Pitch, Please: 14 Must-Read Pitch Lessons Every Startup Founder Should Know

Pitch, Please: 14 Must-Read Pitch Lessons Every Startup Founder Should Know

Pitch, Please: 14 Must-Read Pitch Lessons Every Startup Founder Should Know
Pitch Do’s and Don’ts, from a 500 Pitch Coach
by Andrea Barrica


A few reasons you won’t raise money:

  • Your business isn’t the right fit for VC (which is totally OK!)
  • You business could be interesting to VC, but you have nothing yet. Stop pitching, and focus on building a solid business that solves a big problem, getting customers, and assembling a great team.
  • You’re not talking to the right investors, or you may live in a city without a mature ecosystem that supports early stage companies, or…..
  • Your pitch sucks, and you can’t tell your story on stage or on the fly.


I can help with the last one.


Building a great business is more important than a great pitch, but if you don’t know how to tell your story, you probably don’t understand what is most interesting about your business. This problem affects more than just fundraising.


The hardest part about pitching is that it’s not about you. It’s a delicate balance between being authentically who you are, but more so focusing on what is important to your audience. This is what I help founders understand.


My Most Common Advice To Founders

  1. Don’t start with slides. Avoid templates. There isn’t a magic order, and templates often create boring, clinical, unsuitable pitches. Instead, master this question: what is most interesting about your business? (Seriously, do you know what it is?)
  2. Traction, Team, Tech, Vision – in general, most startups will fall into one of these categories. If you have (impressive) traction, you have a Traction Story. If you have a great team with a previous exit or serious domain chops, you have a Team Story. If you’ve built interesting technology (read: not a mobile or web app), you have a Tech Story. The problem? Most people choose the wrong story, try to tell all the stories, or think they have a truly interesting Team or Traction story – when they actually don’t. If you have nothing, you’ll probably tell a Vision Story, which means that you shouldn’t tell a Vision Story… and that you better bring the personality! Hint: When you figure it out, de-emphasize everything else.
  3. Stop selling the product. Sell the opportunity. Sales pitches aren’t investor pitches. With investors, it’s simple. Increase greed; reduce risk.
  4. Benchmarks by vertical. Know what good traction means in your industry, like:
    Marketplaces – 20% MoM GMV growth & 20% margin
    SaaS – 20% MRR growth, <5% churn E-commerce – >10%MoM growth, margins, repeat customers, average cart size
    Mobile – Engagement (# opens/day) especially if downloads/MAUs are early
    Social impact – focus on business metrics first before you dive into your epic vision. Order is key. Win their wallets, then their hearts.
  5. Don’t. Be. Boring. When dealing with a skeptical crowd, bring up something interesting as soon as possible. Dave McClure loves the traction sandwich and bringing up #s ASAP. Some pitches start with a shocking statistic. If you don’t have #s, mention a team brag, accolade, famous investor, anything you can. The most memorable pitches surprise, challenge, delight, educate, and inspire.
  6. Less is more. Good elevator, good pitch. Let the short pitch (i.e. 60-90 seconds) constrain you in the best way. In an investor meeting, let your answers be brief. If you are dominating an investor meeting, you are doing it wrong.
  7. Cut out detail & marketing speak. 90% of pitches I hear for the first time have way too much detail about the product and product features (looking at you, technical companies.) Cut out:
    Buzzwords like “disrupt”, fixing “broken” industries, “revolutionize”, “rockstar team”
    Forecasts of any kind beyond YTD
    Advisors/Investors (except REALLY famous people/relevant companies)
    Section for use of funds (we know you will hire developers & salespeople)
  8. Tell a story, and master transitions. Stories and case studies allow you to make points and brag (humbly). You can always tell a great pitch by the strength of the transitions – how the founder weaves each section of their pitch together in a cohesive flow and story.
  9. Nail Differentiation, especially if you are in a crowded space. (Hint: you should be able to do this in 1-2 sentences.) Don’t waste time explaining what everyone already knows, especially the problem. If you are a logistics company, don’t go on and on about how big the logistics industry is after you say it’s $4T. We get it. If you are a food delivery startup, don’t talk about the problem of not knowing what you’re eating for dinner. Everybody knows. In reality, a) that’s probably not the problem you’re actually solving, and b) we probably already agree it’s a problem — we’re just not convinced your solution is solving it. The more niche, international, or underground your problem/market, the more time you should spend educating. (Hint: there are no straight answers here – you have to iterate on sample audiences, but see #14).
  10. Focus on what you have learned. What are your key learnings? Steve Blank loves to ask founders this during pitch competitions, and it’s because investors are interested in the real story, not the fake Silicon Valley TechCrunch success theatre version. They also want to know they are investing in a team who can fail, learn, iterate, and move quickly.
  11. Bottom up, not top town market story, as Guy Kawasaki has often talkedabout. Narrow TAM, and be specific. Big #s on a slide make bullshit sensors go off.
  12. Don’t forget delivery. Don’t memorize it word for word. BREATHE. Beautiful, simple slides might distract an audience a little bit, but you are the star.
  13. Your pitch is not your business. Get in your best mental position; work out any insecurities. Come to terms with the imperfection of your company. Ban wishy-washy, apologetic, “trying” language. All startups are lopsided in some way.
  14. Avoid pitch feedback whiplash and don’t try to please everyone. The most successful pitches are often polarizing.


