Keepsakes, Nostalgia, and Apple

When I think back in time, to my youth, I have very strong memories of those days, but not many physical reminders or keepsakes from that era. In my parents’ house, I have some boxes stored here and there, and as I’ve moved around from NYC to SF to NYC to SF to Cambridge to Palo Alto over the last 15 years, I’ve been trying to get rid of things — not hang on to them. However, I do have a smaller box with some actual photo prints, my old passports, my old wallets, and my old wristwatches. Each of these items, in turn, carry a lot of personal nostalgia for me. You wear the wristwatch so much, it becomes a part of your body; you shape the wallet with your body over years; the passports remind you of change over the time and the places you’ve been; and the pictures, well, we all know how important those are.

Now, speeding up to 2015, close to the eve of another Apple announcement (presumably about Apple Watch), I am excited because the Watch is awesome and I want one. And, this all got me thinking: There’s time, so we have Apple Watch; there are wallets, so we have Apple Pay; there is the matter of our identity, like passports, so we have TouchID; and we have pictures, often the most critical trigger for us to recall our memories, for me now entirely taken via iPhone. All of the nostalgia I have ever kept for myself now, with Apple Watch on the way, will fit into one ecosystem, across two devices, connected in the cloud, and at my fingertips with iCloud (hopefully).

I dug out my keepsakes (see pictures below of my old wallets, watches, and passport photos). On the wallets, the green one is a freebie from Newport cigarettes, my dad got it as a promo and I wanted it so badly, so he gave it to me; on the watches, the second one from the left is something I found in the woods in my hometown and have had fixed 4-5x over the last 30 years; and on my passport photos, my dad would sign them for me as we traveled back and forth to India. It makes me realize just how transformative this mobile era is. It is not just changing how we live, but maybe also how we remember our pasts.

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Investing Pre-YC

Being a new, inexperienced, and small investor, I really have to “take what the defense gives me.” Put another way, I am often forced to look in areas and stages where more professional investors wouldn’t go. Sometimes I ride along and go late, but lately, I’ve also been going early, and one of the things I try to do in these cases is see if the company has what it takes to get into Y Combinator in the next 3-6 months. Here, I help them prepare.

People may think of Y Combinator as a startup incubator, and in some cases it can be, but it’s really a startup selector and accelerator. And, over the past two years, it has quietly been moving upmarket, as well as growing in absolute size. This means on Demo Day you can see three companies in a row present, where one has zero revenue, one is making about $4k a month, and one is making $350k/month and growing. This distorts the Demo Day vibe a bit (and potentially puts less mature companies in a tough spot), but ultimately, the YC engine is about a huge, smart, network effect and growing. The best startups coming out of there are doing both, leveraging the network for advice and new customers and growing by any means necessary.

Which brings it back to me and Haystack. I love going to Demo Day but it’s also so big and fun and a firehose, it’s hard for me to make decisions so quickly. So, I meet a bunch of the companies earlier, like many others. So, I also try to meet people early who I think have a great idea and incredible drive and who could benefit from applying and getting into YC. I have a company in the current batch I did this with, and while it was a bumpy road, it worked out and the founders are loving the experience.

A final note: I do not have any special ties with YC to help with applications, and this approach doesn’t work all the time (I’m 2 for 3), but I do think it’s an opportunity to find founders who have already started something that’s beginning to work, and a big idea — if they’re thinking about something big, if they’re leveraging their limited resources, and if they’re focused on how to grow, it’s a fair shot to get into YC. Getting into YC doesn’t mean the company will be successful, of course — but the network, peer & time pressure, and focus on growth gives an early company a great chance to get to the next key milestones.

Hacking Mobile Distribution and Deployment via SMS

As someone who worked on consumer mobile products for a good number of years (and who carries the scars of the endless search for mobile distribution), the chatter about new mobile services using text messaging as the interaction layer has been fascinating to watch. Kent Goldman from Upside has some of my favorite tweets about the emergent trend, remarking “Good old SMS is the new UI” and Jonathan Libov of USV had a longer post (click here) about how this trend developed as a UI and where it could go in the future.

