The 7 (Pitching) Habits of Highly Effective Founders

Finding the right investors is like dating — you need to kiss many frogs before you find a prince.  

Today, I’m going to share seven ways fundraising founders can kiss fewer frogs and find more princes (subtle hint: Batch 19 applications are now open).

Habit 1 – Pitch to the Right Investors

Not all investors are created equal.

Some investors only invest in seed investments. Some investors only focus on Series A.  

Before approaching any investors, do your homework and make sure you go after the right target audience.

You can segment them with these 5 characteristics:

  1. Investment stages (seed, Series A, B, C, etc.)
  2. Check size (e.g. $50,000 – $150,000)
  3. How many deals has he or she done in past 6 months (you will find out how active this investor is)
  4. Industry focus (if any)
  5. Geography (most Silicon Valley investors would not invest outside of the Bay Area)

It is certainly quite rare to turn someone who isn’t already engaged in your industry or geography into someone who suddenly cares about what you’ve created.

Habit 2 – Pitch with Purpose

My colleague Andrea Barrica introduced me to this quote by Maya Angelou:

“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

What do you want your potential investors walk away with after your pitch?

Keep that in mind and you very likely will change the story you tell and the way you tell it.

Habit 3 – Curate Your Story

It’s harder to tell a short than a long story.

It’s easy to tell your investors everything that’s happened in your life since you were 3, but whittling that down to what they really need to know is much harder — and much more compelling.

Don’t be lazy, or self-indulgent. Put in the extra 20% effort and curate only relevant and story that make you uniquely over qualify for your startup.

Habit 4 – Pitch like a Professional  

During your pitch, you need to convey two things: 1) why you are the most qualified person and 2) why investors should give you money now.  

Be sure to cover the following if you are ready, but always start with traction & demo if you have it.

Here are 11 things to cover:

  1. Traction, traction, traction
    1. Revenue
    2. User download
    3. User engagement
    4. Major signed partnerships
  2. Product demo (If you have it. You should have it.)
  3. Market size & target market
  4. Pain point
  5. Product
  6. Team (team, investors, advisors)
  7. Technology
  8. Business model
  9. Monetization model  
  10. Competition
  11. Market Trends

Habit 5 – Understand the Big Picture

Most founders I met are in love with their product.  

Unfortunately, as an investor, I don’t just want a person who is in love with himself or herself or their product.

I want a founder who truly understands how to create a business. You should be the one who can tell me everything about your competitors, market, legal environment or policy changes.

Habit 6 – 24 Hour Follow Up

After your first call or in person meeting, be sure to follow up within 24 hours and make sure to cover the following in your follow up email:

  • Thank them!
  • Your deck
  • Current traction
  • Team
  • Action items
  • Your ask
  • Ask for follow up meetings or phone calls

Habit 7 – Show Passion & Honesty

Building a startup is really, really hard work.

As an investor, I want to find someone who won’t back down when things get (even) harder, and is willing to do whatever it takes to make things happen.

A huge part of working hard — and knowing where to work harder — is knowing what isn’t working (yet).

Show your true self, and be honest. It’s ok to say, “I don’t know.” You don’t need to have all the answers, but you do need to have the strength of character and work ethic to figure it out.

4 Steps Every Startup Must Take To Build Culture, Compete for Talent, and Win

I talk to brilliant founders every day who are 100% focused on growing their company.

They’re solving problems and improving their business at light-speed, turning their great idea into an even better company. Unfortunately, a lot of them have the same blind spot:

They don’t understand company culture.


Having a strong culture doesn’t mean you have a beautifully designed office or that you offer your employees unlimited vacation days or catered lunches.

Culture, at its core, is the way your team works together. In other words, it’s not about the perks.

When your culture is strong, your team is deeply connected and each member takes personal ownership over their own little piece of the company. This commitment is what powers successful startups and it can be incredibly difficult to instill.

To help you along the way, I’ve broken down 4 critical steps to growing a strong company culture.

1. Grow Your Culture By Design

You need to plan your culture in advance.

As a startup, things are constantly in flux. A higher up will leave early on, a feature you thought was brilliant will tank, and as you tumble through these peaks and valleys you’ll hit upon some genius ideas and pivot your company accordingly.

It is very easy for these fluctuations to make team members feel uncertain. It’s up to you as a founder to instill certainty in them by having a strong culture in place before problems arise. Knowing how they will deal with whatever comes next—and trusting their teammates to help—makes this much less uncertain.

Think of Facebook’s now-cliche “Move fast and break things” motto. It doesn’t tell team members what they’ll be working on. Instead, as former Facebook employee Sarah Smith says, the motto told team members “to take risks and not think too much about every potential consequence knowing that if something failed, it would be okay.”