How I judge pitches:

  • Is the product and differentiation clear?
  • Does this pitch communicate the best possible version of this company? (I won’t know this unless I dig in deeper with you.)
  • Does this pitch teach me something, surprise me, or connect me to you as a person?


From Ghana to Poland to the Silicon Valley, I’ve had the pleasure of coaching hundreds of entrepreneurs from all over the world, and many have gone on to raise a lot of money ($50M-ish).


Read the original article by Andrea Barrica here. Click on “Tiếng Việt” on the menu for the Vietnamese translation provided by 500 Startups Vietnam.

Ho Chi Minh City
Floor 46, Bitexco Financial Tower
2 Hai Trieu St., Ben Nghe, District 1
Ho Chi Minh City, Vietnam

San Francisco
814 Mission St. #600,
San Francisco, CA 94105 USA

© 2018 500 Startups Vietnam

How to Build a Basic Financial Model

How to Build a Basic Financial Model



This post was contributed to VentureApp by Kody Myers, business analyst atParo, an exclusive network of highly vetted on-demand financial professionals.


The word “model” is often tossed around the business world, evoking complicated and intimidating visual images to those unfamiliar with them. But instead of depending on your “friend with an MBA” to back you up, any business owner can and should know the basics of financial modeling. So what is a financial model exactly?


A model is a means of predicting the future, and like a meteorologist forecasting rain, a financial model is really just a volatile “best guess” that should be updated frequently. Models take a set of assumptions (and sometimes your business’s performance history) and forecast a future state. Even though they are predictions, models provide a good benchmark and can help run “what-if” scenarios so you are prepared for any situation.


To start, a model doesn’t have to be exceedingly complicated and can easily be created in a program like Excel. We’ve outlined the foundation of a basic model below as well as tips for maintaining it. We’ve also attached a template to help you get started.



4 tabs that should be in your model:



A company’s P&L statement (synonymous with an income statement) tracks your revenues and expenses to determine your net income (also known as your bottom line). If you have historical financial statements, it’s wise to make sure your model matches those. If not, stick to the standard layout of a P&L as the output. The most basic layout should follow this format:


Total Revenue $100,000
(Less: Cost of Goods Sold) $20,000
Gross Profit $80,000
(Less: Total SG&A Expenses) $65,000
Net Income $15,000




Often times, in smaller businesses with simple accounting, the net income from the P&L will be the same as the increase or decrease in cash for that period. However, a cash flow statement adds the element of projecting financing activities like business loans or capital raises. As financing activities do not hit your P&L (since they aren’t considered income), the cash flow statement is crucial to project potential future cash needs, burn rate, and runway.

Cash received from sales $100,000
Less: cash expenses $20,000
Net Operating Cash (cash burn) $80,000
Beginning Cash Balance $200,000
+/- Net Operating Cash $80,000
Plus: cash received from financing activities $50,000
Ending Cash Balance $330,000



Typically the largest expense for any company is human capital. You need a place where you can accurately project out salaries, benefits, taxes, and raises. You also need to consider potential future employees as your business grows. Remember to include a start date to forecast when a new employee’s salary will be a realized expense on your P&L.



