Questions to Ask

Sometimes it is GREAT to have a playbook.  A coach loves a playbook.  A teacher loves a playbook.  A general contractor loves a playbook.

Well, for investors, a playbook is tricky because every investment is different.  No exceptions.  Never will all the key factors be the same:  founders, market, product, scalability, regulatory environment, IP protection, global market forces, etc.

Yet having some “standard” questions to ask when starting to learn about a team and a company is comforting.  So, yes, I am talking about “first meeting” questions.

Likewise, as a founder it is comforting to anticipate what those first meeting questions will be and good to have a general plan on how to answer them.

I read this morning a GREAT playbook on first meeting questions.  It is written from the angel investor perspective, but it is a wonderful resource for founders as well.

Here is it (thanks to Tim Ferriss and Jason Calacanis).

I do have one piece of advice for founders as they answer questions in an investor meeting:  be very open and honest and do not sound like a politician.  Answer the questions directly and thoughtfully.  If you have not quite figured something out, then say that.  No beating around the bush and no BS – that will only have the opposite reaction you are hoping to get.  My number one subjective factor when making an investment decision is trust.

Upstate NY’s Strongest Economy

A Buffalo-based business publication just published an article called “Which parts of Upstate New York have the strongest economies? (And which are trailing the pack?)”.  Here is a PDF of the article:  Upstate NY Strongest Economies.

I am obviously delighted with Ithaca’s ranking and proud to be part of this great and growing ecosystem.  Things are hustling and bustling here and startups are leading the way!

Woohoo!

Accelerate or Not Accelerate….That is the Question

Personally, I am a fan of accelerator programs.  There is a healthy debate on this topic, but I think that being intensely pushed by good mentors for 3 months or so can only improve the chances of success!

This morning I came across an interesting accelerator ranking.  A group of professors (from strong programs) created something called the Seed Accelerator Rankings Project. The lead is Yael Hochberg, who used to be at Cornell and is now at Rice.  Definitely research and stats oriented and produced.  You might enjoy taking a look, particularly as the presentation is very nonacademic!

I read about the project in Term Sheet, which is a great daily on VC.  You can subscribe here.

How to Start a Startup at Cornell

Cornell MBA student Mike Annunziata recently published a great article on starting a company at Cornell from the perspective of a student.  Mike has in fact started a company called Natural Cuts https://www.natural-cuts.com/, and no, it is not a hair cutting salon!

Mike hits the steps (getting started, course work, getting involved with entrepreneurship, taking ideas to market, and getting funded) and identifies which Cornell resources might be useful.

Here is Mike’s full article.

Hope you have a great weekend.

The Importance of Boards

I have written quite a few posts on the topic of Boards of Directors.  Just put in “board of directors” into the search bar.  As a quick review, it is the Board of Directors or “Board” that literally by law makes all critical decisions for the company.  The Board has to vote on issuing stock, approving the annual budget, setting the company’s strategy, changing the company’s by-laws and certificate of incorporation, selling the company, merging with another company, hiring officers like the CEO, shutting the company down, etc.  The list goes on and on.  Good corporate governance is critical at startups and other companies alike!

The importance of the Board is why institutional investors (like VCs) often get a seat on the Board after an investment.  The Board discusses and agrees on strategy.  Discussion is critical.  But don’t be fooled, there is an element of control as investors want a say in critical decisions.  This is pretty natural if you think about.  VCs typically do not want to control the board vote, they just want a seat at the decision table.

When CVF invests we often take a board seat (probably 95% of the time) and when we don’t we take an observer seat (5% of the time).  If the board is already large and we are coming into the company later in its stage of growth, then an observer seat might be fine.

One situation is really scary though.  Sometimes at the seed stage, the company founder insists that he/she be the only board member and that once more financing is raised that the board composition will be normalized (code word for “adding more members”).  From my perspective, this is typically a sign of paranoia.  

I have now done 2 deals where there has been a lead investor (not CVF) who did not mind the “founder as sole board member” trap.  We followed in line with the lead investor and went along with the structure.  This was a HUGE mistake that I will never make again.  Both companies have since failed for different reasons:  one had no product market fit after 3 years of trying.  And one gave up prematurely.  Regardless, had there been an actual board of directors with 2 or 3 members I am pretty confident that the end result would have been better.

Never again.