Tag Archives: Entrepreneur

The Top 3 Startup Pitch Mistakes

You’ve run through your deck a hundred times. You’ve practiced pitching to your cat.

He declined to invest.

Startup founders work incredibly hard to pitch their dream to investors and get funded.

As an angel investor, I see a lot of presentations. So, I thought I’d share the 3 biggest mistakes I see founders making:

1) Not clearly explaining what the startup does. If I don’t understand what your startup does and why within the first minute, you lost me.

Investors are people too, and struggle with attention, especially given the number of presentations they see. A demo day I attended last week had 17 companies presenting.

Don’t lose your audience! Clearly state exactly what you do and what problem you’re solving, ideally within the first 30 seconds.

Being able to clearly and concisely say what you do also helps you attract customers and key employees.

2) Not showing a growth trend.

Don’t make us guess! If you’ve got a strong growth trend in revenue or users, put that graph on the screen.

But don’t rely on our ability to read a graph that pops up for 20 seconds on a slide. Do the math for us.

If you went from $2,000 in revenue in August to $5,000 in November, use a tool like this to find your compounded monthly growth rate. In this case, it would be 36%, which is outstanding.

I saw a founder do this well at a demo day this fall. 6 weeks later, she raised a $3.5 million seed round.

This stuff works!

3) Not taking questions. If at all possible, you want to take questions from your audience.

Even short presentations can allow for this. Some demo days might provide just 7 minutes per startup. But you can present for 3 minutes and take questions for 4.

Every investor has objections you have to overcome before they invest. Give them a chance to overcome those objections by taking their questions.

Answer clearly and concisely. You should be taking about the same amount of time to answer the question as they took to ask it, no more.

I hope this helps! Fundraising can be exhausting and nervewracking, but if you follow a few simple guidelines, you can succeed.

Best of luck!

What have your biggest challenges been in pitching investors? Let me know in the comments at the bottom.

More on tech:

An Investor’s Dream Cold E-mail

The Biggest Challenges for Startups Now

Why I Just Invested in Kippo, Where Gamers Find Love

Photo: “Wrong Way Signs” by Arizona Department of Transportation is licensed under CC BY-NC-ND 2.0

If you found this post interesting, please share it on Twitter/Facebook/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

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 good 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. With their 1% management fee, this could save you $250 on a $100,000 account.

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. 

An Investor’s Dream Cold E-mail

If you’re a startup founder raising money, you’re going to be sending cold e-mails. Lots of them.

So what pitch gets angel investors and VC’s excited, and what turns them off?

Here’s the e-mail I’d like to get:

From: travis@ubercab.com
To: jim@filthyrich.vc

Subject: UberCab intro – everyone’s private driver

Hi Jim,

Do you hate taking taxis? Me too.

That’s why I started UberCab. UberCab lets anyone get a private driver in minutes, right from their smartphone.

We’re seeing some great early traction with 21% CMGR in the last 3 months.

We’re currently raising a seed round to help us take over the taxi industry.

If you’re interested in learning more, let’s set up a time to talk!

Thanks,

Travis Kalanick

Why is this such a great e-mail?

1) Clear value proposition. It’s right in the subject line. Who wouldn’t want their own driver, if they could afford it? And it’s restated beautifully in more detail in the first two paragraphs.

If you can clearly articulate your startup’s reason for existence, you will do much better finding investors, employees, and customers.

2) Hard data showing real traction. Travis gives us the plan and the big picture “why.” But he also gives us solid data we can’t argue with.

Real people are paying real money for this product. Revenue is growing an average of 21% a month (Compounded Monthly Growth Rate), an outstanding track record.

That chart alone will get a response from almost anyone. And if you don’t have great revenue growth, how about user growth, or even visits to your landing page?

3) It’s short. Investors like me get countless e-mails a day. So if a message is long, it’s not likely to be read.

4) It’s bold. Travis doesn’t talk about modest growth. He talks about completely taking over a major industry.

VC’s and angels are in the business of finding giant successes. It’s the only way to pay for all the losing bets!

You need to show them you will be huge.

4) Company is actively raising money.

Investors are in the business of making investments. While they may be interested in just meeting and talking, they’re probably going to be more interested if you’re actively raising a round.

What isn’t here:

1) Irrelevant details like winning a pitch competition, being in Forbes 30 under 30, etc. Save that for page 7 of the deal memo, if at all. Focus on product and customers.