With the release of Magic and, why is all of this happening at the same time? When Twitter launched back in 2006, its signature 140-character limit was originally created and imposed in order to ensure tweets fit inside text messages, which were limited to 160 characters. Since then, users could always tweet via text through Cloudhopper by syncing their phone to their Twitter account and texting their tweet to 40404. I still do it often when I’m on the go and don’t want to open TweetDeck but have a question I want to ask or thought I need to share in the moment.

Here’s a brief recap of how we got here:

  • Dearth Of Mobile Distribution Dampens Developer Libido: If you’ve read this blog over the years, I am a broken record on this topic – mobile distribution is so hard to engineer, yet while the overall market size of mobile users creates the largest technology market we’ve ever seen. For an enterprising mobile developer who has tried his/her hands with a few apps only to never get distribution, these conditions can force mobile app makers to look for other ways to capture consumer attention on phones.
  • Global Tidal Wave Of Messaging Apps: We all understand this, I trust — the massive footprint of mobile messaging apps which will eventually turn into commerce, interaction layers, and much more.
  • Avoiding App Store Noise and Taxes: Kent pointed out releasing a service via SMS also allows developers to avoid the morass which are the mobile app stores. This also reduces developer libido, working so hard over an app only to see the store flooded with copycats, black box featuring schedules, and drastic changes in UI which reduce search functionality and browsing. I’d add to Kent’s point that for digital transactions for services rendered through the app, some of these new SMS services could provide a bypass around Apple’s 30% toll in the app store.
  • Reduced Cognitive Load Requirements: It’s hard to design a transactional mobile app where the user doesn’t have to make lots of decisions. Uber is one of the few. But, if I could just text “I want X delivered a bit after 8pm” it’s just easy, and I don’t have to search for an app, open it, wait for it to load, and then find the input areas, etc.
  • Easier User Onboarding: Asking to download a mobile native app has many steps. Find the app. Push button to download and/or use TouchID to verify download. Wait for the software to arrive. Open the app, wait for it to load. Then, sign up, register, perhaps go through a tutorial….ah, screw it, I just want my burrito and some organic juice. Another friend, Robert Stephens, pointed out it’s an easier request of the user’s time and attention, and after a few interactions, an easier upsell to download the native app. But, to start, asking a user to just “Send us a text to 70707 to get started with Sandwich Valet” is a pretty easy call to action.
  • Immediately Cross-platform: Kent also pointed out going text-first on mobile also makes the service omni-platform from Day 1, even for a Windows Phone. That’s a joke. But, not really, think of Xiaomi in China or other OS and app ecosystems emerging. Whereas many startups are thinking about going iPhone-first, some of these new services can service everyone right out of the gate.
  • Conversational UI: This is sort of an aside, but related….My friend Max shared a screenshot of and called it “Conversational UI,” which is clever — delivering a service (in this case, in a mobile native app) in a format where users feel like they’re texting with their friends.
  • Gateway To Mine Our Conversational Patterns: Last year, we started to see apps deployed which mined our emails to build up our profiles and preferences for eventually delivering a predictive or AI-based solution. Like email, getting into our native messaging clients like SMS provides developers another fertile ground for mining our conversational habits and preferences. People have been wondering aloud about “How can Magic scale if humans are providing answers?” and the answer is, often, “AI.” Eventually, machines will be communicating with us, and we will likely not have any idea.
  • Potential Drawbacks To This Strategy: This all sounds great, but what are the drawbacks? It’s hard to build a bond with the user without the mobile app. Not having a mobile app blocks the service from leveraging core phone sensors (mainly GPS and camera). Some commerce functions require a browsing interface or creating a basket of goods, in which case typing out the basket is inefficient. There’s also a business model consideration for services which launch here but are on top of other services — additional tips and fees could conceivably add 3x to COGS of an item’s true cost. And, well, we must only believe it’s a matter of time before Messenger, Whatsapp, Snapchat, Instagram, maybe Twitter, and others do some version of this, too, inside their own “chat” experiences.

Which Funds Catch American Unicorns Early?

Like everyone else blabbering on about unicorns, I catch myself reading the posts, too — and many LPs I talk to often just want to know, “How many unicorns do you have?” I’m partially joking, but it’s directionally true. These are the companies which drive the outsized returns. However, I wanted to ask a slightly modified question and see what public data sources would reveal. I wanted to focus on America, on consumer companies that have grown to a $1Bn of private market value since 2008., and specifically on the institutions which were able to invest relatively early — not later stage investors. Here’s the list I came up with, based on a conversation on Twitter. (Disclaimer: Please let me know if I missed any company or fund, happy to amend this!)

