The Opportunity of Our Lifetimes

Print This Article

Our generation–those born in the 70s, 80s, and 90s–has a great opportunity ahead of ourselves. We have the ability for the first time in human history to eliminate extreme poverty within our lifetimes and ensure shared access to prosperity regardless of color, geography, or nationality. This possibility is worthy of a boisterous cheer.

By 2050, we’re projected to have 9.5B humans on this planet, however. Our planet will not allow a world of 9.5 billion humans living in the manner the average citizen of the Western world lives today, yet alone the 6.6 billion we have today.

Here inlies the great connection between sustainability and poverty. Unless we as a global society invest to develop the needed technologies to allow for humans to become sustainable in food, energy, and water production we will end up having less resources than are necessary for 9.5 billion people to live in a world without extreme poverty–let alone a world in which there is true shared prosperity, mutual security, and equality of opportunity. This is the greatest challenge of our lifetime as entrepreneurs, social entrepreneurs, scientists, technologists, and public servants. We must have sustainability to end poverty.

As a friend of mine from high school recent wrote me, “We must work toward the creation of a world where the standard of living, human rights, basic freedoms, and sustainability are all compatible.”

The two billion people that Goldman Sachs projects will be added to the global middle class by 2030 may never make it if sufficient food, energy, and water resources don’t exist. Dominic Wilson and Raluca Dragusanu, showed in a Goldman Sachs Economic Research paper published on July 8 called “The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality” that close to 70 million people a year are entering the global middle class. They define this range as those with per capital income $6,000 and $30,000, purchasing power parity adjusted. They foresee shifts such as:

1. Changing spending patterns.
2. Increased pressure and competition for resources
3. Greater threat of environmental degradation
4. Rising environmental consciousness
5. Political and social changes

Through one lens, we could have resource wars, strife, famine, and terrible droughts, melting ice caps, biodiversity extinctions, and rising sea levels.

Through the other lens, we could have a world of growing prosperity, security through commerce, and gained respect among cultures and religion, a world of ubiquitous broadband, a world of communications technology that will enable humans to gain a common language and understanding, a world in which dictators can no longer use scare propaganda to wedge the false division of us vs. them, a world in which there is access to education, healthcare, nutrition, and opportunity for all, a world in which entrepreneurship thrives and technology drives improves food production, water access, and non-carbon based energies, a world in which our identity as human is so much more important than what divides us.

We have come to a turning point in history. This is both the challenge of our lifetime, and the great opportunity of our lifetime. How can we enable the great economic and creative potential for all humans while ensuring we leave a world of environmental stability to our grandchildren?

Will we invest in the creation of a new Apollo Plan for Energy? We will create the Global Bill of Rights that provides access to education, healthcare, and nutrition? Or will we fall into a once great society as the benefit of inexpensive petroleum leaves? Will Malthus finally get his way?

Is growing economic prosperity possible in a world of declining resources and increased commodity prices? Does our lifetime end up being marked in history as the time of resource wars, increased poverty, and environmental damage? Or does it end up being marked by global collaboration, shared prosperity, and sustainability. We have a choice.

This is the greatest opportunity of our lifetime, and our greatest challenge.

How selfish soever man may be supposed…

Print This Article

I just sent this to a couple of my friends and wanting to blog it as well. I just watched the video of the much-talked about Gates speech on Creative Capitalism on Friday at Davos. For me, it was one of the most inspiring and influential speeches I have ever heard. Though Gates is not the best speaker in the world, his message is right on. The WSJ article on the speech is here and the video of the speech is here.

I especially enjoyed the Adam Smith quote Gates references:

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.”

Here’s an excerpt from the speech transcript:

In many crucial areas, the world is getting better.

These improvements have been triggered by advances in science, technology, and medicine. They have brought us to a high point in human welfare. We’re really just at the becoming of this technology-driven revolution in what people can do for one another. In the coming decades, we’ll have astonishing new abilities: better software, better diagnosis for illness, better cures, better education, better opportunities and more brilliant minds coming up with ideas that solve tough problems.

This is how I see the world, and it should make one thing clear: I am an optimist.

But I am an impatient optimist. The world is getting better, but it’s not getting better fast enough, and it’s not getting better for everyone.

The great advances in the world have often aggravated the inequities in the world. The least needy see the most improvement, and the most needy get the least — in particular the billion people who live on less than a dollar a day.

There are roughly a billion people in the world who don’t get enough food, who don’t have clean drinking water, who don’t have electricity, the things that we take for granted.

