As a founder, “20 things founders say and what investors think” by Trace Cohen is very insightful. So, here I’ll share 20 things some investors say and what A.I. startup founders think. Most are from our A.I. startup’s real meetings with various investors.
Disclaimer: Never say any of these to potential investors out loud. This is written by a founder who obviously wants their startup’s fundraising efforts to fail, has already written not so positive things about Y-Combinator’s president’s ideas, probably isn’t getting funding from Tesla, IBM nor… most sole crushingly… Juicero any time soon. Yet somehow, his startup,Market Sensei, continues to grow.
Here we go, the first is my personal favorite:
Investor <Website>: “Some of our best investments have been through an introduction by a mutual connection. So, find someone in our network, that is the only way we look at investment opportunities.”Founder: Wow, that’s a bold statement. Since you only make investment decisions from opportunities within your network, I guess that conclusion is from deep analysis of the good investments from opportunities that turned out well from your network versus investments from your network which did not turn out well. Holy cow, genius! Their best investments MUST have been through introductions from within their network. Interesting, but not the kind of reasoning I want to build A.I. with. No thanks from me, but good luck on your next self validating ‘best investments’.
Investor: We’re interested in investing in A.I.Founder: Great! Well I hope so… A.I. will change the world…Wait, that’s why you are interested right? Definitely not because you’ve been sucked in by buzz… right?
Investor: How is your A.I. better than the rest?Founder: Hmm…It’s a one hour meeting, doesn’t seem like you have prior experience in A.I. … But, I might as well cram in a thorough course on A.I. and how our A.I.differentiates itself from the rest within 10 minutes. Actually let me only make it 5 minutes long because you will probably interrupt me if I go on for 10 minutes.
Investor: How are you using deep learning?Founder: Oh my… It was the buzz that sucked this investor into A.I. . Might need to HODL through the rest of this meeting.
Investor: It’s not possible, we tried something like this in another company. We pumped millions and it didn’t take off.Founder: Yes, sounds like you did it really wrong, seems like you don’t know how to spend your millions, that’s probably why you should invest in our startup and let your funds grow. On second thought, I don’t want to be carrying the stress if your other portfolio companies tank.
Investor: Isn’t IBM watson already doing it?Founder: Face-palm… IBM’s most notable foray in A.I resulted in MD Anderson cancer research center spending almost $40 million dollars but having nothing useful at the end…
Investor: Why can’t Google just do it?Founder: Hmm… Google plus…?
Investor: Have you talked to <insert big name potential industry partner> ?Founder: I see you watched Shark Tank… and think that all it takes is a cold call to talk to the decision makers at any company. Hmm, if there was certainty in speaking to <insert big name potential industrial partner> right now and getting the deal why would we be here now. That’s down the line and thats why we are here. Heard of something called “strategy”?
Investor: Will your startup leverage <insert other buzzword(currently ‘blockchain’)>?Founder: Holy cow, here comes the chain I knew, they are interested in the buzzword buzz, screw long term potential :( . We’re screwed, should have just pitched them on an ICO or investing in our own Bitconnect, well:
Bitconnect testimonial: https://www.youtube.com/watch?v=xK3yuxrmCac
Investor: What are your daily active users(DAU)?Founder: O.K… we have novel innovations that could improve the lives of thousands and have people paying for it… But I see you watched the Social Network, HBO’s Silicon Valley and heard about Snapchat‘s growth… Hmm, how do I break it to you that we didn’t spend half a billion dollars on advertising last quarter so our DAU pale in comparison to Snapchat’s right now. Also, we are not trying to build the next social network, that is so 2004 and its kind of blowing up in everyone’s faces.
Investor: What’s your burn rate?Founder: Hmm, thank you again HBO’s Silicon Valley.
Investor: Here is some advice, this is what I think you should do with your business…Founder: Oh lord, half an hour is already gone and I’m probably going to spend another half an hour listening to advice about things my team has been deeply analyzing for months from someone who’s only known our business for days and does not have full knowledge of all the details… I should have spent this time working on <Insert super important tasks> which would have grown our user base/ revenue/ or put out a potential fire. Well, maybe the advise is genius, I’ll take notes.
Investor: <Insert follow up great piece of advice>Founder: Wow, they just said exactly what we’ve been trying to explain. But they missed some fine points we should worry about and that’s ok because we’ve been analyzing this longer. They’re smart, we’re on the same page but they don’t want to invest…I guess they just didn’t want to say an outright: “No, this is not the right investment for us right now”. Nice of them, but that would have saved me half an hour.
