As New York develops into a thriving ecosystem for startups, a culture is slowly being created. I have had the opportunity to attend a wide variety of events and to meet with countless people in the startup space. From this experience, I have noticed some recurring items that I wish were avoided for the benefit of us all:
2. If you ask someone to do something on an equity basis, don’t be surprised if the lens with which they view the opportunity changes. Anyone working on equity is basically making an investment of their time and should conduct proper due diligence. If they don’t, you should be questioning whether this is a person you want as a business partner.
Make sure you have all the resources available at their disposal so that they can make an informed decision.
3. Don’t miss calls. If you have a call scheduled with someone, especially someone you are trying to do business with for the first time, make sure you are available at that time. If a calendar invite was sent, then you have no excuse.
As New Yorkers, we are all busy and need to account for our limited time on a granular level. As a basic courtesy, if extenuating circumstances prevent you from making a call, please send an email. Perhaps working in finance in a former life (where very rarely does someone miss a call) has tainted my outlook but I see this sort of absent mindedness happening regularly among some “entrepreneurs”.
4. If your startup has graduated from an accelerator/incubator, do not automatically assume your valuation is some dollar amount because every company that exits from that program is “valued” that way. There are no automatic valuations.
Valuation is determined by future cash flows. All qualitative factors and quantitative metrics are drivers of expected cash flow, whether it is number of users, impressions, or some metric you that you have conceived in your dreams.
Your company’s valuation is determined by the expectation of future cash flow. Period.
5. Event organizers, please stop holding demo/pitch events at bars. If you attract a decent crowd, the environment will not be a conducive for demos/pitches.
These events should be conducted in proper venues where the audience has a reasonable chance to learn about the product or service, and the presenter has a fair opportunity to introduce said product or service. And be heard.
6. If someone accepts your request on LinkedIn, do not send a message 30 seconds later asking for investment. Build a rapport.
See the following exchange from earlier in the week:
7. If you are seeking investment, please make sure your website has a contact section. I was recently conducting some research on both pre-funded and post-funded startups and noticed that a large number of pre-funded startups do not have any way for people to get in contact with them.
Stealth is stealth but if a potential investor or partner actually gets to your website and is interested, why make it difficult for him/her to get in contact with you?
8. Don’t get ridiculously drunk at networking events. This one is obvious but I recently had the misfortune of listening to a gentleman badly slur his elevator pitch.
9. Entrepreneurs, please stop building anything resembling a CHA or Cab Hailing App. Like the name implies, CHAs are those apps whose primary purpose is to help you hail a cab. Yeah, Uber is cool but do we need 100 Ubers? What problem are you solving and where is the differentiation?
New York is a hot bed of sophisticated thinking and the great majority of New Yorkers are able to hail their own cabs without an application. History has demonstrated this to be true.
For those that are having difficulty securing a cab, I am available to demonstrate the motion if necessary and would be willing to put a video on YouTube for the benefit of the masses. In fact, I should just offer to teach a class at General Assembly or Skillshare demonstrating the technique in person if there is such a void in the market.
For some reason that I cannot fully explain, my blood boils when I see one of these apps. But to be fair, the most difficult times to get a cab are during rush hour and when it is raining. No application can fix that unless the app prevents rain or actually increases the total supply of cabs citywide that are available. As far as I know, none of these apps do that. The number of medallions has been fixed for a while now and using technology will not increase the supply.
These CHAs may be good elsewhere, but are not needed in New York.
10. Investors, please stop investing in CHAs. I know there has to be a better use for your funds. There doesn’t seem to be a Series A crunch when it comes to CHA’s. Yesterday morning, I read that Hail-O raised another $30 million in funding after raising $17 million in March. That’s $47 MILLION! Ironically, later in the day, taking a cab downtown I noticed the cabbie had a Hail-O air freshener hanging from the mirror. Hail-O hasn’t even entered the New York market yet but one thing is for sure is that $47 MILLION can buy a lot of air fresheners.
I would be eager to know what sort of exit multiple investors are predicting. Even using the most minimal IRR’s, I cannot see how some of the funding for these Cab Hailing Apps is being justified. Which also might explain why so many investors who often jump on the latest thing because everyone else is doing it, so often find themselves left out in the rain.
Anything you find particularly annoying in the Alley? Sound off in the comments below…