Diseases like malaria that kill over a million people a year get far less attention than drugs to help with baldness.

So, the bottom billion misses the benefits of the global economy, and yet they’ll suffer from the negative effects of economic growth they missed out on. Climate change will have the biggest effect on people who have done the least to cause it.

Why do people benefit in inverse proportion to their need? Well, market incentives make that happen.

In a system of capitalism, as people’s wealth rises, the financial incentive to serve them rises. As their wealth falls, the financial incentive to serve them falls, until it becomes zero. We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well.

The genius of capitalism lies in its ability to make self-interest serve the wider interest. The potential of a big financial return for innovation unleashes a broad set of talented people in pursuit of many different discoveries. This system, driven by self-interest, is responsible for the incredible innovations that have improved so many lives.

But to harness this power so it benefits everyone, we need to refine the system.

As I see it, there are two great forces of human nature: self-interest, and caring for others. Capitalism harnesses self-interest in a helpful and sustainable way, but only on behalf of those who can pay. Government aid and philanthropy channel our caring for those who can’t pay. But to provide rapid improvement for the poor we need a system that draws in innovators and businesses in a far better way than we do today.

Such a system would have a twin mission: making profits and also improving lives of those who don’t fully benefit from today’s market forces. For sustainability we need to use profit incentives wherever we can. At the same time, profits are not always possible when business tries to serve the very poor. In such cases there needs to be another incentive, and that incentive is recognition. Recognition enhances a company’s reputation and appeals to customers; above all, it attracts good people to an organization. As such, recognition triggers a market-based reward for good behavior. In markets where profits are not possible, recognition is a proxy; where profits are possible, recognition is an added incentive.

This week’s Economist had a section on corporate responsibility, and it put the problem very nicely. It said it’s the interaction between a company’s principles and its commercial competence that shape the kind of business it will be.

The challenge here is to design a system where market incentives, including profits and recognition, drive those principles to do more for the poor.

I like to call this idea creative capitalism, an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world’s inequities.

Some people might object to this kind of market-based social change, arguing that if we combine sentiment with self-interest, we will not expand the reach of the market, but reduce it. Yet Adam Smith, the very father of capitalism and the author of “Wealth of Nations,” who believed strongly in the value of self-interest for society, opened his first book with the following lines:

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.”

