in the world are YOU doing at this startup?"
That is a stinging question tossed at entrepreneurs by a VC whom I respect. He does it to evaluate the CEO and make his investment decision.
First timers and even veterans see this as demeaning and negative. They react defensively with hurried exclamations that they are able and determined to make the next Google out of this idea, pull the company through the swamps filled with competitive alligators and snakes, avoid traps and pitfalls, overcome storms and disasters, create awesome results in the shortest time, and about everything else, single handed, including walk on water.
So after a quiet chuckle, the VC tries to figure out the
true story and make a decision to go or not go with investing in your company.
I find the fundamental purpose of this question very
important. Most inexperienced startup leaders do not realize how important to
VCs are the special skills are of the CEO and each of the core team of managers.
Veteran VCs will quickly tell you the game is all about people.
So how would you, the CEO, answer that stinging question? Here are some suggestions that I have seen work well:
- “I am a builder” works well if that is what you do well. Building an organization that builds a great startup is fundamental to leading a new enterprise. Look at your resume before responding.
- ”I am the startup’s chief recruiter” is what you say if that is what you do best. I’ve seen several startups grow successful because the CEO was outstanding at finding and hiring great people. One example is John Morgridge of Cisco.
- “I am great at execution” of bplans for startups. Doing a plan is very difficult. Startup experience executing a plan with success is very valuable. Point to your career and get your references ready.
- “I am great at sales” is that Larry Ellison of Oracle told investors. The rest is history.
am skilled at raising capital” works if that what you have done. Be sure to have a track record
that reflects it.
Note that each
response is singular. That is focus. You do not get an enthusiastic response if
you say you are a “good general manager”. That is for MBAs of large
corporations to do well. In a startup you are expected to be outstanding at
So if you are that
focused, who is doing the many other things required to run the startup? The
answer is simple: the core team is running the company. The CEO will use 20
percent of his time raising capital for the rest of his startup life. Another
20 percent is consumed by continuous recruiting. So the skills of vice
presidents are very important, in fact critical to the success of the startup. In
other words, investors expect a complete management team to run the new enterprise.
It is not all up to the CEO. He does not have to be a god of everything. He
just has to be outstanding at something important to the startup.
BOTTOM LINE: Focus. Yourself. Choose. And practice your short speech in response to the stinging question “What in the world are YOU doing in this startup?” When you can respond with a focused reply and point to the rest of your team’s special talent, you will be well over the first and primary hurdle in the way of raising capital from world-class investors. That skill is central to building your unfair competitive advantage.