Since 2008, the following consumer-facing companies (U.S. HQ’d only) have been formed and reached a private market valuation of at least $1Bn. I’ve also included the only the institutional funds (even if small) who were in the round before a $100M pre-money valuation, give or take, based on public sources — note, 1) I may have not listed a fund, so please correct me if I need to, and 2) I am not listing individuals:

Uber / Lowercase, Benchmark, Structure, Founder Collective, Kapor, First Round, *AngelList
Pinterest / Bessemer, FirstMark, High Line
Whatsapp / Sequoia
Instagram / Baseline, a16z, Benchmark, Lowercase
Waze / BlueRun, Magma, Vertex
Oculus / *Kickstarter, Formation8, Spark, Matrix, Founders Fund, Big Ventures
Nest / Shasta, Kleiner Perkins
Tinder / none (*Benchmark now on BoD)
Living Social / Revolution, Grotech, USVP, Lightspeed
Groupon / NEA, Accel, SV Angel
Houzz / Advent, Sequoia
Square /
Khosla, First Round, SV Angel
Snapchat /
SV Angel, Lightspeed, Benchmark
Wish /
XG Ventures, Caffeinated, Felicis, Digital Garage, CRV, AME Cloud, Formation 8, GGV
Instacart /
Y Combinator, Khosla, Canaan, Sequoia, *Funders Club
Tango / Hambrecht

Assuming this list and rundown is true, what can we glean from it? Well, no surprise, Benchmark and Sequoia are both early and swinging big; First Round and SV Angel caught a few, as did Khosla and Lowercase, then there’s actually plenty to go around for the rest, as many firms have one — and two companies above were actually part of crowdfunding platforms (while one was on Kickstarter, but no equity was sold there). Finally, consumer is what grabs everyone’s attention and what the tech and popular media focus on, but relative to enterprise & B2B startups, there are just fewer consumer companies (16 since 2008, by this case in the U.S.) that reach $1B status — however, the total market cap of the consumer companies is much larger, hence our collective obsession and fascination of tracking such things. Oh, and LPs care, too ;-) By the way, if I only started counting from 2010 onward, the list for consumer would drop from 15 to only 10, and a good portion of them have been acquired already. Of course, there are many more in the pipeline, and if I checked on this list in a year, there will be more.

Sources: WSJ; Crunchbase; Fortune.

The On-Demand Stack

This is an unprecedented time in technology platforms and deployment. One of the biggest consumer trends (among others) to emerge from the SF Bay Area is the idea of “The On-Demand Economy.” Lately, the space has gotten so hot (and some may label it frothy, even), that the term “on-demand” has been loosely used to describe an even larger phenomenon — order everything from your phone, even if it’s not truly “on-demand.” As a result, while the phrase “on-demand” sticks, I like to point out there are two types of species in this genus: (1) services which are truly on-demand, like Uber, Lyft, and Postmates, where users demand a good/service, which then triggers the system to fulfill that demand; and (2) services which allow the consumer to transact by phone, but the service is delivered at a scheduled time, like Instacart — here, the consumer experience feels close enough to on-demand that it all gets wrapped up into one moniker.

How We Got Here (Briefly)
I’m going to quickly gloss over some big topics, just for context: After the 2008 crash, there was a little shift in the economy. People will argue that in the resulting slow recovery and then tech boom, everyone is doing a little better, but many people haven’t gotten FT jobs back (often stopping to look for new work) and have settled into the life of a 1099-er. This has been furthered by the unintended consequences of reforms in healthcare law, which have motivated many employers to cut back their workforces’ hours to be under 30 hours/week, the threshold where employer-mandated care kicks in. And, finally, you have the still unbelievable ubiquity of little computers proliferating across our homes and pockets, all connected to data or WiFi. Those phones, as I’ve written about many times before, form to collect the greatest consumer technology market we have ever seen — yet, mobile distribution remains choked for many, forcing some daring entrepreneurs to monetize by using the phone to aggregate demand and fulfilling that demand through offline operations.