Often, people build assumptions into formulas or scatter them throughout a model. While convenient at the time, this can be confusing in the future when you are deciding which levers you can pull to test different scenarios. Having a dedicated assumptions tab keeps things organized and makes handing off the model to someone else easier, too.



Think carefully through your assumptions

  • It is nearly impossible to accurately project future revenue, however, projecting costs is a different story
  • To make a successful model you should rely on building out costs and the logic behind those costs (i.e what will cause them to increase or decrease)
  • If you have solid logic behind how your costs grow in different sales scenarios, you can start to back into reasonable revenue projections


Nothing should be hardcoded

  • The key to a useful model is one that can function as an interactive tool to play out a variety of “what if” scenarios and accurately adjust to changes in assumptions
  • It takes a LOT of time to update hard-coded values if you want to test different scenarios such as faster growth in the first quarter of the year
  • You’ll forget what to change! If your assumptions are not driven by some cost logic, you will likely forget what needs to be updated if you were to change a revenue growth scenario

Keep things organized

  • Keeping your model organized is essential to making it a useful tool
  • Even the most basic models will have enough assumptions, data points, tabs, and unique outputs making it difficult to remember where everything is and how everything works
  • Consistent formatting and building out tabs that have a clear purpose will help you when you need to come back to your model to test a new hypothesis


It’s our hope that you now have a better understanding of what a model should include. Whether you are the CEO of a Fortune 100 company or an entrepreneur working out of your garage, build a sound financial model so that you aren’t making decisions in the blind.


As a final tip, be cognizant of your time and core competencies. If Excel isn’t your forte, consider finding someone to help you. What might cause you many nights of hair pulling frustration, would be a cinch to an experienced financial analyst and only take a few hours to build.


Editor’s note: the experts at Paro created an Excel model template that could be really useful for many businesses. You can download it here.


Read the original article by Kody Myers here. Click on “Tiếng Việt” on the menu for the Vietnamese translation provided by 500 Startups Vietnam.

Ho Chi Minh City
Floor 46, Bitexco Financial Tower
2 Hai Trieu St., Ben Nghe, District 1
Ho Chi Minh City, Vietnam

San Francisco
814 Mission St. #600,
San Francisco, CA 94105 USA

© 2018 500 Startups Vietnam

Raise for Milestones, Not Runway

Raise for Milestones, Not Runway

The most common thing founders are taught about fundraising is that they should raise for 18-24 months of runway (while “adjusting for increase in headcount, etc.”). That’s the advice you should take if you don’t want to fail. If you want to win, however, you should start thinking a bit differently. You’ll also notice that the best companies don’t tend to raise on a 12 month fundraising schedule but either much earlier like 6 months or much later. That’s because they’re smashing through their milestones ahead of schedule or they just don’t need to raise because their revenue is growing faster than the pace they can hire (yes, this happens).


After all, that is the kind of company you should strive to lead as a founder.


Because the “18-24 months of runway” advice is so ubiquitous amongst founders, a lot of new founders tend to miss the reason WHY that advice exists. The WHY is always more important than the WHAT in the road to success.


When a startup needs financing, it’s because of one of three reasons:

  1. need it to survive;
  2. need it for business growth (just a quick PA: headcount growth is NOT growth. It should be the byproduct of a growing business);
  3. because it’s basically “free”.*


*Most startups at the early stages are raising money for a varying degrees of mixture of (1) and (2). Unless you are Slack or Uber, it’s likely not (3) – even if you think it may be.


When an investor invests into a startup, it’s because of one of three reasons:

  1. their money allows for the startup to get to a size that’s multiples higher than where it is now;
  2. their help allows for the startup to get to a size that’s multiples higher than where it is now;
  3. they believe this company will get to a size that’s multiples higher than where it is now – regardless of their money or help.


Common denominator here is that investors invest because there’s a clear outline to it being a likely profitable investment.


So when a founder is looking to raise on “18-24 months of runway” and they communicate it so with their prospective investor without much substance around the business reasons why, it misses the mark completely between what investors want and what the founder needs.