2) Every fact on the business. You will want to write a detailed deal memo including lots of info on the product, key metrics, future plans, etc. But an e-mail intro isn’t the place for it.

3) Just an idea. No knowledgeable investor is interested in funding an idea alone.

I hope this helps! And if you have questions or thoughts on finding investors, please leave a comment at the bottom!

More on tech:

The Biggest Challenges for Startups Now

Why I Just Invested in Gauge, the Best Way to Sell Your Car

Key Metrics for Startups: Consumer vs. Enterprise SaaS

Photo: “Like A Boss mini dog tag” by ylmworkshop is licensed under CC BY 2.0

If you found this post interesting, please share it on Twitter/Facebook/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

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 good 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. With their 1% management fee, this could save you $250 on a $100,000 account.

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 Biggest Challenges for Startups Now

Lately, I keep seeing startups running into the same problems.

As an angel investor, I work hand in hand with numerous startups. I also see presentations and deal memos from hundreds more.

Let’s dig into some of the biggest challenges they have in common:

Recruiting

The labor market is red hot, especially for top tech talent.

So how can you get an edge in recruiting? One tactic I’m seeing successful startups use is hiring worldwide.

The pandemic has most of us working remotely anyhow, so an engineer being in Canada or India is less a barrier than before.

Startups probably don’t have the resources in house to handle the complicated legal and tax implications. But fortunately, International Professional Employer Organizations (PEOs) can help.

These companies hire your employees, wherever they are, and handle all the regulatory issues. You just cut them a check.

So you’ve got the tax and legal down pat…but how do you get that amazing engineer to accept your offer?

Amazon sends a gift to prospective employees who do well in interviews. They generally choose the “book bomb,” or a bunch of books they think the prospect will like.

I might favor some yummy food through SnackMagic or Goldbelly. 🙂

CAC Expansion with the iOS 14 Update

For consumer companies in particular, the iOS 14 update stung. iOS devices now prompt users to block ad tracking, and most do.

If you were advertising on Facebook or Instagram, that tracking data helped get your ads in front of the right people.

Let’s say you are a D2C underwear brand for women and only ship in the US. Without tracking, you could be spending your precious ad dollars advertising to men in Germany!

The upshot: Customer Acquisition Cost (CAC) expansion. The cost to get a new customer increased by 3x or more at a lot of companies I’ve seen.

So what should you do?

How about YouTube ads? One successful startup I saw recently doubled their YouTube ad spend with a mere 5% increase in CAC.

Users on platforms like YouTube are often searching for something, not scrolling through a feed. There’s greater intentionality.

If they’re searching for information on women’s underwear, you know that they could be a good prospective customer, and you can show your ad.

This would be even more true for search engine ads.

Another great option is influencer marketing. Platforms like GRIN or Outfit Talent make it easy to find and pay influencers whose audiences are interested in products like yours.

Wrap-up

Being a founder can be lonely. You always want to tell everyone “how great things are going.”

Being an investor is different. You see countless companies struggling with the same issues.

So know that you’re not alone and there are good solutions! The main thing is to keep trying.

I hope this was helpful to someone. And if you have any feedback, please leave it in the comments at the bottom.

Have a great weekend everyone!

More on tech:

3D Printing a Human Ear

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

Inside a Startup Accelerator Demo Day

Note: I am not an investor in any of the companies mentioned

Photo: “defeat” by katiew is licensed under CC BY-NC-ND 2.0

If you found this post interesting, please share it on Twitter/Facebook/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

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 good 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. With their 1% management fee, this could save you $250 on a $100,000 account.

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. 

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

Knowing who owns your company should be easy, right? Just keep a spreadsheet with the names and percentages and you’re all set!

Unfortunately, company ownership is a lot more complicated than that. Different investors buy in at different prices and different terms over time. 

That’s where Capbase comes in. Capbase can handle your incorporation, capitalization table (list of company owners), stock options and a lot more. Capbase is so advanced that when you raise a fundraising round, it can automatically update your cap table as the wire transfers come in!

It’s basically a startup in a box. And it’s taking over the industry. 

Very few corporations use any software solution to manage their cap table. In the future, I think all of them will. And Capbase is hard to beat. 

Best of luck to this awesome team!

More on tech:

Inside a Startup Accelerator Demo Day

What if Everyone on Earth Had Super Fast Internet for $1?