The On-Demand Stack
When we think of “On-Demand,” we think of apps like Uber, and there are many — and more in beta or seeded that may seep into the mainstream. But, if we peel back the layers of these apps, what we find is a complicated stack of business operations, supply, and technologies. I won’t be able to capture them all here (though, please do reach out and I will add to the list)

  • Labor: The apps we use need people (for now) to carry out the labor. Here, startups (such as Task Rabbit, Homejoy, Shiftgig, Wonolo, etc.) work to provide labor in specific verticals where the end customer is a network of businesses.
  • Mobile Phones and Networks (iOS, Android): Sort of obvious, but bears repeating that the proliferation of phones makes this all possible, even despite mobile distribution being hamstrung for many.
  • Infrastructure & Services: What makes some of these apps run, perform, and adapt to users’ needs? Garry Tan had a great tweet last year, something to the effect of “The best software is invisible.” Well, if we looked underneath the Uber app, we’d find a range of technologies, some lumped into SDKs, some built in-house, and some external services that, combined, help with optimizing routes (Addy, Narvar), passenger & driver matching, pricing, fare-splitting, SMS communications (Sonar), promotion/referral redemption & management, app indexing, deep links (Button, URX) and one day loyalty. As labor comes through their funnel, potential drivers need to go through background checks (Checkr, Trooly, Onfido). Of course, when you get into an Uber, you can now integrate your Spotify experience into your ride. I’d also expect more of these complimentary, ancillary services to help delight users and drive deeper loyalty and engagement.
  • Deployment Application Layer: These are apps like Uber and everything else we put on our phones. Too many to count here, of course…

As a final note, I’m both biased positively on this trend (though there are risks) and heavily invested up and down this stack, mostly at the application layer. I do not know how far the trend will pervade outside the early-adopter tech centers and beyond transportation and food. I’d be lying if I said I did. What is clear is that for now, real companies can be built as services for the larger app companies, and I do believe even in transportation and food (the best two daily active use cases) we will see more version and plenty of healthy competition, collaboration, and eventually consolidation. Be careful what you demand.

Kicking Off The StrictlyVC Insider Series


Late last year, in one of my many chats w/ Connie (who created StrictlyVC), we came upon the topic of “Hey, how could StrictlyVC be something more than it is today?” Big question. We batted around a ton of ideas. I was willing to help on whatever made sense, and Connie — juggling a daily newsletter and a bunch of other things — decided on a few live events for 2015. Thus, “The StrictlyVC Insider Series” was born.

Connie had her first event last week in San Francisco, and the turnout was great, all readers of her newsletter getting to meet live, in person, in the beautiful offices of Next World Ventures (which was also hosting an original Banksy — see pics below). We were lucky to book a star lineup — I kicked things off in conversation with Keith Rabois, then Mark Gainey (Strava founder), and the event closed out with Naval from AngelList & Connie in a 1:1 discussion. If you’re interested in the world of venture and you haven’t already signed up for StrictlyVC, take a look at Connie’s excellent post-event reporting which recapped the conversations about Strava, AngelList, and two separate posts (Part I & Part II) on all market insights from Keith Rabois. (Sign-up here for StrictlyVC.)

In particular, I want to highlight the discussion with Rabois (again) and would encourage you all to read through Connie’s synopsis. In the first part, Keith makes a more detailed case about why private companies should be going public in today’s environment, and why it’s unhealthy (and an excuse to avoid scrutiny) for the overall ecosystem. The full argument from Rabois is captured here, by Connie. In the second part, Keith and I discuss how larger VC firms can think about having a multistage strategy of investing at seed, traditional Series As and Bs, and then on to growth. I see more firms wrestling with this issue as company formation becomes quicker, cheaper, and flooded with micro- and crowd-based funds. See more of Part II here.

Finally, congrats again to Connie and her readership at StrictlyVC. What may look like a simple daily newsletter on the venture industry requires a ton of work, focus, and dedication. And, we are already planning the second event and talking to a few speakers. From what I see so far, it will be fantastic, and as soon as we know the date, time, and venue, you’ll want to pen this in your calendar.