To an investor, you might as well say, “I want to collect paycheck with your money for the next 2 years. I’m sure the business will be bigger in 2 years than it is now, but not sure…”


Investors are NOT funding a startup for it to survive, but rather for it to thrive. As a founder, stop thinking about how much money you need per month with added staffing and marketing costs and multiplying it by 18-24 to come up with the arbitrary number of your raise. Instead, as a founder, start thinking about what is the next fundable milestone for your startup is and work backwards from there on staffing, marketing costs, etc.. THEN, add that 30-50% buffer. Then the funding narrative becomes, “I can grow so you get what you want, I just need what you can easily give (money or help).”


A fundable milestone is an achievement that is able to show next round investors that you have highly derisked the main risk factors of the previous round, while showing evidence of a high (or even better, higher) remaining upside.


I’d love to stop seeing founders raising arbitrary numbers like $1M and rather having founders say something like, “We’re trying to raise our (Current Round) to get to be able to raise our (Next Round). Based on (Next Round) comps, we think we need to get to X KPI and prove out A, B, C to have a compelling reason for (Next Round) investors to become part of our story. We THINK we will likely need (add increase in cost events here – ie. “to hire (#) people to keep our growth,” “added marketing costs,” etc.). All that and using our current and low-end projected growth levels we think we can get there in 6-10 months, then adding (30-50%) buffer, we’d like to raise $XXX.”


The danger of not thinking about the actual reason why you raise a certain amount (usually if it’s just based on an arbitrary runway) is that there is no winning scenario. Likely survival scenario is that you’ll either over raise, give up too much equity, and overspend to accomplish the same milestone you could have hit for less. Likely fail scenario is that because you have more money in the bank than what to spend it on, you end up spending it in all kinds of unnecessary channels and never end up getting to your next milestone (like extra hires here and there, extra promotions here and there, focusing on way long term stuff without executing on what’s needed now, etc.). Yes, you can overfund yourself to your death. Either way, it’s likely a non-winning scenario.


For your next round, start thinking about which milestone you think you need to hit to get an investor excited and work backwards in coming up with the amount and what that represents from a time standpoint. That will help you raise quicker and get to your milestones efficiently while optimizing for equity upside for you and your team.


Read the original article by Tim Chae here. Click on “Tiếng Việt” on the menu for the Vietnamese translation provided by 500 Startups Vietnam.

Ho Chi Minh City
Floor 46, Bitexco Financial Tower
2 Hai Trieu St., Ben Nghe, District 1
Ho Chi Minh City, Vietnam

San Francisco
814 Mission St. #600,
San Francisco, CA 94105 USA

© 2018 500 Startups Vietnam

Trust Starts at 100% and Goes Down

Trust Starts at 100% and Goes Down

Trust starts at 100% and goes down…


Investors (especially those who have been in the game for a little bit) are jaded. Winning over investors is not just about showing traction / progress (although that is a big component to getting investors onboard). It’s also about trust. Fundamentally, investors have to trust you in order to invest in you. And, I think most investors will give entrepreneurs the benefit of the doubt…until they cannot.


So, trust in you starts at 100% on first interaction and only goes down from there. Your job is to make sure that you don’t screw that up. But, there are lots of ways to screw it up that you may not even realize that you are doing so:


1) You name-drop and overstate your friendship with a bunch of famous people who don’t know you really well


I cannot tell you how many people tell me they are bffs with Dave McClure. If you’ve hung out with someone a few times socially, that does not make you best friends with him/her, and name-dropping here does not help you build rapport.


If you really want to name-drop to build rapport, it’s much more effective to say how a particular person has affected you. e.g. “Dave McClure’s no-BS blog has been a great resource for me in my startup journey, and it’s been fun being able to hang out with him once or twice.”


2) You mix up the definition of common software startup KPIs


This is unfortunate. Often, I see entrepreneurs get the definition of common startup KPIs wrong, and it comes back to bite them even if it’s just an innocent mistake. For example, commonly, a lot of entrepreneurs of let’s say marketplace businesses will say they are doing $1m per year in revenue. But, really they mean GMV (in most cases). This is a really important distinction — especially if your business is making money by taking small margins between transactions (such as in a marketplace).


3) You act cagey about information


Early stage investors understand that there is a lot of work to do in an early stage startup. And you may not have all the answers (or most of the answers!) But that’s ok.