Why I Just Invested in Gauge, the Best Way to Sell Your Car

Photo: “wrapped gifts with string and paper tape scissors on wood table” by PersonalCreations.com is licensed under CC BY 2.0

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

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

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 good 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. With their 1% management fee, this could save you $250 on a $100,000 account.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! 

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. 

Why I just invested in eyerate, the best online review tool

If you run a retail business, you know what a royal pain online review sites can be. Get one unreasonable customer, and all of a sudden their bad day is turned into your business nightmare. An angry one star screed torpedoes your average and you’re left to rebuild, bit by bit.

But what if you could capture ten times as many positive reviews from your happiest customers, cheaply and easily? And at the same time, you could motivate your employees to give the best service ever?

Well, you can. EyeRate, an innovative software startup from the Sacramento area, has created an incredible tool that both generates awesome reviews and motivates employees.

Here’s how it works:

1) Customer gets a haircut (or any other service).

2) Afterward, the customer gets a text message “You just saw Sarah. How was your experience? Rate us 1-5.” (Customer info pulls from the POS, so no need to enter anything.)

3) Customer texts back 5.

4) Customer is automatically prompted to post the review to Google, and does so with a single click.

5) Sarah gets a cash reward (usually $5-10 each time), which is automatically processed by EyeRate. The business owner doesn’t have to do anything.

By prompting happy customers to review you, EyeRate generates an average 10x increase in positive reviews for its clients. If a customer rates you less than a 4, the customer has the option to post OR share their feedback privately with the business owner and the message is forwarded to leadership to followup.

Where would you rather spend your scarce marketing dollars: expensive Google or Facebook ads with questionable usefulness? Or motivating your employees to provide great service and capture the awesome reviews, building your brand online and making your foot traffic skyrocket?

95% of consumers check online reviews before deciding which store to go to. Online reviews are also critical to your position in Google search. This is the where you will make or break your business.

I just invested in EyeRate, and the company is growing at warp speed for a reason: it produces reliable, massive increases in revenue for its customers that far exceed its modest monthly fee. Competitors like Podium and BirdEye can prompt a customer for a review and aggregate the data, but they can’t handle payments to employees, which is how you motivate them to give great service and ask for reviews.

Check out EyeRate today, before your competition does!

More on tech:

ONE OF THE HOTTEST TECH STARTUPS IN THE WORLD CALLS HOBOKEN HOME

WHY I JUST INVESTED IN GAUGE, THE BEST WAY TO SELL YOUR CAR

KEY METRICS FOR STARTUPS: CONSUMER VS. ENTERPRISE SAAS

Photo: “Symbols – Daytime, Barber Pole – Trinity Barber Shop, Storefront next to a Walton’s Restaurant, Other Stores, Pedestrians on Sidewalk” by MIT-Libraries is licensed under CC BY-NC 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

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 good 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. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

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. I’ll also get $10.

Why I Just Invested in Gauge, the Best Way to Sell Your Car

If you have a car to sell, you generally have 3 options:

1) Craigslist. You can get a good price, but buyers are flaky and the process takes forever. If you can sell it at all.

2) Dealer trade-in. Easy but the price is terrible.

3) Sell to a used car lot. See # 2

Now, there’s a much better option: sell your car with Gauge. Gauge is a Salt Lake City-based startup that gets you the highest price for your car, easily. When you list your car with Gauge, you get competing bids from multiple dealers. You pick the offer you’re happiest with, and that’s it!

Selling with Gauge avoids the hassles of shady Craigslist buyers, and the competitive process gets you a better price than taking the car to a dealer.

But what about Carvana?

What about them? Carvana buys your car itself, which means their incentive is to give you the lowest price possible. While Gauge does buy your car directly from you, it does so on behalf of dealers and buyers who want to bid on it. Gauge only makes money if you decide to sell your car on their platform. If you’re not happy with the bids you get, you’re free to sell your car elsewhere. So Gauge has every incentive to get you the best price possible.

This model is working so well they’ve earned a stellar 4.7 star average on Google. Sellers love the great customer service with no fees. Dealers love Gauge too, because they can get better quality cars than at most auctions. And not having to show up at an auction in person is a huge time savings, not to mention being safer.

Gauge is growing very fast, and I’m super excited to be an investor! They only list cars in the Salt Lake City area at the moment, but they’re expanding rapidly, with several new markets already in the works.

If you’re in the area with a car to sell, I don’t think you can do better!