The 40 Business & Personal Lessons I Learned in 2007

Print This Article

Personal Lessons

1. Life is precious and can be very short. Value it, keep things in perspective, and count your blessings. In February, I was driving down I-95 in Maryland in a snow storm on a Sunday evening trying to get back home to North Carolina when my car spun out after accelerating out of a toll booth area. I did a 180 degree spin, hit the front of another car, then continued another 180 degrees until I was straight again. My engine had cut off and I was drifting at 3-4 mph towards the curb when I realized a semi-truck was coming at my car. It missed me by about five feet. I really wanted to get back home that night so I could be at work the next morning but realized very quickly that it wasn’t worth trying. I sometimes can get wrapped up in what is next, what objective I am I pursuing now, and what appointments I have coming up. I realized it wasn’t really a big deal at all if I was stuck in Maryland for the night while the storm passed and missed a few things at work the next morning. I’ve also learned metaphorically not to accelerate in the snow without tread on your tires–you might spin out.
2. One can see much further if he stands on the shoulders of giants. I’ve been fortunate to develop a few great mentor relationships over the past year and added a few tremendous people to iContact’s Advisory Panel like Jud Bowman, Merrill Mason, Mike Doernberg, Mike Fitzgerald, and Buck Rizvi. I met Brett Icahn, Bill Clinton, and Marc Benioff during 2007 and learned from their wisdom.
3. It’s hard to stay in the game for very long when you’re not happy. Consistent hard and intelligent effort over multiple years is a key part of what makes a start-up succeed. It can be hard to sustain consistent effort for five, six, seven, or eight years. I’ve found that taking the time needed to make sure you are happy in what you are doing is an important investment. If you do not take this time you will generally not be able to last long. While I worked harder than ever before in 2007 (except perhaps in 2003 our first year), I’ve made sure I’ve taken time to build personal relationships, create memories, be with family, hold Entrepreneur and Social Entrepreneur meetups, read about the world, and speak to aspiring entrepreneurs–things that keep me happy and productive. I’ve found that I cannot help others if I am not happy and healthy.
4. I am an extrovert–I feed off the energy from others. I love to meet with and interact with passionate, driven people. I took a few MBTI-type tests in 2007 and in each one I was very much an extrovert. I refresh and get my energy by being around people. I do enjoy being alone in multiple-hour blocks in order to get work done, but as soon as the work is done I want to be around people again.
5. We are all humans and should stop killing each other. I find it difficult to understand why human genocide and warfare still happen in an age of easy communication. I will spend much of the rest of my life working to create stronger societies and reduce human suffering and end extreme poverty and war while creating access to education, healthcare, technology, and food. I became more committed to this life mission in the past year. There is absolutely no good reason in our world of opulence and riches that 26,000 children should die every day from preventable diseases and starvation in the developing world. We should have a global identity and stop create false separations and divisions.
6. The world has more opportunities than you might think. Sitting in a room planning to start iContact in 2003, Aaron and I could not and did not fathom we’d be able to create an 80 person company with a $10 million run-rate by the end of 2007. It was beyond my imagination. I am a very confident and goal-oriented person but could not even see beyond getting 2500 customers. We now have 18,000. Opportunities and possibilities will open up that today you cannot even think of today–if you just take the leap of faith and get started and keep at it. The opportunities get bigger and more interesting as your grow. If you are in business, you learn about raising financing, strategic acquisitions, convertible debt, private placements, private equity, and leveraged buyouts. As you add experienced people to your team that understand and have completed sophisticated transactions, many opportunities open up to you. The world of institutional capital is absolutely fascinating–and yet is almost off limits unless you bring someone onto your team that understands it or are able to build your company beyond a few million dollars in sales. At that point, they start calling you.
7. Keep associating with extraordinary people. I have been greatly helped by the relationships I’ve been able to make with people in New York, Boston, D.C., Chicago, Los Angeles, and San Francisco. For understandable reasons–I’ve found that large groupings of young, ambitious, extremely smart, passionate, dedicated people tend to live in major cities. I love North Carolina and hope to spend the majority of my life in the State. But there is no doubt at the moment that there is a brain drain of the best and the brightest to New York, Boston, D.C., and Atlanta after they graduate from UNC, Duke, and N.C. State. I started the Entrepreneur & Social Entrepreneur Meetups in June as one way to get smart passionate driven people who care about changing the world to associate with others who are similar and encourage them to stay in North Carolina after they graduate. The meetups have grown from 8 attendees at the Wine Bar in Chapel Hill in June to 60 attendees at my house of social entrepreneurs in Chapel Hill today. I’ve found that tremendously positive developments can occur when you connect smart people and when you choose to associate with extraordinary individuals.
8. Don’t write off dating women of any type. While in New York with a group of friends in February, I wrote off dating women who were older than I due to many of them wanting to get married right away. As soon as I did this, I met a wonderful 25 year old woman in New York who I learned a lot from and then began dating a 28 year old woman from North Carolina who I also learned a lot from. I was wrong to write off women who are older than I. I learned I could often relate better to women who were in the professional world already doing something to change the world versus in school. At a point during the Summer, seemingly not having learned the full lesson yet, I wrote off dating younger women due to not being able to relate professionally and often intellectually with them. At one point I decided to stop trying to actively date women seriously at all until I was older and could actually meet someone younger than I was who was making serious efforts to change the world and reduce human suffering. As you can predict, I of course was proven wrong again. The lesson I learned is that while I can develop helpful guidelines that are often true in regards to dating, I should not categorically write off women of any type. I found the chances just as high to meet a brilliant driven ambitious 20 year old as they were to meet a professional 27 year old who could care less about getting married right away.
9. Humans have a deep desire to be accepted for who they are and not judged. Being judged personally can have positive consequences such as getting helpful feedback or getting life guidance, but it can often hurt. I’ve yet to truly figure out and reconcile when it is a positive experience to judge another human and when it is best to simply accept them as they are. Perhaps the separating line may be in business versus outside of business. In business, judgment and guidance based on facts and metrics can be very helpful. Outside of business, I’ve seen that humans often want to be loved and accepted and not judged–at least before they are truly known by an individual. I admit I’m a bit confused still on this lesson, but I’ve learned it to be true in many cases personally nonetheless.