So if a developer built and launched a new feature in a few days only to find that it crashed the Facebook site, it was okay. That sort of reckless, rapid innovation was at the core of Facebook’s culture and everyone bought into it.

Planning a strong culture in advance requires you to answer several questions, including:

  • What does your decision-making process look like? Do individual team members have the power to “move fast and break things,” or do they need your approval first?
  • What is the top priority in your work? Are you customer-centric, or do you have a growth-at-all-costs mindset?
  • How does your team communicate? Slack? In person? Email? Does all communication need to be transparent and visible to the whole team?
  • What is the team’s relationship with each other? Do you have team events, or do you keep work and personal life completely separate? What about for remote workers?

Having this in place before problems arise is critical to growing a successful company.

2. Recruit What You Don’t Have—Not Just More Of The Same

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It’s easy to get tunnel vision once you have a clear picture of your company culture. You imagine your ideal employee and you begin recruiting people who fit that template perfectly.

The problem is that you have shortcomings and you need to recruit people who compensate for them. If you’re only recruiting one type of person, you are not creating a team with a diverse skill set who can cover for and complement each other.

For example, if you have a sales rep on your team and are hiring a second, recruit someone who complements your current staff. If your current sales rep has an analytical personality, try to recruit someone who is more creative.

Hiring for your weaknesses is trickier than it sounds because it requires you to be hyper-aware of your own shortcomings and blind spots. To do it well, you have to constantly audit yourself, your team, and your hiring process.

Ask yourself these questions:

  • Are you using a diverse set of recruiting channels, or are you recruiting exclusively from similar groups? For example, are you only posting to job boards frequented by people with a certain background?
  • If you had every team member write down their biggest weakness, what would be the most common answer? Have you hired someone who is strong in that area?
  • Are there any areas you give less attention to because they don’t fit your skill-set or you find them less interesting? Have you hired someone to delegate them to?

It’s tricky to be aware of your blind spots, but it’s critical to building the right team.

3. Manage Your Cultural Carriers

There are two kinds of authority in a company. Founders, project managers, team leaders, etc. all have official authority and define your company’s culture as part of their job. On the other hand, there are always going to be unofficial cultural carriers on any team.

Some people are charismatic, some people are persuasive. Who are these people on your team?

Look around and develop your awareness of WHO the unofficial carriers are, and their effects on your team.

Let’s say you have an all-hands meeting each morning. If you and everyone in a leadership position show up on time every day, it sets the tone that punctuality is expected. However, if an unofficial cultural carrier shows up late for the meeting consistently, other people will begin to follow suit.

Sometimes managing these unofficial carriers means sitting them down and talking to them about your company culture and their role in it. You want their buy-in, because they can be a huge benefit to your culture.

When your team hits a tough obstacle, it is a huge help to have an unofficial carrier on the team who embodies your company culture and is 100% committed to pushing forward. They will drive their team to do the same.

4. Hire The Same Way You Date

Hiring someone solely because their CV qualifies them for the job is a mistake. You need to know they communicate in a way that fits your culture, that they enjoy the sort of environment you’re cultivating, and that they have a mentality about work that jives with your company.

To figure out if candidates really fit your company culture, you have to get to know them on a more personal level.

There a number of ways to do this:

  • Have them eat lunch with the company.
  • Invite them to a team social event.
  • Take a long walk with them after the interview.

Anything that puts you in a situation with them outside the context of an in-office interview is going to give you a more complete picture of how they interact and whether they’ll fit your culture.

This isn’t just about making sure your company culture stays strong. It’s also about being fair to the candidate and your team. Bringing someone on who is destined to struggle with your company’s culture sets them up for failure, and forces an unnecessary burden on your team.

Your Culture Is Your Biggest Advantage

As a startup, you have to build and keep a rockstar team to succeed. This means you’re frequently going to go head-to-head with bigger companies for the best candidates. You won’t be able to offer them the same salary or perks as a giant company. All you have to sell them on is your culture.

But this can be to your advantage. Having a strong culture means creating bonds of trust between your team members and this creates loyalty to your company. You may not be able to bribe your team members with retreats and office dogs, but you can create a culture that connects your team on a much deeper level.

To hear more from Louise, follow her on Twitter at @louise_kinglui

Should You Take the Offer? A Growth Marketers’ Framework to Climbing the Startup Career Ladder

This post comes from Alex Nucci, VP of Growth at ClutchPrep, a company that provides textbook-specific videos and tutoring in science subjects to college students. Under Alex’s guidance, ClutchPrep has tripled their MRR over the past 8 months.

8 months ago, I hit a crossroads.

About to choose my next career move, it wasn’t clear to me which option was best. They were all great, but there was definitely a better one to pick (there always is).

I created a list of things that one considers when making a decision like this. The idea was to put them all in perspective with what my long term goals were, as opposed to being lured in by what might be a short term win.