LA Confidential

Upfront Pic

In late January, I headed down to LA to attend the Upfront Summit, which was organized by Upfront Ventures. I had a bit of time before and after the two-day event, so I filled it up with some meetings and talks. I haven’t been writing much over the last month for a variety of reasons, but have a backlog list to work through, starting with this post. Here’s a recap of the trip, which I’ll say was very enjoyable, fun, easy to get around with Uber, and gave me real confidence that the LA tech and startup ecosystem has the makings to be a very durable thing. Thanks to Cross Campus, Upfront, Earwolf, and Amplify for making this a very memorable trip and to everyone who showed up to hear me shoot the breeze on all these topics. I felt at home in LA, and I didn’t expect that nor will I forget it.

Cross Campus
On Wednesday morning, I talked to a small group of seed-funded CEOs working out of Cross Campus in Santa Monica. It was a more private chat, and everyone had products going along and trying to figure out how to get to Series A. The conversation flowed as if I was in the Valley, not somewhere else, and we discussed strategies of how to leverage the Valley’s VC ecosystem from a 1-hour flight away. It’s nice to see these coworking and incubator spaces popping up in the LA area, and I believe Cross Campus is

Years ago, I met Adam Sachs (then with StepOut, which was acquired by IAC) because his company had garnered great interest in India, and I was working on projects in India. We remained friends, and after a while, after Adam moved his family to LA, we reconnected. At the time, I was with Swell and getting into the world of podcasts — so was Adam. He graciously invited me to part of his series on podcasts with Earwolf. In this discussion below (see SoundCloud embed), we spend nearly 50 minutes talking about lessons from Swell, mobile product design, the podcast market, and advice for entrepreneurs in the podcast space. We also talk a bit about investing.

The Upfront Summit
The Upfront Summit was the catalyst for the trip. What a fantastic event. Let me just say that upfront, pun intended. The first day was mainly focused around LPs on stage. Let’s just say the room was so quiet, you could hear a pin drop. It’s been very educational for me to learn more about what LPs do, how they think. That evening, there was a great party, and then Steve, Kanyi, and few others hung out late night. The next day was a more open conference at the Paramount Pictures studio in Melrose. Stunning location. The Upfront team did an amazing job of not tooting their own horn, but rather bringing a range of investors, press, companies, and LPs from the LA region to showcase the region in whole. That takes a lot of thought to sit back, invite other big players, and take the orchestra conductor role. There were great sessions, my personal favorite being a chat with Tim Ferris. The best session overall, however, covered how the LA region embraced VR as a new category. You can listen to the panel here, below. When I heard these guys speak about all the nuance around VR, it was absolutely clear why Zuck bought Oculus and why the deal was a good deal for him.

After Paramount, I had a late flight out of LAX, but had some time, so I rolled in an UberX down the hills over to Venice. See the picture below from my Uber, what an epic sunset. Paul Bricault, who is with both Greycroft and Amplify, was kind enough to organize a pretty big event for me at the Gem offices in downtown Venice. We talked about a lot of things such as mobile apps, on-demand economy, Apple’s future ambitions, difference between seed and Series A, and how LA startups could compete for talent with the Bay area. Here’s the full chat below.

LA Sunset

Transforming Dropbox, Airbnb, and Uber Into Global Juggernauts

Juggernaut: “a huge, powerful, and overwhelming force or institution.

There are three private tech companies — Airbnb, Uber, and Dropbox — which are on a path to go public. In this environment, they also benefit by staying private longer, and that extra time can help each company fortify reserves, address weaknesses, and plan for the future. It wasn’t too long ago when, on the verge of a huge IPO, Facebook made a bid for Instagram. Facebook didn’t perform well in public markets initially, and many attributed that to the company’s slow transition to mobile. While it took significant work for Facebook to rebuild its native iOS app, having Instagram in its back pocket has proven, over the years, to give the company yet another dangerous weapon in their mobile arsenal.

What could the three big companies listed above (Dropbox, Airbnb, and Uber) learn from Facebook as they wait in the stable? And, could those companies actually use this precious time as a private company to join forces with other high-growth, private companies to create not just durable public companies, but to create global powerhouses on the level of Facebook and become a $100B+ institution?

Or, put another way:

What could transform Airbnb, Uber, and Dropbox from epic companies they are today into multifaceted global juggernauts?