10. Gratitude is an extremely powerful character attribute. I watched the movie The Secret three times in 2007. While it has some seen some deserved criticism for being ‘over the top’ a bit, it nonetheless is one of my favorite movies of all time if not my favorite. The principles it shares are the exact principles I’ve used for the past six years and are the same principles found in Think and Grow Rich, one of the thirteen books that have changed my life since I was 17 (the others are Rich Dad Poor Dad, Rich Dad’s Guide to Investing, The Lexus and The Olive Tree, The Commanding Heights, The Spirit of Enterprise, The Worldly Philosophers, The End of Poverty, My Life, The Secret History of the American Empire, Understanding Power, Good to Great, and The Giants of Enterprise). One of the key principles of The Secret is the Attitude of Gratitude. Gratitude is such a tremendous power for good–and I’ve learned that in the past I have not shown nearly enough of it.
11. Humans have a deep desire for love and affection in their lives. It is so nice to have someone to make you eggs and toast (metaphorically). One of the nicest experiences I had in 2007 was when a women I was dating made me eggs and toast for breakfast in bed. It felt so nice to have someone to care about you in that way. I’ve found that this desire for human affection and love can sometimes cause someone to stay with an individual that is just not right for them in the long term, if that person does provide support and affection.
12. If you are going to meet someone for the first time, Google them first. Find a couple topics for discussion prior to meeting someone for lunch. Take five minutes to learn their background whenever possible. I have gone into a few of the business lunches I had in 2007 without knowing a thing about the person other than the company they worked for due to being rushed prior to lunchtime. I have made it a point to review my next day’s schedule before I go to sleep each night and do any needed research on people then–and this practice has been helpful.
13. My definition of love is different than that of most. I define love as a ‘deep personal care for an individual.’ Thus I tend to love anyone that I truly care about and very much enjoy spending time with. Thus I found it very possible to love multiple people at the same time. I’ve learned that many others feel that you can only truly love one person at a time. While I agree with this statement in terms of physical love, for me I find it possible to love two or three people at any one point in time. As this can often frustrate the heck out of women I’m dating, I’m trying to figure out a way to reconcile the many forms of love and express the difference between loving someone and being in love with someone, which may be different. I’ve learned that I have to be very careful and explicit in how and when I say I love you to a women because of this difference in definitions.
14. Be real, smile, connect. Don’t just talk about business. One of the most valuable lessons I learned in 2007 was that my natural ‘expressionless’ face often looks like a ’stone face’ and can intimidate people or make people think I am cold-hearted. I was completely unaware of this. I learned the lesson from feedback I received at the Grinnell Leadership Seminar in August in Chapel Hill. I learned instead to be real with people, relax, stop being so serious all the time, and to not just talk about business–to not act like the whole world is always on my shoulders. I also learned to let my free child out, live through my heart more often, and to ‘Ride the Dragon’ when times are difficult. I learned from my roommate James that I can often be very intense and serious immediately when meeting new people as I would immediately inquire about their passion and want to talk about business, current events, poverty, war, social entrepreneurship, politics, or religion rather than less intense topics like music, movies, food, or games. I’ve learned with the help of my friend John, the Grinnell group, and James to be less serious–at least initially when meeting people. I’m still working on getting rid of the stone face, chilling out more, and being more real–while still working hard and getting things done.
15. Share your passion with people. Another lesson I learned at the Grinnell Seminar was to share my passions with people. I often was afraid to share my passion with people in business settings due a feeling that it was not fully relevant to the business. My passion is learning about and working to reduce global poverty and human suffering both at home and in developing countries. On day three of four of the Grinnell Seminar we were asked to share our passion. They told me that when I did this my eyes lit up and I became real to them. I then learned the most important lesson of all–that they would much rather follow that passionate person with eyes lit up than the stone faced serious leader they were exposed to on days one and two. I’m still working on figuring how and when it is best to share my passion with others, but feel the mental freedom to do so has been a bliss.
16. Marriage is very rarely perfect. Growing up I believed marriage to be a union between two people who were destined to be together and that other than the rare argument, marriage was generally perfect. Seeing the interactions and hearing the stories of many married couples, I now know this to not be true and that a successful marriage takes at the minimum tremendous communication skills on both sides, generally overlapping life plans, and a willingness to compromise with one another.
17. Love and good health are the two of most wonderful things God created. While I believe the purpose of my life is to be happy, help others, and create further life–two of the absolute best things in this world are love and good health. Humans spend more time and money working to acquire and keep both than any other two substances. Love can surely move mountains.
18. A Great woman can make a huge difference to a Great man. I’ve seen this be true in many of the biographies of leaders, Presidents and Captains of Industry that I’ve read in 2007 and seen it true in my own life.
19. Don’t lead women on. Even if you don’t want to ruin what you have now, don’t lead women on. It’s mean and not worth it to do so. I’ve learned this lesson in 2007. I was hurt by a woman during 2007 who I felt led me on. After I could understand what it felt like from the other side it became easier to no longer do–though I still was by no means perfect. I’ve still struggled at times with avoiding this behavior, but I am committed to working on it and being as upfront as possible about feelings–or sometimes delaying sharing feelings until after I know they are stable. Often my feelings are not stable and are tied to how I feel at the moment rather than how I feel overall. I’ve worked on being able to discern which type of feelings are which.
20. Don’t ever let your mind limit yourself. Just because you can’t understand how you’ll achieve any great goal–whether it is to become a billionaire, end world poverty, find a soulmate, or become a global leader–doesn’t mean you should not set the goal. As you progress toward your vision you will figure out how. Man often overestimates what he can accomplish in one year but greatly underestimates what he can achieve in five, ten, and twenty years.