After spending some time grouping and prioritizing, I placed all of the reasons into buckets. I then used them to help me score my choices.

The way I see it, these are the most important ranking factors when choosing the path to level-up within your vocation.

The buckets are career oriented, and do not take into account a whole slew of other preferences or situations. Culture fit, health, family, location…these variables are more intimate in nature. It would be hard to give advice on them without some context.

Additionally, experience and age should also play a big role in how you choose what’s most important to you. Where you are on your career trajectory is somewhat subjective, and how you weigh each of the buckets should depend on that. Self awareness is key.

Everyone should rank them differently, depending on how career vs lifestyle vs risk-averse oriented they are.

In no particular order, the buckets are:

Mentorship 💭

Do you deeply respect the team or leaders at this company?

Working alongside the right people can greatly accelerate your career trajectory. The inverse is also true; working with the wrong ones can add years to that journey.

Pick your sources of experience and inspiration wisely — more so when building a foundation.

Assuming equally willing mindsets and difficulty levels, It’s harder to unlearn something than it is to learn it. Quitting a bad habit is more challenging than picking up a new good one.

This is probably the most undervalued bucket — at least it comes up less frequently when others say why they chose a job.

I would advise anyone under 25 to make this their top deciding factor. Pick the absolute best person or team that will hire you, and take that job regardless of anything else.

Passion 🔥

This job fulfills you, at least right now, at a personal level. Doesn’t matter what anyone else thinks, this shit feels good.

Become passionate about things that line up with your skills and strengths.

Passion can represent itself in a job through one of more of these:

  • Cause
  • Industry
  • Company
  • Position

If you’re lucky enough, you’ll find something that hits on all four.

I have mixed feelings on choosing a career path based on passion. It’s hard to tell someone to not do what they’re passionate about, yet the reality is that it’s hard to line up passion with skill. It’s also likely that once you do what you’re passionate about day-in and day-out, you’ll lose interest in it…it’ll become routine and no longer fulfilling (this happened to me).

A more interesting (and less common way) of choosing based on passion, while having a successful outcome, is to become passionate about things that line up with your skills and strengths.

If people tell you that you argue too much, you might be a good lawyer 🙂

Compensation 💰

Two main versions of this:

1. Pays above average for that particular job description

2. It’s the best paying job offer you’ve gotten

Ideally, if this bucket is having considerable weight on your decision, it’s being used as a tie-breaker. A reason to pick one out of a few jobs that are very similar and fulfill you in the same ways.

Odds are, that if the job doesn’t also hit on a few more buckets that you value, you should stop considering that opportunity. When given a chance between learning or earning, choose learning and maximize that opportunity. Especially early on in your career.

There are exceptions, of course. Like taking a job that you expect to last <6 months. Or the extra money brings in some needed flexibility that allows you to plan or fund your next move.

Flexibility 🔓

By taking this job, you can work on your side project. Or take that night coding bootcamp. Or start working part-time on something that gets you closer to your ultimate goal.

Or put in time at the non-profit you’re passionate about.

Flexibility without a clearly defined ulterior motive, though, is just comfort. And comfort stagnates progress.

In most cases, this will be a temporary position or solution, and ideally matches well with the compensation bucket. Lining up both should give you the needed time and resources for your real career to take off soon enough.

Flexibility without a clearly defined ulterior motive, though, is just comfort. And comfort stagnates progress.

Security 🛡

Working for the government. Or a Fortune 500. Or an organization that’s been around for decades.

You know that you’re (relatively) set for a long time. That the health insurance is great. That you’ll do good so long as you work the system.

This position, at this company, makes you feel set and secure. You’re comfortable.

I almost fell asleep while writing about this bucket.

Stage Experience 🚀

See what it’s like to be part of the early days of a startup. Learn about corporate structure. Strap onto a rocket ship that’s about to go from 30 to 100 employees.

You might want to see if it’s what you really think it is. Or if you’re a good fit at a company this size. Maybe it’s about getting first-hand experience, so that you can learn to sell to companies at that stage.

This is somewhat similar to mentorship, in that you’re looking for learning experiences, or validation, on something that will make you better at your ultimate goal.

Industry Experience + Networking ⛓

If you already know what industry you want to be a part of, you’ll ideally take positions that help you get to know how things work. Or meet the people that shape it.

The goal of this is to come out of this with a mix of 30% what you know and 70% who you know.

Having people that trust and believe in you is great. Having those people be inside of your industry is even better.

Creative Freedom 💡

Do you want to draw the map or steer the ship?

Do you want to take the risk of creating the something new from scratch, or do you want to manage an existing process and/or execute on it to perfection?

You might be able to create, manage and execute early on. As you scale, however, it’s likely you’ll only get to focus on two of them.