<Disclaimer> Below is just something I’ve been thinking about for fun. A few disclaimers: I’m not suggesting any of these services as targets because of weaknesses, but because I think they’re strong companies and teams and would add tremendous long-term value. Second, many of the companies I’ve listed below could well remain independent for a very long time — this post is just more of a thought-exercise around wondering, “what if they joined forces?” There’s also an international angle here in Europe and Asia, but I’m not sure that makes sense pre-IPO. I may also have a small interest in a few of the companies listed below, but it’s really so small it doesn’t make much of a difference — this post is mainly for fun, not to suggest a serious strategy for any company moving forward. </Disclaimer>

Dropbox – I drafted this up before Microsoft came in and scooped up Sunrise, after buying Acompli (Exchange email) a few weeks earlier. While Drobpox has big ARR and operates at a very strategic layer between computing, network, and storage, if we assume the cost of storage is on a path to $0, how does Dropbox fortify itself for the eventual scorn of public investors? And, especially so, after the ups and downs that enterprise-focused competitor Box went through?

So, I’m thinking aloud now. What if they merged with Box and both co-owned this layer, with Box focusing on enterprise, expanding to verticals (like health/IT), and Dropbox continued to foster an ecosystem of apps on top of its cloud platform? In addition to Sunrise (whoops), Hackpad, Mailbox and a few others, what if Dropbox acquired or commissioned other products to reinvent excel, accounting, and other traditional MS offerings reimagined for a mobile & cloud native world? Dropbox has the opportunity to be a $100B company, and it will be interesting to see if they can do it.

Airbnb – This is the one “startup” that, to me, is the most defensible of them all. I mean, what can stop Airbnb at this point? Unstoppable, it has the best network effect in the world and is in one of the largest market categories.

So, Airbnb will likely be fine, but why not arm itself with strategic assets while its value climbs in private markets? My personal favorite idea is acquiring Lyft: Airbnb benefits by deepening travel-related ties in key cities, and Lyft benefits 10-fold by finding a home in a rocketship (and getting pre-IPO stock for themselves and their investors!), by leveraging the Airbnb network effect to launch more cities faster. Other acquisitions could be Couchsurfing, home services (like Handy and Homejoy) and Foursquare, to control their places database and API (which is used by Instagram, Uber, and others).

And, finally, we have the Big Kahuna, Uber – I believe Uber will be a bigger company by market cap than Google, largely because the market it addresses (transport and logistics) is just so damn enormous. I do not mean this as a slight against Google. Today, Uber is turning the corner to be on a collision course with Amazon and Google — for instance, in a few cities, all three services will deliver you basic items within a few hours.

Uber’s big investors — they’re holding the biggest convertible note in the history of notes — are also expecting more than UberX and Uber Kittens. What else could they do? First, buy Postmates, and — boom — now they can provide not just rides, but couriers who can deliver food. (They could also acquire DoorDash for the backend and routing technology; and OrderAhead for the menu and payment integration.) Next, buy Instacart, which gives them the staple household activity of ordering and delivering groceries (and Costco, Petco, etc.). Then, scoop up HotelTonight to offer users who are traveling the seamless option of booking transport and lodging effortlessly.

(When I drafted this earlier in the week, I listed “a mapping solution” to liberate itself from Google Maps and “an autonomous navigation technology” (like Cruise?) to liberate itself from Google’s self-driving solution. Well, it was an interesting week with Google announcing a self-driving taxi plan, which Uber of course countered with a university partnership around self-driving.)

Brief Field Notes From The Seed World

Below are some topics that have come up often lately in conversation with early-stage founders, so I wanted to write them down. Most of them are not related to each other, so I just smashed them into one post for brevity’s sake. I hope some of this resonates with you and, if you see something different, I’d love to hear your perspective. -Semil

Owning The Metrics: At a certain point in a company’s fundraising path, the foundation of conversation shifts from promise to data. Executive team, market, and vision remain critical, no doubt, but so much of every conversation, every piece of diligence and modeling, revolve around metrics. One thing I’ve observed is the best executive teams don’t just grasp their metrics — they own their metrics. Owning the metrics means the team has defined each term, pegged them to industry standards, and has set up systems to measure, record, and slice data in ways that demonstrate a firm grasp of modeling, ratios, and drivers. While investors can fall in love with narratives, a grasp of the metrics can instill a more rational level of confidence.