Business Lessons

1. I have to solicit cross-team input in order to get it. I’ve learned that input and feedback from team members has tremendous value and have learned that it is often difficult to get enough of. I learned to proactively seek it through surveys, skip-level meetings, and pulse-check lunches, discussions, and coffees with different staff members. I found that the best ideas very often come bottom-up.
2. A percentage of people will always criticize you regardless of how you perform. I learned in 2007 that regardless of how well you are performing, a small percentage of people will always be critical of you. In the political world, if you can achieve a 60% approval rate you’re doing a tremendous job. It is very difficult to operate in a world in which 40% of people don’t approve of what you are doing–but I’ve learned it comes with the territory of a leader.
3. Stop worrying so much about what people think of you. Just be different, work hard, and get results. Be concerned with what you do and make sure it aligns with your values and principles, but don’t spend endless mind cycles worrying about what people think.
4. You need to have thick skin and persistence to succeed in this life. I learned from my friends Carolina that you must be direct and upfront with people to get what you want in life. I’ve learned through my friend Joktan and my CFO Tim that you often have to negotiate what you want in life. I’ve learned further through enduring criticism that one must have thick skin, perseverance, and persistence to succeed. There will always be someone coming after you.
5. Our team is extremely valuable to the company. In the beginning it was just me and Aaron. Then we added Josh, David, David, Brad. Today we have 80 team members and are growing. I’ve learned that the value of our team is immense. We have made many investments in better benefits, more vacation time, stock plans, and conscious culture-creation for the team and every time the investment has paid off in creating a family that is happier and more productive.
6. Slow times should scare you. While slow times are rare at iContact these days, in the past few years we have had 2-3 slows times that I noticed–periods of 3-4 weeks in which not very much was happening either due to Holidays, vacations, product cycles, or coincidence. In every case, we’ve had an issue underneath the surface that came out as soon as the slow time ended. I’ve learned that whenever I feel there is a time that is slower than usual, to work extra hard and spend and extra time listening to what’s going on at the staff level of operations.
7. Randomly tell people that you appreciate them, that they are doing a great job. People don’t get enough praise. When someone is doing a job well, mention it to them. Don’t let your only interactions be interactions in which you suggest different behavior.
8. Attack issues head on. Be direct and communicative, not passive aggressive when addressing issues. Take a couple minutes to think then act immediately. I took the time to have a three hour late-evening meeting with my partner Aaron in May to clear up some issues we were miscommunicating about before an early morning flight to New York the next day. Holding that meeting was very helpful to our alignment and continue positive interaction. While I’ve not always been successful in doing this, I’ve learned to take the time to meet with people in person to clear up any issues as soon as you detect there may be an issue.
9. It can be very helpful to fundamental investing results if you have an understanding of global macroeconomic trends and causes. Understanding why currency values, interest rates, and commodity prices fluctuate has been very helpful in determining which personal investments to make. The basic lesson that when interest rates go down in a country while a budget deficit rises, currency values will also go down in a country has made Warren Buffet quite a lot of money in the past two years. The great value of a liberal arts education in hindsight is that you can more easily see the bigger picture of how the world operates. Markets are by no means efficient and he who has a perspective that others cannot see will be able to produce premium returns. Now if I could only predict where oil will be in five years. A financial planner friend of mine thinks it will be at $60 per barrel due to the large supplies currently being found and the lag between the time higher prices cause higher technology investment and when higher tech investment causes an increase in supply. Personally, I don’t see any way the price of oil will do anything but go up in my lifetime with a limited supply and demand that will increase many times over before we are able to greatly eliminate dependence on oil as a source of energy.
10. It can be very helpful to fundamental investing results if you can have advisors that set policy on your team. By watching a documentary on the Carlyle private equity group I learned that you can get great returns if you know what the policy and government interaction is going to be on highly regulated industries like defense in advance and you have former Presidents and Secretaries of Defense and State working for you.
11. Don’t make people feel like you are going around them. Skip-level meetings are often very helpful (where you meet with people who don’t directly report to you in order to get a better pulse on the business) but be sure to explain to the person who reports to you that you are theoretically going ‘around’ why you are doing what you are doing and that it is not caused by anything they are doing wrong. Unless of course it is–in which case you need to talk to them about what’s going on right away anyway.