No matter how much you like everything else about the job, if you can’t see yourself executing on someone else’s ideas, you won’t be happy in the long run.

Same goes with putting yourself in a position that requires a lot of creativity, when what you really want is to execute on a clear vision.

Trophy 🏆

If you’re in finance, you spent some time at Goldman. If you’re in tech, you were a double-digit hire at Airbnb. Maybe you get to work at a multi-exit entrepreneur’s newest venture.

These are hard to come by, and very few people will turn down the opportunity. Even if they just plan on sticking with them for one year, and doing a right of passage.

It’s hard for this to not pay dividends. This stepping stone will likely make every step you take after it one much easier.

Applying this way of thinking led me to a clear choice. When I finished the list, I decided to join Clutch as VP of Growth.

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At the stage I was at, I weighed mentorship, stage experience and creative freedom above all else.

A few specific reasons:

1. Join a brilliant + dedicated team.

From the outside looking in, I could tell ClutchPrep was about to hit an inflection point on all fronts — team member count, revenue, product scale, experience — and I wanted to be part of that journey.

2. Tackle a real problem (textbooks) within a broken system (college education).

Clutch had just been accepted to 500 Startups Miami Distro Dojo Batch 1, and I was looking forward to going through a Growth-specific program with the rest of the team.

3. I get to do what I love most: grow revenue.

When it comes to your career, opportunity cost should be treated as the greatest cost of all.

If you are currently searching for something new, I hope this helps you find some clarity. If you’re not searching, but after reading this realize you are not hitting on the points that matter most to you, I hope this kickstarts a new search.

My advice: Go for the long term win. When it comes to your career, opportunity cost should be treated as the greatest cost of all.

We live in a time that you can pick, or at least try, anything that you want to do. More than ever, we have the luxury of being fulfilled through passion. You owe it to yourself to give it a shot.*

When you look back at the decision you made, it should be clear that it brought you further along to your ultimate goal. Regardless of what happened, how long it lasted, or if you changed direction.

If you made the choice based on a vision of your future self, you’ll be happy with it.

Thank you Bibi, Jenny, Johnny & Marcio for reading drafts + giving feedback.

* This paragraph was a great, almost-verbatim, point made by Marcio, Clutch’s CEO, while giving feedback on a draft.

To learn more about the Distro Dojo growth accelerator program, go here.

To join 500’s newsletter of daily growth marketing tips, go here.

Special thanks to ClutchPrep for contributing this post.

The 500 Accelerator in a Nutshell

Today’s is the last installment in a series of essays by 500 founder Troy Sultan documenting his journey through the 500 Accelerator, Batch 16. Here Troy shares his closing thoughts on the Accelerator, and his opening thoughts for the considerable “Everything Else” that’s on its way. 

To read the rest of the Troy’s posts in this series, scroll to the end of this piece for links. To apply for Batch 18 (deadline June 20, 2016), go here.

It was 10pm on a Monday in November, two hours before the application deadline for 500 Startups’ 16th batch. Two months prior we were interviewed and rejected from Batch 15 — for good reason. We were too early.

The company was barely a couple months old and wasn’t ready to fully leverage the accelerator’s value. While aware of this, we interviewed anyway to learn what that value actually looked like, and if it would be relevant when we were indeed ready for it.

Two months later on that Monday night in the office, we were heads down GSD. My calendar interrupted, reminding me that applications were due at midnight for the next 500 batch.

I broke the productive silence and muttered to Wade for a quick sanity check. “We’re not interested in 500, right? Application is due in 2 hours.”

Wade: “Nah. What’s the value?” I agreed, and that was that.

“But wait!” my brain said. “Lets torture ourselves by imaging a fictional scenario where we regret not applying at some point in the future!”

So I blurted aloud, “Imagine —just for argument’s sake — sitting in the 500 office a few months from now laughing with new friends, fist-bumping over big wins, having grown and learned in unimaginable ways, looking at each other asking, ‘Can you image if we didn’t apply?’”

Fast-forward 6 months, and we’re now 500 grads.

Filming our batch video (full video at the end of this post)

While it’s feels impossible to fully capture in a blog post, I try my best to highlight our experience below.

Some lessons & wisdom we’re walking away with:

  • The people you think have their shit together, don’t.
  • You’re great at some some things and suck at others. Figure out both quickly.
  • Some of the best companies don’t reflect it at the seed stage.
  • As an investor or employee, if you consistently pick winners at the early stage, you’re lucky, not good.
  • Ability to fundraise at the seed stage is largely dependent on you running a “tight process”.
  • Shit happens at every early stage company: cofounder breakups, down months/flat revenue, bad hires. It’s not just you.
  • When your company starts to grow, things get harder not easier.
  • You’re more than just the founder of a company. You’re a unique human being that others love regardless of your company’s outcome.
  • You must find ways to enjoy the journey or you’ll go insane (this one is particularly tough for me).