What looks really bad is when founders try to be evasive about their answers. If you don’t know the answer to something, just own up to it! But then explain your plan to figure out how you will figure it out. At this point, a big reason why people will invest in your company is related to their trust in you and your competency. So how you think about solving problems or getting to answers is actually very telling about a founding team. In some sense, you could say that your ability to answer questions well when you have little-to-no information is actually an opportunity to prove yourself.


But a lot of founders will act cagey and evade questions or beat around the bush when faced with difficult questions. This leads investors to believe that there is something either really wrong with your business or that you, as a founder, are not sharp.


4) You get defensive


I think a lot of founders who get defensive don’t even realize they are doing so. It’s actually really helpful to do mock investor meetings with other people before you start fundraising. (We do this in our program at 500 Startups). Investors can sense defensive founders from a mile away — it’s not just about what you say / don’t say but also about your body language.


You are going to get tough questions. You may even get inappropriate / borderline inappropriate questions. For example, what if an investor says to you, “You know I’ve only invested in founders with CS degrees from MIT / Stanford / Cal, because if things don’t go well, I can always broker an acquihire. Why should I invest in you?” No joke – people ask stuff like this. Investors will ask all kinds of things — if you and your co-founder are married, you will get questions about that. If you didn’t go to a name school, people will ask about that. If you are pregnant, people will ask you about how you will balance your job with your kid. People will ask you about how your race may make it harder for you to fundraise and what you will do about that if you can’t raise.


And some of these questions may be inappropriate so you may not want to take money from those investors. But many other questions will be fair questions but just tough to answer and will take you aback.


Practice mock investor meetings. Ask a friend to ask you the most inappropriate questions possible. Practice taking a deep breath before answering anything. You just cannot get defensive.


5) You don’t / are unable to address discrepancies between your answers


If you have discrepancies in your answers, investors will ask you about them. You definitely need to be able to address this well, otherwise it will at best confuse an investor and at worst, make him/her think you’re a liar. For example, let’s say you tell me you have thousands of leads for your SaaS product that you cannot convert due to a lack of resources. And then later you tell me that you need money to pour into lead generation. And if I ask you, “Oh, why aren’t you focused on converting those existing leads?”, you need a really crisp answer. Either your existing leads are junk / not qualified, in which case, you should own up to it. Or, you actually have tried to covert your leads into sale but there is something wrong with your conversion / on boarding process. But, whatever it is, something doesn’t add up, and you need to be able to address this.


There are a number of other reasons why trust decreases with more interactions over time. But these are the primary ones I’ve seen in my interactions with founders.


Read the original article by Elizabeth Yin here. Click on “Tiếng Việt” on the menu for the Vietnamese translation provided by 500 Startups Vietnam.

Ho Chi Minh City
Floor 46, Bitexco Financial Tower
2 Hai Trieu St., Ben Nghe, District 1
Ho Chi Minh City, Vietnam

San Francisco
814 Mission St. #600,
San Francisco, CA 94105 USA

© 2018 500 Startups Vietnam

Sam Altman on Founders and the Fear of Rejection

Sam Altman on Founders and the Fear of Rejection

Sam Altman on Founders and the Fear of Rejection


In this episode of Startup School Radio, host and YC partner Aaron Harris sat down with Sam Altman.


Altman has been the president of Y Combinator since February 2014. Earlier, he was the founder of Loopt, a mobile location technology startup that was founded in 2005 and was acquired by GreenDot in 2012.


Later in this episode, Harris interviewed Aarjav Trivedi, the co-founder and CEO of fleet automation startup RideCell. You can listen to the entire episode in Soundcloud right here, or via iTunes.


One particularly interesting part of the episode was hearing Sam talk about how securing contract agreements with U.S. mobile operators was a key milestone for starting Loopt, and how he went about negotiating those kinds of deals as a young founder. This portion started at around 10:00 in the episode:


Aaron : As a 19-year old, how did you get those kinds of relationships? Mobile carriers are not well-known for doing deals with small companies.


Sam : Well, I was 20 by then. And, you know, you just sort of show up. I think one mistake people make is they tell themselves why they can’t do something, rather than letting somebody else tell them no. And sometimes you find out that you can actually do it and the people will do it with you. I think people cut off a huge amount of option value in their lives because they just assume someone is going to not do something. And you may as well find out, because maybe they will do it.