12. Don’t make people feel you are consulting others about their field without them. If you are going to consult with someone outside your company about a topic you have someone in charge of, tell the person in charge of the department what you are doing and why in advance and either invite them to join you or meet with the person afterwards or explain your reasoning why you’d rather meet with the person alone.
13. Speed of implementation matters. Cutting just a day off each stage of a project can save a week of time or more by the time a project is done. Weeks of time saved can greatly increase customer acquisition and internal efficiency. Encourage your team to get one additional thing done before they leave in order to reduce time delays from projects. The very large majority of ‘real hours’ (versus ‘human hours’) spent on a large project is time waiting on persons to review, approve, or provide the next part of the project. It can take many extra weeks to complete a project that only requires only a few hours of human effort if each phase waits in the inbox of an individual for three days instead of two.
14. Take the time to explain to people how your thinking process works. I once felt that because I was CEO I was justified in making small decisions (like the background color or text font face on a web page) without taking the often extended amount of time needed to fully think through and explain my reasoning. I learned that while I may have been justified, I found that things would get done better and more effectively if I did take the time to think through and explain my reasoning fully.
15. Always create a competitive round when you are raising VC. Work to get multiple term sheets when you raise venture capital. Our pre-money valuation increased a full 50% from when we received our first term sheet to when we received our fourth a couple weeks later in May. There really isn’t an easier way to create perceived value than to get competition in a round. If you can create a parallel process and receive multiple term sheets you will have more power. Group mentality does at times take hold, causing the valuation to be bid up with multiple players in the deal and some of the secondary terms to be softened.
16. Have comparables ready when talking valuation. Be prepared with revenue multiples from both public companies that are similar to yours and private comparables. Depending on many factors (team, technology, industry stage, revenue growth, market size) one can expect to be able to raise funds at 2x to 10x your revenues from the trailing twelve months or 1x to 4x your projected revenues from the next twelve months. If you don’t have any revenues yet, the valuation will be whatever you can negotiate with an investor and based upon your experience and any intellectual property you have. At the end of the day, the market valuation for your company is what an investor is willing to pay—and as such it is important to have multiple firms competing to invest in your firm if possible. Depending on the stage of your company, you may be able to raise funds at a 30% to 70% discount off the public market trailing or forward revenue comparables.
17. When giving VC presentations, prepare well and give a knockout presentation.. Invest in a graphic designer to make your presentation look nice and go heavy on actual examples of customer use and light on complex slides. I have seen a short flash product demo video or customer video interview within the presentation work well. Don’t let any slide have more than five bullet points or fifty words.
18. When negotiating raising investment, have a top tier legal advisor on your side. Once you receive a term sheet, have your attorney review it right away and provide feedback before you discuss it with the investment firm. Your negotiating power will be based upon how much you need the money, the reputation of the firm, your reputation as an entrepreneur, any past successes you’ve had, your experience, the quality of your management team, the members of your advisory panel, the size of your addressable market, your market timing, the quality of your technology and IP, your ability to walk away; and whether you have other competing term sheets.
19. Make sure you know which terms are important to you in term sheet negotiation. Generally the valuation, option pool size, liquidation preference, participating preferred, founder revesting, and preferred stock veto rights are the most important terms to negotiate. You may wish to have your attorney or CFO if you have one negotiate the finer points directly with the firm’s attorney.
20. The investment firm providing the highest valuation isn’t always the best firm to work with. I learned that there are many important factors in a venture capital deal. The most important is not the valuation, but instead whether you have good chemistry with the firm who wants to invest and in particular with the person who would be joining your Board of Directors. You will create, or destroy, much more value in the years following the investment by having the right person on your Board and the right firm backing them than you will by going with the firm that provides the absolute highest valuation possible. The other downside of pushing up the valuation beyond what you feel is fair is that the ‘winning’ investor will often ride you much harder to justify their higher purchase price–often creating lots of stress that simply is not worth the cost.