Confusing Inbound Interest With Real Interest: This scene usually unfolds as follows. The founder receives a cold email from an investment fund. Often, it will come from the big dog at the fund, some times an underling. A few of these rack up, and the founder starts saying “we have inbound interest.” No, you have inbound email, and inbound email is not necessarily interest. Most of this “interest” is just trolling. So, how does a founder measure real interest? I’ve written about this a bit in a post titled “Turf Signaling.” Read it. Then, ask yourself: Will this investor engage in conversation on email, and/or hop on the phone? If that goes well, will the investor come to your office or a place that’s convenient for you? The moment you start bending to the schedule of the investor who emails you, you’ve already signaled you’ll go out of your way for him/her. You’ve signaled your intent before even meeting the person.

Anticipating Reference Calls: In the diligence process, an interested investor will talk to customers, big and small. The easy tip for the founder is: Train those references! Reach out well in advance, spend time with them, explain to them that investors will be reaching out, explain the process, and do it early. Priming those conversations helps make for smoother diligence, and also demonstrates the executive ability to anticipate events, to marshall resources, and to engage third-parties in the success of your company.

The Peculiar Seasonality Of Valley Fundraising: This comment only replies to larger investment rounds, say those of about $8M and above, the types the very large Series A funds now make. (For rounds small than $8M, this doesn’t apply.) There is a seasonality of how larger rounds are raised in the Bay Area. While deals can certain “close” in the summer or in late November and December, those times in particular are not great times for kicking off a fundraising process. (Read an earlier post I’ve written called “Creating A Fundraising Process.”) Put another way, it’s great and wise to “start” discussions formally with investment firms from January to about Memorial Day, and then again in September, maybe a bit into October. Outside of those windows, it’s tougher (not impossible) to start conversation with the types of firms and partners that a founder may want to engage. Again, not impossible, but much harder. Investors won’t like to admit this because they work hard (it’s true) and many have had their summers or holidays evaporate because they’re working on a deal, but it’s more often to close a deal that likely started a discussion earlier in the year. (Again, I know people will cite data about when deals happen, but that’s when they’re reported to that source. They likely closed earlier, much earlier.)

Rolling Closes And A Twist On Exploding Offers

By now, we all know seed stage fundraising doesn’t happen in rounds – seed funding is a process — and it’s dragged out for many weeks, many months, and sometimes years. Founders and companies issue notes for debt which converts to equity when a round is priced by a bigger fund (most often), and those notes are usualled “capped” at some price. Likely, you’ve read about this before and/or can find more information on the intricacies of notes and capped rounds on the WWW.

I stumbled upon a lesson in raising Haystack. Because the fund is very small (like, really small) and because the LPs are mostly just individuals I know personally across the country, I can also raise the fund in a rolling model — though I can’t “split caps.” What I initially found — like a founder raising money — is that oftentimes people can wait a bit before committing to see who else comes in. No problem, but after a while, I realized it could encourage behaviors that are counterproductive.

So, instead, when someone approaches me about the fund, and there’s mutual interest, I politely mention that from the time we discuss any details, I give the person about one month to decide. It’s enough time to ask questions, poke around the web to learn about me, and to make a decision. I have now most certainly informed people after their month is up that I will happily save their name for the next fund. No harm, no foul — but I retain control and peace of mind. It sends an important signal.

Seed-stage founders could do something similar in an era of rolling closes. Instead of meeting millions of early-stage investors like me and trying to herd us like blind mice, why not put a clock on the offer? There’s so much seed funding going around, don’t worry about saying “no” to someone. It’s simple — you meet someone who inquires about your business. They dig in a little and explore. You gently suggest that your company policy is to give early-stage investors about 4 weeks from time = 0 to decide. After that, it moves on to a different “cap.” The key here is that one has to be totally comfortable with just walking away from an investor — and I’m writing this to underline the fact that oftentimes it is entirely OK to do so.

A founder I know well struggled for 8 months to just get $500k. Brutal struggle. Now, he’s in YC. When word spread, he had plenty of offers, of course. But, many of those people early didn’t invest, and he let them hang around the hoop. Now when those folks ping him, he’s quoting a higher cap. Time is money.

Haywire is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2015 Semil Shah.

“I write this not for the many, but for you; each of us is enough of an audience for the other.”— Epicurus