More on tech:

WHY I JUST INVESTED IN CRAFTER, MAKER OF THE MOST BEAUTIFUL ARTS AND CRAFTS KITS IN THE WORLD

7 COMPANIES HAD 3 MINUTES EACH TO PITCH US. THIS IS WHAT HAPPENED.

INSIDE A STARTUP ACCELERATOR DEMO DAY

Photo: “Corvette Stingray” by pyntofmyld is licensed under CC BY 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

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 good 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. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

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. I’ll also get $10.

Why Indian Tech Is Exploding

The Indian tech industry is growing at an incredible pace:

Indian startups have raised a record $10.46 billion in the first half of 2021, up from $4 billion during the same period last year

Salaries are also increasing rapidly, from an average of $40,000 to $70,000, and even $150,000 for some top engineers.

Why is Indian tech growing so fast? I think several changes in the industry in recent years are weighing in its favor:

  • Major investors went remote due to COVID, and have largely stayed that way even as the pandemic recedes in the US. This means they can meet an Indian entrepreneur just as easily as one across the street in San Francisco. This democratization is great for the entire industry.
  • The venture industry as a whole is on fire, with both exits and valuations in the US reaching staggering levels. This gives venture firms more incentive to look outside the US for better deals, and more cash with which to do so.
  • It’s easier to incorporate in the US than ever. I recently invested in a startup that lets companies incorporate, issue stock options, and handle compliance cheaper and easier than ever before. Many of their customers are outside the US, but incorporate here to make fundraising from American investors easy. (More on this awesome company soon!)
  • India is stacked with tech talent. Anyone who has worked at a software company in the US can tell you that Indian-Americans are a huge part of the industry, and they have incredible skills.
  • China is killing its tech industry. Heavy-handed regulation, massive fines, and even disappearances of tech entrepreneurs is having a chilling effect, and the number of Chinese startups breaking out is way down. India competes with China for venture funds, and right now, it’s looking like the better bet.

New regulations that may require companies to expose users and break encryption are the biggest risk I see on the horizon for Indian tech. But with a deep talent pool and ample funding, India’s is a startup scene to watch.

सौभाग्य!

More on technology:

INDIA IS SOAKING UP VENTURE CAPITAL LIKE A SPONGE

CHINA IS KILLING ITS TECH INDUSTRY

7 COMPANIES HAD 3 MINUTES EACH TO PITCH US. THIS IS WHAT HAPPENED.

Photo: “India – Enroute Tso Moriri, Ladakh” by sandeepachetan.com is licensed under CC BY-NC-ND 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

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 good 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. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

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. I’ll also get $10.

How Do You Know If a Startup Is Getting Traction?

Investors look at a lot of startups before laying a bet. But how do we know if the company’s product is catching on, or has failed to find traction? And as a founder, how do you know if you’re headed in the right direction or…nowhere?

In a recent episode of the superb podcast This Week in Startups, investor Jason Calacanis and guests Craig Zingerline and Allen Chen broke down a key metric: customer retention.

Do you have product-market fit? There’s no one better to answer that question than the people who use your product every day. Here are the customer retention numbers to look for, over a 6 month period, for different types of startups:

  • Consumer social (think Instagram): 25% is good, 45% is great
  • Consumer transactional (think Uber): 30% is good, 50% is great
  • Consumer SaaS (think Netflix): 40% is good, 70% is great
  • Small and medium business (SMB) and midmarket SaaS (think Freshbooks): 60% is good, 80% is great
  • Enterprise (big company) SaaS (think Oracle): 70% is good, 90% is great

As you can see, business-to-business products should be a lot stickier than business-to-consumer ones. Consumers are fickle and their investment is minimal. At the other end of the spectrum, major corporations don’t adopt new software lightly. It’s a process that sometimes takes years and costs a fortune. So they don’t switch often, either.

The panel emphasized that you don’t have to get to these numbers right away, but that they should be a goal. Good luck!

For more on startups, check out these posts:

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Check out the Stuff I Use page for some great deals on products and services I use to improve my health and productivity. They just might help you too!

Photo: “Jason Calacanis” by jdlasica is licensed under CC BY 2.0

This Is How Vlad Tenev Built Robinhood

“You can break down Robinhood into a series of small steps, the first one being start Robinhood, and every subsequent one being some variant of don’t stop and keep going, right, and you end up where we are today. “

In his mid-20’s, Vladimir Tenev lived in New York City. His apartment was tiny and spare. All his time went into his high frequency trading startup. Then mom came to visit.