Investor: <Insert follow up bad piece of advice>Founder: Definitely not going to do that. Take note, not to do that. Not even mad, more mad at myself that I should have vet meetings better, another note for next time. There goes my good night sleep, now I’ll have to make up for this time which I could have spent “working on <Insert super important tasks> which would have grown our user base/ revenue/ or put out a potential fire.”
Investor: You’ll figure it out, you guys are smart, you went to Harvard/Dartmouth/Stanford/<insert well known institution>Founder: Hmm, so you are choosing not to invest AND to take a cheap shot at us? Touché, we’ll regret not having that passive aggressiveness in our lives but we wish you well.
Investor: Our team is going to analyze the investment opportunity and let you know.Founder: Sounds great…Hmm, but you didn’t ask us how much cash on hand we still have, e.t.c how can one ascertain the value of a company without that information? Well, I’m sure they know what they are doing, they’ll figure it out, they “went to Harvard/Dartmouth/Stanford/<insert well known institution>” .
Investor: A bit too early for us but keep us posted in a few months as you make more progress.Founder: Sure… well in a couple of months we’ll have grown way more but you’ll probably want the same deal terms or a better deal for yourselves…I’ll just save us both some time and not try to schedule another meeting. Also, I’d much rather be surrounded by visionaries that don’t pass on a great opportunity when they see one. People praise Steve Jobs & Steve Wozniak, not the third Apple founder Ronald Wayne.
Also, didn’t you say you are an ‘early-stage investor’, does this mean we should be searching for ‘early-early-stage investors’? … Never-mind.
Investor: <Approaching end of meeting> do you have a pitch deck and business plan?Founder: Hmm, are those the important multi-page detailed documents our team spent hours working on to showcase our existing traction and strategy on how to keep outperforming ? You mean, the first documents we sent to you before this meeting so you could have a great understanding of our company’s potential and ask informed questions? Yes, I think we do.
Investor: What is your startup’s <insert important metric>?Founder: Detailed analysis of those metrics are in the pitch deck and business plan you just asked about but never read…Actually, most answers to the questions you’ve asked us were in those documents too. So, how about I just say ‘we’re tracking our metrics on a hyper-ledger blockchain blah blah blah deep learning blah blah’ and see if that works better. Know what, that actually sounds good, might as well throw in ‘A.R’, ‘V.R’ and ‘IOT’ while I’m at it.
Investor: Do you have a lead investor?Founder: Great, an investor that believes in the killer strategy of finding innovative startups by leading from behind. No, Google Ventures is not leading our round but I heard one of their genius investments in Juicero, a wifi enabled Juicer, could use extra hands. If a well known lead investor is such a great indicator, you could invest in that. If you are really into A.I and love startups connected to Google & other Silicon Valley billionaires, then I’d recommend Altschool . Altschool’s already raised $170 million from seemingly a who’s who list. I assume because they saw the founder’s past work with Google plus, and went like: “That’s the kind of result we need with the future of kid’s education.”. Their ‘lab schools’ that charged $30K a year per student allegedly led to students falling behind… but who cares right? Besides, they’ve now pivoted to scaling in public schools. As the startup mantra goes:
“ ‘Fail fast’ with wealthy clients then, when they won’t take mediocrity anymore, scale it to the public”. — Anonymous
Wait, do like 100 interested investors each waiting for a lead investor, count as a lead investor? If so, yes! We have a lead investor, an initial round closed, the cash in the bank but we just love raising money instead of building our actual business so much that we keep taking meetings and pulling the management team away… Actually, I doubt lead investor math works that way, so the answer is no. But, did you know that… You could be a lead investor? Crazy I know…
For Founders: Once you’ve worked with/on startups for long enough and have seen investors that passed on your startup literally lose millions on their failed investments, you realize that: If you are really building a company that must exist, then no investor can decide its fate. IMHO The best strategy is to build a great company and not just what investors want you to build.
For Investors: A business that solely requires multiple rounds of investments to survive is known as a ‘Ponzi Scheme’. Investors, are you looking for the next great tech companies or the next great Ponzi schemes?
For Haters: Sorry, no time for that.
20 things investors say and what A.I. founders think (But shouldn’t say!) was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.