Other takeaways from our experience:

Focus & Direction

Our target customer changed. We went from selling into multiple customer types to one. This led to us refocusing our product roadmap and feature set, refining our sales and on-boarding process as well as our messaging. We’re more focused.

This changed the way we’re thinking about the business as a whole, which comes with it’s own challenges. Contrary to my broader point here, we’ve lost clarity on the company’s long-term vision as new learnings and opportunities came to light. We’re becoming more comfortable with not building the big vision now and focusing on the immediate opportunity in front of us as things will change.

Collaboration + Community

It’s easy to build in isolation. Isolation from customers/users, friends and family and other entrepreneurs in the trenches. I’ve written before about thepsychological challenges of company-building and I believe isolation is the breeding ground for these. This is something the 500 environment helps you avoid.

The office space was one of my favorite parts of the program. It’s an intensely collaborative space where you can’t avoid cross-pollinating with creative and vulnerable minds on similar journeys. Pains. Lessons. Growth. Fundraising. Hiring. Firing. Emotional swings. Swapping stories. Friendship.

The level of intellect, curiosity, hustle and standard that permeates the 500 office and community is both contagious and addicting. I felt FOMO regularly when leaving the office. I knew that time spent elsewhere had less of an impact on my personal growth.

That said, there’s a clear downside to this setup: distraction. It’s easy to spend the day bonding with batchmates and not building your business if you‘re not disciplined. It’s easy to convince yourself the relationships are valuable (and they are), but there’s a direct impact on your bottom line for each hour you’re not heads down. As they say, balance is key.

Network, Learning and Inspiration

There’s something to say about building a powerful network in a friendly, organic environment vs. one that feels forced. We know a lot more smart folks now than we did before the program and those relationships feel real as opposed to transactional.

We met dozens of operators and investors who came by for late-night chats and shared insights on their mindset and entrepreneurial journey with off-the-record candidness. And they were accessible. We connected with many of them personally who were genuinely interested in being helpful.

Two sessions that had a memorable impact on me were Gary Swart of Polaris Partners and Jess Mah of InDinero. They served as a strong reminder that we’re all human; that we all go through hardship. It’s the ones that don’t give up who win out.

From an evening chat with Wesley Chan of Felicis Ventures, an under-publicized fund with massive wins:

Support & Validation (or a punch in the face)

Confidence is a huge part of staying the course as an entrepreneur, and having a sounding board to let you know when you’re killing it (and when you’re fucking up) is invaluable. The 500 culture is exceptional at telling you like it is, no filter.

He loves us.

The 500 partners have seen hundreds of companies pass through the accelerator, so learning what other later-stage companies looked like at seed makes for an interesting perspective. It’s an implicit measuring stick and helps build confidence when you get praise and create a fire when you’re slumping.

You learn that the teams touting growth, getting press, raising large rounds are, again, just normal humans. Like you and I. Smart, hardworking people who muscled through the troughs. That’s it.

You leave 500 deeply believing this.

Trust

Building a company is a lonely journey. We got close with the 500 team who genuinely care about our success, and not just because they’re on our cap table. They care about our emotions, mental health and how much we’re enjoying the process. They know all days won’t be good ones. They invest in you ability to win long-term and they make that clear. I’ve never felt pressure to exaggerate numbers or disclose anything but the exact truth about the health of our business, my psychology, worries, challenges or concerns. It’s hard to put a price on that.

And although B16 is winding down, I feel like we’ll have that trust forever.

Last but not least: Fun

To my point above on enjoying the journey, we had insane amounts of fun. As a fellow batchmate likes to say, we burned the candle on both ends. I’ll tell this one in pictures:

That night we all went out in suits. For no reason.
Batch ski trip to Lake Tahoe
BBQs on BBQs
Farewell dinner 🙁
More BBQs

After the program ended, a batchmate and I sat in my apartment reflecting on our experience. Best parts? Worst parts?

While this post summarizes the good, we were at a loss for the bad. Sure we can nitpick: mentor whiplash (major first-world problem), seating charts, scheduling, wifi and A/C issues (if I showed up to a meeting with you sweating, it wasn’t nerves I promise) but we had no substantial knocks against our experience — honestly. It was incredible.

That said, our conversation landed on a massive caveat:

You get out of the 500 experience (and other accelerators, by our guess) what you put in. Accelerators are kitchens, not restaurants. You have to get dirty and cut through the noise to find value for team and your business. One can easily go through an accelerator and get marginal value from it. That’s the asterisk next to most self-driven learning models and, well, life in general.