Aaron : It’s something that sounds so shockingly simple, but I think in practice, it’s really, really hard for a lot of people, because of some combination of ego and not wanting to be turned down. That ability to actually say, “No, I’m just going to keep going…”


Sam : I do think it is not wanting to be turned down. And I actually think this is one of the hardest life skills to learn. I think, unlike most of these other things that are bad with bad entrepreneurs, good entrepreneurs are often particularly sensitive to rejection. They take criticism online very harshly. They are afraid to try to hire a candidate because they might say no. And you really just have to say, “You know what? Sometimes people will say yes.”


But I think people, especially first time founders, are just generally extremely insecure and they put a huge value on not even giving somebody else a chance to tell them no or reject them or whatever.


Aaron : How do you advise people to get around that drive for external validation?


Sam : It’s this deeply personal thing. I don’t think there’s any general advice that works. But at some point, people make a decision that, “You know what? I am going to trust myself. I’m going to trust myself to do the right thing. I’m going to decide that I believe in this business and that the haters are going to be wrong and I’m going to get this done.”


If you’re doing something interesting, the chances that some Internet commenter will say that it’s stupid or not going to work is 100%, and the chances that some investor is going to tell you that it’s dumb is 100%. And you either decide that’s how you’re going to live your life, in which case honestly you shouldn’t be a founder if you can’t get past that, or you just say, “You know what? I have the courage of my convictions here and I’m going to go do this.”


It takes people a little while. It takes most of the best founders not very long. It’s an intense problem for a while and then it becomes a minor problem over a course of a month or two. But some people are always…it’s always an intense problem for some people. Even today I hate reading nasty things about YC, or about me personally. But you just say, “You know what? I’d rather be me than the people writing this.” And you move on.


Read the original article by Sam Altman here. Click on “Tiếng Việt” on the menu for the Vietnamese translation provided by 500 Startups Vietnam.

Ho Chi Minh City
Floor 46, Bitexco Financial Tower
2 Hai Trieu St., Ben Nghe, District 1
Ho Chi Minh City, Vietnam

San Francisco
814 Mission St. #600,
San Francisco, CA 94105 USA

© 2018 500 Startups Vietnam

11 Reasons We Didn’t Invest in Your Company

11 Reasons We Didn’t Invest in Your Company

11 reasons we didn’t invest in your company
Phil Nadel, Sep 5, 2016


Like most VCs, we often review dozens of deals each week. We have developed a funnel that enables us to quickly eliminate those that do not fit our general investment criteria (e.g. industry, stage, model).


The deals that survive this initial culling process are subjected to much greater scrutiny and due diligence. This process includes a thorough review of the deck, financial statements and projections; discussions with the founders, customers and other investors; and a review of third-party information relevant to the company, its product and industry. Companies are eliminated from further consideration during various stages of this process and, in the end, we ultimately invest in a small percentage of the deals we review.


When we decide not to invest in a company, we always take the time to explain to the founders the reasons for our decision. The purpose of this article is to provide a review of the 11 most common reasons why we choose not to invest in companies in hopes that some founders will find it helpful in improving their chances of raising capital.


#1 Lack of transparency/candor. If we detect that a founder is not being forthright, we immediately lose interest. Venture investing is based on relationships; being opaque makes for an inauspicious beginning of a relationship.


#2 Nothing proprietary/defensible. If a company doesn’t have something that is proprietary that makes it defensible against potential competitors, then its success will lead to its downfall.


What do I mean by that? Without a moat, the company’s success is easily replicable. The more success it has, the more competitors it will attract. But if it has a secret sauce — which could include technology, processes, knowledge, relationships, etc. — its odds of sustained growth are far greater. And while first-mover advantage is helpful in the early stages, it usually doesn’t mean much in the long run (e.g. Myspace).


#3 No proven, scalable paid marketing channels. We like to invest in companies where our capital can be used to fuel revenue growth. If a company has not yet identified cost-efficient marketing channels that are scalable, they are more likely to burn through our capital experimenting and testing to find them.


