Month: September 2015

This is part 2 of 2. Part 1 is here. Follow me @samirkaji for my always random, sometimes relevant thoughts on the world of venture investing and startups. In my last post, I described how to effectively ask for a warm introduction to investors through mutual contacts. Of course, the premise of the article was centered around the supposition that most investors today still primarily (or solely) engage only with companies that are referred in by a trustedsource. However, as many of my readers accurately pointed out, most entrepreneurs simply don’t have robust enough networks that they can effectively leverage for warm referrals to targeted investors. This rings even truer for entrepreneurs migrating from areas outside of Silicon Valley, LA, or New York. While there are fairly rational reasons why investors are biased toward referred companies over cold inbounds, we know that great companies can come from anywhere. Despite that fact, many investors have bluntly told me that they doubt they will invest in a company that comes in from outside of their network. I’d posit that this legacy way thinking has sub optimized venture returns by overvaluing social proof and creating unnecessary mental biases when evaluating out of network deals. I’m going to cover this in a future post in much more detail, as I think it’s an important topic to deconstruct. Further supporting the point, take note of First Round’s analysis of their portfolio, which evidenced that non-referred companies outperformed referred companies by a substantial margin. Courtesy: First Round Capital Review. Again, I’ll leave the behavioral psychology discussion for another day. Instead, I’ll focus here on how to most effectively “cold call” an investor to assure a higher probability of engagement. 1/ Focus The spray and pray approach of messaging investors is as effective as those emails that populate your Gmail promotions folder. As a mildly active angel investor with an AngelList profile, I get 40–50 non-solicited emails a month from entrepreneurs fundraising. Unfortunately, the majority of the emails come off as spammy with very few including “engagement hooks”. Looking at my last 75 inbounds, I counted 9 that I (subjectively) consider to be effective emails. 9 out of 75. That’s 12% for those counting at home. It’s important to qualify yourself when approaching an investor to confirm mutual fit. It’s simply unreasonable to expect an investor to do homework on you to determine whether there may be a fit if you clearly have neglected to do cursory homework on them. Pre-qualify yourself. 2/ Research firm infrastructure Once you’ve compiled a wish list of investors, leverage public channels to determine decision-making and sourcing processes of an investor. Most large venture firms have multiple associates whose main role is to source...

Follow me @samirkaji for my always random, sometimes relevant thoughts on the world of venture investing and startups. This is part one of two. Next time I’ll cover how to craft the perfect cold email to investors. For entrepreneurs, raising capital from external investors for first time can be incredibly challenging and frustrating. And I get it. Competition for capital is fierce. Seed rounds are up 2.5X from 5 years ago, and there are more startups than ever vying for investor attention. But far too often, I see entrepreneurs repeatedly make simple and avoidable mistakes. One of the most common mistakes, but most easily correctable, is not knowing how to effectively approach or get introduced to sophisticated venture or angel investors. Founders often lament the fact that most investors publicly say they are highly unlikely to invest in a deal that isn’t referred in from someone they trust in their network. In reality, it’s an easily explainable and reasonable stance: 1/ Time remains the most precious resource for investors, and referrals provide the necessary filter to separate noise from signal. Reasonably, the people that know you best will send you the deals they know fit your “type”. 2/ With so much information publicly available about investors and their connections, every entrepreneur should be within a single degree of almost any investor. If you can’t get a mutual contact to refer you, my visceral reaction as an investor will be a) you were too lazy to find a mutual contact or b) none of our mutual contacts were willing to endorse you to me. Neither is a positive signal, even if it may be nothing more than perception. 3/ Getting a cold email typically translates to “I’m getting an email from someone that’s doing this for the first time”. Most investors prefer to invest in repeat entrepreneurs, who have the networks to enable warm introductions. With that said, I realize that’s not a profound statement to say that warm intros are almost a must, but I do want to cover the “how” of effectively asking for an investor intro from a mutual contact. First, let’s cover what NOT to do. Please never, ever send an email like this: “Hi Samir Hope you’re well. Not sure if we have discussed, but I have launched a new software platform focused on digital currency management. We’ve been seeing tremendous growth and are ready to take the next step to really scale our business. I’m attaching our full pitch deck and executive summary here. We are looking to raise a $5MM round and wanted to see if you could help connect us to a few investors? I’ll be in your area next Wednesday and...

Building a business is really, really hard. Having closely worked with hundreds of founders over the last two decades, I’ve (admittedly vicariously) seen the darker moments that invariably accompany entrepreneurship. When my long time colleague and friend Sam left Silicon Valley Bank (SVB) to join First Republic Bank (FRB) three years ago, it wasn’t the classic case of chasing greener pastures. For starters, I had spent my entire thirteen-year professional career at SVB, met my wife at the organization, and was enjoying a great position at the top brand within the venture market. So why leave? Easy. Working with operators, the entrepreneurial bug had bit us and we both wanted to take on the challenge of building something. And outside of being known for it’s platinum client service levels, FRB is an organization built around the principle that employees act as their own proprietors, encouraged to build their own franchises based on individual inspiration. As is the case with building any business, the last three years have been anything but easy. But despite long days, nights, and weekends, it’s been an incredibly gratifying experience, and one that has exponentially amplified our empathy for the founders we work with. When we left, we knew things were going to be challenging. Competition from established banks within the venture and tech space is ferocious (and we knew were we were going to be confronted with a bit of “no one gets fired for buying IBM”).   Additionally, while banks are a necessity for businesses, choosing a bank typically ranks low on the strategic decision tree for many. To build something meaningful, especially as an underdog, we knew we had to be better. For the first few months, we did what most people do when starting a new role. We took inventory, and started leveraging our rolodexes in an effort to start building a client base.   While things were going well in the early days, we knew that if we were going to create something truly unique, we needed clarity of mission and identity. Without identity, a business is similar to a rudderless ship, drifting through the ocean until a merciful wave capsizes it. But there is one important truth about identity, and it’s BFA. Be. Fucking. Authentic Attempting to manufacture identity to fit a business narrative is a suckers bet. Passion isn’t a trait that can be faked and without authenticity of mission, it’s impossible to maintain the resolve necessary to navigate the personal and professional challenges that inevitably will be presented. So in August of 2012, we decided to lock ourselves in a small conference room to determine the what, why, and who of our business. Thankfully,...