My recommendation

If you’re an early-stage founder, I highly recommend considering an accelerator, whether 500 Startups or another. If you think your business is beyond the ‘accelerator stage’, I’d reconsider (at least as it relates to 500). Much of our batch raised $500k-$1M+ prior to the program and some had up to 20 employees. I’d bet they feel similar to us about the experience.

Do your diligence on existing programs, talk to alumni founders and partners and decide which program is the best fit for your company.

While it’s hard to know today the affect 500 will have on our business long-term, it certainly feels like we made the right decision. It’s changed the way we think — and that lasts forever.


Thanks so much for following our journey 🙂 If you’re interested in joining 500, applications for Batch 18 in SF are now open. Apply here and let me know you applied.

P.S. — Check this out:

Previous posts:

500 Startups Batch 1 — 5 Years Later. Where Are They Now?

At 500 Startups, each group of founders that is accepted into the accelerator’s four-month program is called a “Batch,” an apt description, since participants receive a series of commands they’ll later process and execute.

The founders who presented at 500 Startups Demo Day in August 2011 are considered Batch 1; today, Batch 17 is entering week six of a four-month program that will culminate in their own Demo Day, the product of intense study, practice and camaraderie.

Batch 1’s pitches were presented at 500 Startups’ Mountain View office, but today, Demo Days are held at Mountain View’s Computer History Museum, a venue that can accommodate hundreds of attendees, including investors, friends and the media.

High production values give these pitch sessions the same vibe as a high-energy stage show, but some things haven’t changed since Batch 1: participants continue to be “unified by a strong international and female founder thread and ‘attitude,'” a trait TechCrunch noted in its August 2011 Demo Day reporting.

Today, a look back at several companies that participated in Batch 1 Demo Day to see how far they’ve flown since leaving the nest.

Kudo

Based in Indonesia, Kudo describes itself as “an Online to Offline (O2O) company, bringing e-commerce to mass millions of Indonesians.”

In practice, this means creating sales kiosks in public areas that accept several forms of payment. By targeting consumers in physical spaces, Kudo’s founders hope to drive sales from people who might not be inclined to order online or visit a store.

Because approximately 81 percent of Indonesians don’t have bank accounts, Kudo’s payment and logistics platform bridges financial and technical gaps. Customers use Kudo kiosks to refill mobile phones, purchase tickets or buy physical goods.

Where are they now?

In November 2014, founders Albert Lucius and Agung Nugroho closed a seed round; six months later, their metrics were strong enough to land a seven-figure funding round.

Vidcaster

Vidcaster, a “video experience platform for marketing and training,” created custom workflows that let users easily promote, distribute and manage marketing and training content. Offering turnkey solutions that included hosting and SEO, co-founder and CEO Kieran Farr told TechCrunch that he followed Dave McClure’s advice to launch a freemium service that would augment his existing subscription services.

Three months after Demo Day, Vidcaster raised a $350K seed round, which gave the company enough runway to integrate with Salesforce, Hootsuite and Marketo, increasing its reach. After winning a grant from the City of New York to “hire and expand in Lower Manhattan,” Farr relocated the company from San Francisco.

Where are they now?

In December 2015, Vidcaster was acquired by Vidlet, a marketing research company based in Palo Alto. Farr remained aboard as CTO, where he helped the new company develop a service that uses smartphone cameras to conduct ethnographic research.

Snapette app, via Facebook

 

Snapette

Initially an app that connected shoppers with nearby shoes and apparel, Snapette quickly grew into an ecommerce discovery platform with more than 2 million users.

Where are they now?

In October 2011, co-founders Jinhee Ahn Kim and Sarah Paiji closed a $1.5M seed round; in August 2013, after partnering with more than 200 brands and stores, Snapette was acquired by PriceGrabber, a price-comparison shopping site, for an undisclosed amount.

Looksharp

InternMatch, a jobs marketplace for internships and grad students that launched in 2009, raised $400K in angel funding before securing its berth in Batch 1. While going through the accelerator, founders Andrew Maguire and Nathan Parcells redesigned their site to improve usability and search. A month after their demo, they raised an additional $500K.

Where are they now?

Initially focusing on west coast opportunities, InternMatch gained traction by building a large team of brand ambassadors who were also marketing interns. Employers pay to post listings, but students use it for free. In January 2013, the company raised $1.2M in a bridge round to expand its services to include internships and traditional paid positions for enrolled students and recent graduates.

Six months later, a $4M Series A round allowed the company to add more engineering and marketing roles and develop data products to match users with open positions. After changing its name to Looksharp, the company acquired competitor Readyforce in December 2014.

Today, Looksharp currently claims to serve 10 million users, or 70% of all new graduates and college students.

Elizabeth Yin, 500 Startups EIR, co-founder LaunchBit

LaunchBit

LaunchBit, a customer acquisition tool for SaaS companies, was created to help publishers send content to B2B audiences via niche ad inventory such as newsletters and blogs. The firm also helps publishers identify and manage ad units that can be inserted into email newsletter.

