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8 Takeaways from Brian Watson of USV

 

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Brian Watson, a member of the Union Square Ventures investment team, sat down with us recently to talk about a topic on top of every entrepreneur’s mind: funding. Brian is a straight-shooter and he gave us a LOT to think about. Check it out:

On when to raise $ for your startup:

The first question is, “Do you even need to raise outside money?” In the tech world, there’s this idea that raising money equals success, but that’s not necessarily the case. Brian tells us that there needs to be a good reason for funding, like that you are scaling so fast, you need help to maintain the costs of infrastructure. Don’t raise money unless you really need it, because you’ll be giving away some equity in your own business. Brian stated, “I’d always opt to own my whole company if I could.” Don’t focus on funding so much in the beginning, focus on building something that people really love.

On first steps in fundraising:

If you have a website or a service people really love, start asking your friends and family for funding first. You can go on Kickstarter and raise 15-20 grand for your business, maybe more. You should be creative about getting money. If you have something people love, ask your users to help support you to make it bigger. That kind of money is great because it has no strings attached, and it all goes toward making the site better for them.

On eventually hooking up with a VC:

Finding a VC is very much like dating: you don’t just want anybody, you want to find a good partner for you, a good fit for you. So, feel us out and see if we do what we’ll say we do. Do we give good feedback? Are we asking the right questions? It’s great to start a relationship with a VC even before you’re asking for funding because there’s no pressure then, the stakes are lower, it’s a shorter meeting, and you’re just getting the ball rolling. And from a VC’s perspective, it’s more attractive to then when teams are more independent. That’s just like dating too: you want what you can’t have, you know? Investors feel that.

On how to approach a VC:

Do some research and find the person at the VC firm who thinks the way you think or who is into what you’re doing. If you can’t get a referral to meet that person, a cold e-mail is fine, but keep it short. Just 4 or 5 sentences. Shorter is better and more actionable. Don’t reach out on Facebook…they’re always the creepy ones. You can reach out on Twitter. Just keep it all short and include a link to your product and be REAL. It’s better to be raw and true than to be polished and fake. That goes for everything, right?

On pitching to a VC in person:

Come in with very clear message and a short deck. Less is more. A simplified story that is coherent and interesting is better than 20 slides. Brian likes a 6-slide deck, with your vision, your traction thus far, the product you’ve built, and the team. You can Google “6 slide deck” for some examples. Remember that the goal of this pitch is to get to another conversation. That’s all. Brian tells us, “So come in, give us a good story, inspire us, and convince us to bring you back. We need to believe in your mission and the problem you’re solving. Err on the side of simple, you can always go deeper and do more follow up next time. Simple and concise is more likely to get a response.”

On having more than one investor in your business:

Most VCs will not be upset if you say I want to work with another investment partner also. Co-investing happens quite frequently and it’s a good practice because it brings more people with expertise around the table. However, your lead investor should be the one you connect with the most.

On startup boards:

Not having a board until your first venture money is OK. Brian recommends an informal board structure early on. Get some people on your side, meet with them monthly or weekly, get used to doing board presentations and getting their perspective on your business. It’s good practice.

On the NYC tech scene:

Brian is super bullish on NY right now. He tells us it’s a very different mindset than other places. The type of person drawn to San Francisco is more of an optimizer, making something faster or more efficient or cheaper. That’s what drives innovation out there. In New York, the businesses that are successful are more about people and interesting new ways people are connecting with each other or new ways businesses are connecting with people. Plus, there’s more diversity of ideas here. Out there, it’s all tech all the time. So figuring out where to base your business is really a personality question: what do you want as a founder and where do you think your team will thrive better?

Today’s post is written by Audrey Gray, owner and creative lead of Studio Gray New York.

Reprinted By Permission.

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About the author: The Phat Startup

The Phat Startup is an integrated media company that produces premium content for all levels of entrepreneurs.  We are inspired by and fuse together Lean Startup methodology and Hip Hop culture.

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