We prefer to invest in companies that have already done at least enough of this initial testing so they can use our investment to scale the channels that are working. And we have a strong preference for founders who intimately understand paid customer acquisition and don’t reply to our questions about growth by saying “We’re hiring a growth hacker.”


#4 Don’t know your Key Performance Indicators (KPIs). We find there is a direct correlation between the depth of a founder’s knowledge of the company’s KPIs and the company’s success.


First, founders must demonstrate they understand which metrics are important to their business. Second, they must demonstrate they are properly measuring and calculating those metrics. Finally, they must know which levers to pull to affect each KPI and which KPIs need to be tweaked for the business to succeed.


#5 Short runway. When we invest in a company, we like to see that it will have at least 12 months of post-close runway. Raising money requires a lot of time and effort and distracts founders from growing the business. We want the company to have adequate resources to enable the team to focus on growth without having to worry about quickly raising another round. Also, the next round becomes much easier to raise if a company has demonstrated 12 months of improving KPIs and growth.


To calculate post-close runway, founders must know the current cash burn and must have formulated detailed projections of how they will spend the funds they are raising and how much cash they will be burning each month post-close. This calculation can be done assuming: (1) zero revenue, (2) current revenue with zero growth or (3) reasonable revenue growth based on historical trends.


#6 TAM is too small. We often see companies that have innovative, sometimes ingenious, solutions to a problem faced by a relatively small group. For a company to achieve exit velocity, it needs to be addressing a large enough market to make its upside revenue potential meaningful to an acquirer. If a company can’t demonstrate to us that the size of the market that its solutions address is reasonable (for us, that is usually north of a $1 billion-per-year market), we usually pass.


#7 Pre-revenue or pre-ship. We find there is a disproportionate decrease in investment risk relative to the increase in valuation when a company makes its first sale. In other words, the risk decreases more than the valuation increases once a company graduates from pre-revenue to building and shipping a product for which someone is willing to pay. Thus, we think it prudent to invest after a company has made this first sale and has shown some early evidence of product-market fit.


#8 No vision. We like to invest in companies whose founders have a clear vision for how to grow the company to 100x its current size. While getting there will certainly require the company to deviate from this vision, not having a vision makes it infinitely more difficult. A North Star keeps founders on track, even in the craziest storms.


#9 Don’t intimately understand your competition. Companies often tell me “we have no competitors.” I generally find this difficult to believe and push back with “How is your target market currently solving the problem you intend to address? That’s your competition.”


Beyond this rudimentary knowledge, founders should thoroughly understand the solutions being offered by their competitors, which market segments they are addressing and how they are selling. A company’s potential customers will be comparing the company’s product against other available solutions, and sharp founders will have properly positioned the product for success.


Not being extremely knowledgeable about these other options and differentiating your product accordingly is a recipe for failure.


#10 Lopsided founding team. Products need to be built and products need to be sold. These tasks require vastly different skill sets that are rarely possessed by the same people. We prefer to see a founding team with experience in a variety of disciplines, from engineering and development to sales and marketing.


Having all disciplines baked in from the founding of a company helps ensure that it creates both great products and products that can be sold. Yes, companies can hire talent in areas in which they are deficient, but then that deficient area is not really part of the company’s DNA. Plus, it’s always preferred if the folks managing the hired hands have experience in the relevant area.


#11 No skin in the game. We want to see that founders are 100 percent dedicated to the company before we jump in. At a bare minimum, they need to be working full time on the business. Ideally, they have invested a relatively significant amount of their own money in the company, as well. Paul Graham wrote that once founders take steps such that it becomes “unthinkably humiliating to fail,” they quickly become “committed to fight to the death.” We agree.


This list is not exhaustive, but hopefully it gives founders a helpful checklist to make sure they are addressing some of the most common reasons why we (and probably other early-stage investors) pass on deals. And, by the way, if you’re doing all of these things right, we’d love to hear from you.


Read the original article by Phil Nadel here. Click on “Tiếng Việt” on the menu for the Vietnamese translation provided by 500 Startups Vietnam.

Ho Chi Minh City
Floor 46, Bitexco Financial Tower
2 Hai Trieu St., Ben Nghe, District 1
Ho Chi Minh City, Vietnam

San Francisco
814 Mission St. #600,
San Francisco, CA 94105 USA

© 2018 500 Startups Vietnam