Where are they now?

A year after Batch 1, LaunchBit raised a $960K seed round and relocated from the Bay Area to Las Vegas in search of “cheaper operational costs and a better talent pool to tap,” co-founder and CEO Elizabeth Yin told tech.co. After BuySellAds, a LaunchBit partner, expressed interest in an acquisition, Yin realized that her “passion wasn’t in ads.”

After LaunchBit was absorbed into BuySellAds, Yin joined 500 Startups as a Entrepreneur-in-Residence, and now runs 500’s Mountain View Accelerator as a partner in the firm.

Batch 17 Demo Day is August 2, 2016

Batch 17’s Demo Day is already on the books for August 2, 2016.

Active, accredited investors and their representatives are invited to join our founders and our team at the Computer History Museum in Mountain View on August 2 from 12 – 6pm.

Demo Day requires pre-registration.

Sign up to join Batch 17 Demo Day here.

How To Pitch A VC

“Everyone” understands the high-level goals of a pitch: Make yourself memorable, and drive home your product’s value.

But working out how to put it all into one, non-boring pitch is another matter altogether — and something we work on extensively as part of the 500 Accelerator.

Over the years, we’ve learned that sticking to a step-by-step strategy for pitching VCs is a common struggle for startup founders.

Do they introduce themselves before or after their companies? Should they list their most impressive metrics upfront or work them into the pitch? What’s the proper way to end investor conversations?

Good pitches follow a rigorous structure for engaging investors and proving a company’s value.

Like all good marketing and sales, the startup pitch process starts before you ever walk into the office—it starts with research.

1. Know Your Audience

Before you ever walk into a VC’s office, you need to research the person you’re going to be meeting and adapt your strategy accordingly.

First you have to understand his/her interests:

  • Does the VC have expertise in your area? Adjust your pitch according to how much background knowledge they have.
  • Have they had any successes? If so, frame your company in a similar light.
  • Did they publish mission statements? Figure out their priorities and focus on addressing them.

Then you have to understand the logistics. You need to make sure the fund is in a position to invest in you and that you’re talking to the people who can make it happen:

  • What is their fund size? If they have a $25 million fund, they won’t cut you a check for $10 million.
  • Where are they in their lifecycle? If a firm is towards the end of their fund, they’ll be more selective in writing their last checks.
  • Who are you meeting with? If it’s someone below partner, he/she won’t be making any decisions. You may still want to meet w/ him/her, but it’s important to know.

What you’re trying to find is the simplest possible explanation of your company’s value—tailored for the VC you’re meeting. When you figure it out, practice it again and again until there are no weak points in your presentation.

2. Grease The Wheels, Then Get Straight To The Point

When you walk into the room, your first instinct is going to be to jump right into your pitch. If you do this, you’re wasting a valuable opportunity to refine your pitch for these particular investors.

Instead, start by asking them one question: “What is the most important thing you want to make sure I cover?”

This answer is hugely helpful in focusing the rest of your presentation. If they ask about market size, you’ll know to spend extra time covering it. If they ask about your team, you’ll know where to take a deeper dive.

Opening with this question also gets them engaged early in the process, before you’ve begun to really pitch your product. It helps to set a casual tone for the pitch, which is a huge boost to you.

Have A Casual Opening Conversation

Investors aren’t just investing in your company, they’re investing in you. Beginning with a causal conversation engages them person-to-person, instead of presenter-to-presentee. That connection can be very persuasive.

There are many casual conversation openers, like bringing up a mutual connection, but the key is to give the best, most authentic impression of yourself. Scott Friend, managing director at Bain Capital Ventures, says that he comes to pitches with two questions in mind:

  • “How good of an evangelist is this person going to be for their company?”
  • “Is this someone I would want to go to work for?”

Both of these questions center around your charisma and character, two things you can impress early on with some quick conversation. However, don’t let the conversation prattle on. Keep it to a few minutes tops, and then get into the meat of your pitch.

Start Things Off With A Succinct Tagline

Get to your pitch’s core by introducing your company with a tagline and short explanation. Right out of the gate, you want investors to know what they’re looking at and why they should care.

A good tagline should be seven words max, and should hint at your company’s vision in a memorable way.
Curios Following your tagline, you need to explain what your company does. Do this in less than five seconds, in language anyone can understand.

For example, “We make Facebook ads easy” is a good, straight-forward explanation of your service. “We drive synergistic mobile bitcoin monetization through international arbitrage using a distributed GPU cloud-based computation and transaction engine written in assembly,” is a mess.

The last thing you want is to ask a VC to waste mental energy figuring out your convoluted explanation.