When she saw his shabby surroundings, she began to cry. She told him she had a friend who worked at Macy’s. Maybe, she could get him a job there.

It must’ve taken great fortitude for Tenev to push ahead with his own business, despite few signs of success and the anguish it caused his family. But push ahead he did. Today, the company he built, Robinhood, has over 13 million users and plans to IPO soon at a valuation of around $40 billion. Tenev’s net worth exceeds $1 billion.

Tenev came to the United States as a child from Bulgaria and attended the elite Thomas Jefferson High School for Science and Technology, which US News ranks the best public high school in the entire country. What would’ve become of Tenev if he had stayed in Bulgaria? He might have had a very normal life. But giving this smart kid a superb education and access to a great entrepreneurial ecosystem turned him into a billionaire executive.

Tenev didn’t stop learning when he finished school. He taught himself to write iOS apps by watching free Stanford courses online while commuting on the Caltrain. It really shows you what a person can accomplish learning on one’s own for nothing now that knowledge is much more freely available.

Robinhood faced numerous obstacles along the way, but Tenev and co-founder Baiju Bhatt blasted through them. It took two full years of constant work to build their product. Venture capitalists were highly skeptical of their business. How could they make money without charging commissions? How could they beat giant competitors like Etrade and Charles Schwab? And could a couple of math guys make a beautiful consumer product?

But they kept pitching, and ultimately raised $250,000 from Google Ventures. Tenev couldn’t even get a job interview at Google 4 years prior. What if he had let that discourage him from ever approaching Google for an investment?

Just days before a meeting to approve a critical license Robinhood needed to operate, they were still $500,000 short of the required capital. Only the birth of an executive’s baby saved them by providing an excuse to postpone. By the new date, Tenev had raised the money.

A key lesson for startups: Robinhood didn’t worry about monetization until it achieved a large user base. It was confident that, like Instagram, winning enough users would give them all the opportunities for revenue they’d need. And they couldn’t put the cart before the horse.

What sticks out to me most about the Robinhood story is Tenev’s perseverance. At first, his business looked laughable. Later, it gained a bit of traction but faced seemingly insurmountable obstacles in fundraising.

But he just keep pushing, day after day. Now, 11 years after he started his first company, he sits at the helm of one of the hottest startups in the world.

For more on startups, check out these posts:

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Photo: “File:TechCrunch Disrupt NY 2016 – Day 2 (26902081436) (2).jpg” by TechCrunch is licensed under CC BY 2.0

NBA Top Shot: An Overnight Succcess 8 Years in the Making

NBA Top Shot’s popularity is exploding. Users pay to own an iconic basketball image or video clip, such as Lebron James dunking on someone (plenty of those choose from!). Their ownership is recorded on the blockchain in what’s called a Non-Fungible Token (NFT).

NBA Top Shot is a creation of Dapper Labs, a Canadian blockchain company. It started selling NFTs of cats called CryptoKitties. From these humble beginnings, Dapper Labs has grown to a million users on NBA Top Shot alone and recently raised $300 million in venture capital at a $2.4 billion valuation.

In an interview with CEO Roham Gharegozlou, angel investor Jason Calacanis marveled at how far this company has come:

Another 8 year overnight success in the making. It’s so funny how, as a founder, you can go from being like a punchline of a joke to the absolute belle of the ball.

Calacanis noted that video games have already sold digital items for real money for years, so the NFT business model is really not that much of a stretch. What’s more, for the young, owning a digital asset feels much more natural than owning a baseball card.

Dapper Labs plans to branch out to other sports leagues, and ultimately to recording ownership of items beyond video clips and images. If Dapper controlled the ownership records of, for example, cargo, this could be a truly massive company.

I was impressed with Gharegozlou’s perseverance over nearly a decade, going from obscurity to a partnership with a top sports league and a unicorn valuation. I was also impressed by how forward thinking the NBA is. If the creator of CryptoKitties came up to most major businesses with a proposition, they wouldn’t even get a reply. In its work in the crypto industry, as well as its highly successful COVID protocols, the NBA is clearly doing something right.

Give this intriguing interview a listen!

For more on NFTs and crypto, check out these posts:

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Photo: “LeBron James New York City More Than a Game 3 by David Shankbone” by david_shankbone is licensed under CC BY 2.0