    By 2017, many of the rents WeWork was paying had doubled as the real estate market strengthened. Losses ballooned, but Neumann kept expanding.

    Two years later, WeWork reached the end of its rope. A huge financing with Softbank fell apart, leaving the company forced to go public just to raise enough capital to avoid bankruptcy.

    But the public markets weren’t buying it, turned off by big losses and an erratic CEO. The IPO fell apart.

    As WeWork faced bankruptcy, Softbank agreed to save the company. Its price: a valuation of just $8 billion, down from $47 billion in the last financing round.

    The board forced Neumann out soon after and he and his family left for Israel.

    In a final humiliation, they flew coach.

    So what did I learn from this, as an angel investor? Here are a few of my takeaways:

    1) Avoid self-dealing founders
    2) Beware FOMO. Both Neumann and Elizabeth Holmes of Theranos were experts at leveraging it.
    3) Focus on unit economics. You can’t “lose money on every one, but make it up in volume.”
    4) Don’t value an old economy business like a software business.

    Neumann may be plotting his return. He has acquired more than $1 billion worth of apartments in recent years.

    I don’t know what his angle is, but I’m pretty sure he has one.

    More on tech:

    FOMO: Investors’ Worst Enemy

    How Startups Can Dominate the Elevator Pitch

    The Top 3 Startup Pitch Mistakes

    Never miss a post…subscribe!

    Photo: “TechCrunch Disrupt NY 2017 – Day 1” by TechCrunch is marked with CC BY 2.0.

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    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 and returns have been great so far.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. 

    Misfits Market

    My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

    Every fruit and vegetable is super fresh and packed with flavor.

    I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $10 on your first order. 

  • Correction to Prior Article

    About an hour ago, I posted an article about a Melvin Capital position in GameStop Corp. A very astute reader pointed out to me that the SEC filing on which it relied was from a prior year, so the information was no longer up-to-date.

    Fortunately, thanks to the reader’s help, I was able to confirm the error and remove the post within about 1 hour.

    I apologize for this oversight. 🙏

    Unfortunately, that old report came up as the first result in a Google search I did for SEC data, and I neglected to confirm the date. I’ll be watching those dates like a hawk in the future! 🙂

    I appreciate your understanding and look forward to digging into financial markets and more with you in the future!

  • How Startups Can Dominate the Elevator Pitch

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    You walk into an elevator. As the doors close, Doug Leone of Sequoia steps in.

    Suddenly, a lump appears in your throat. Your palms sweat.

    This is your moment.

    Last night, I went to a fascinating pitch event at a startup accelerator in New York City. Each one had just a single minute to deliver an “elevator pitch” to an audience of operators and investors.

    In this challenging format, many managed to paint a compelling vision. So what key elements should you make sure to include, and what should you leave out?

    Here are some do’s and don’ts.

    Do:

    1) State a company name, clearly. Sometimes the name doesn’t pass the “bad telephone” test. I’m left wondering “did they say ‘Aleck Watt” or “Alley Cot’?” and it’s actually “Aliquot,” to take a fictional example.

    Make the name clear and easy to understand.

    2) Clearly state the value proposition. Instead of just talking about the market, talk about exactly what you do.

    If Uber pitched, they could tell us how broken the taxi market is. True, but what does Uber actually do?

    Make that value proposition for the customer very clear. “Uber can get you from anywhere to anywhere quicker and easier than a taxi.”

    You also want to identify the customer clearly. Is it individuals, businesses, governments?

    3) Explain the business model. Too often, it’s unclear how a startup actually makes money.

    To take the Uber example, just say “We take 30% of all rides on the platform.” Keep it simple and avoid discussing numerous different revenue streams.

    If you don’t tell us how you make money, we’re left to assume that you don’t make any. No bueno.

    4) Tell us what traction you have. If your revenue is growing 20% month over month, definitely mention that.

    If you don’t have any revenue yet but your user sign-ups doubled this month, talk about that.

    Of all the areas of a pitch, this is the one startups miss the most. Give us a reason to think your product is catching on!

    Don’t:

    1) Leave us wondering what your product does. If we don’t know that within that first minute, you’ve failed.

    2) Don’t talk about Total Addressable Market (TAM). Founders often think they can get investors salivating by mentioning that they’re taking on a $500 billion market.

    But we know those numbers are often plucked from the air (or a Gartner report). Save it for a second meeting.

    3) Mention other business lines you may pursue in the future.

    Just stick to the current business. There’s no time for anything else.

    The elevator pitch is simple: introduce the company, what it does, and what traction it has. It should give the investor enough information to say, “I want to hear more.”

    Best of luck!

    What do you think makes a great elevator pitch, and what should be avoided? Let me know in the comments at the bottom.

    More on tech:

    This Is How Startups Pitch Investors

    Fathom: The Podcast Player from the Future

    The #1 Reason I Say No to Founders

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    Photo: “Help is on the way, elevator, Chicago Tribune, Chicago, IL.JPG” by gruntzooki is marked with CC BY-SA 2.0.

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