3. Segue To Your Numbers

Now that you’ve piqued investors’ interest, you want to get them engaged with your company’s story. This brings you to a fork in the road:

  • If you have strong metrics, make sure to bring this up early and be specific.  e.g. “I founded this SaaS company two years ago, and today we’re doing a $2m runrate.”
  • If your metrics are weak, begin your story by focusing on how massive the problem is. e.g. “I founded this company after realizing there are a million teenage cricket players like Jim, unable to get a date.”

When you talk about your metrics, you have to make sure they’re integrated into your company’s story. You can’t just say “We have 1000 downloads.” Without context, your metrics don’t make sense.

Showcase Your Most Relevant Traction Metrics

In general, the further down the funnel a metric comes from, the more valuable it is.

For example, having 20,000 downloads doesn’t mean you have 20,000 customers right now. Your active users, on the other hand, show how many top customers you have right now.

Depending on the specifics of your business, your actual metrics might differ, but they should be related to these:

  • B2C Companies: DAU / MAU > Downloads > Partners
  • B2B Companies: Revenue > Number of Customers > Pipeline leads

Maybe your B2C service is a web app, so you track user registrations instead of downloads, but in general this is how you should prioritize your metrics.

Once you’ve decided which metrics to show, keep three things in mind:

  • Do your numbers support each other? If you have a huge number of B2B enterprise-level customers but your revenue is low, investors will sense something is wrong.
  • Are you using industry standard metrics? Making a VC translate your “custom” metrics overcomplicates things.
  • Can your metrics stand alone? If you have weak metrics, highlight some strategic partnerships to prove you have the infrastructure for growth.

It’s important you follow this strategy when you’re focusing on traction metrics. When your traction alone isn’t impressive, however, you’ll need a different approach.

Highlight Your Potential Growth With Market Metrics

When your traction is weak, you can always use market metrics to underscore how high your ceiling is. Market size and availability are key here.

Airbnb’s first pitch went this route:

AirBNBBy breaking down what their company could be in such a simple diagram, investors understood the exact segment of the large market they were attacking.

When you take this approach, you have to convince investors that you understand the problem that customers in this market face and that your product is the best solution to it. You need to be able to describe the specific segment of the market, the specific problem, and your product’s specific and differentiated value in a way that anyone on the street could understand.

If not, it’ll look like you identified a large vague market but couldn’t figure out how to penetrate it.

4. Tell Your Product’s Story

After showing investors why they should care about your product, you’ll be tempted to show off all the features you’ve spent time developing. But investors only care about the problem your product solves, and why it’s the best at solving it.

The most powerful way to explain your product’s value is with a story. Speak slowly and naturally as you tell investors how you, or a hypothetical person (preferably a real one), experienced this real life pain point, and how you dreamed up your product to fix it.

You want your story to be streamlined and approachable. It should make your product’s value obvious, and it should engage investors on a personal level.

If you don’t have a story, you can still explain the problem your product solves, but you’ll sacrifice the personal engagement a story brings. Still, this is a better option than telling a story no one can relate to.

Showing The Product’s Value

When it finally comes time to explain your product, focus on its benefits, not its features. The difference is this:

  • Benefits: What your product helps customers accomplish. e.g. “The iPod puts 1000 songs in your pocket.”
  • Features: What your product does. e.g. “The iPod is a digital music player with 1 GB of storage.”

These benefits are why customers will buy your product and help grow your company, which is an investor’s top concern. However, you’ll need to incorporate your benefits into your company’s story, and you shouldn’t make it sound like they were easy to develop.

Stories without contrast are boring, and investors want to hear about your ups and downs. They want to hear how you struggled early on, what roadblocks almost kept you from building this solution, and how you overcame.

These contrasting points make your story memorable, which should be a primary focus in your pitch. But being memorable alone is not enough. Once you’ve engaged investors with your story, you need to convince them that your solution is the best.

Pinpoint What Makes Your Company Profitable

Explaining your product’s value is one thing, showing how that value becomes revenue is another.

There are three aspects to this:

  • What makes you better than your competition?: Prove your market expertise and highlight your competitive advantage / differentiation.
  • How are you monetizing?: Explain clearly how you’re turning this advantage into dollars.
  • Are you profitable right now?: Compare metrics like CAC to LTV to prove your current profitability.

Your company needs one amazing thing that makes it a real winner, and this is your competitive advantage. More than that, you need a clear path to converting that advantage into profit, and some evidence that your plan is working.

However, investors aren’t just evaluating your product, they’re evaluating you. They need to have faith in your team’s ability, and it’s your job to instill that belief.

5. Sell Investors on Your Team

Investors want your story to be about more than a great product, they want to know how special your team is. They want to see that when things looked grim, your team had the grit and skills to keep the company going.

Investors are also particularly interested in teams because companies pivot all the time in search of opportunity, but their core team usually remains consistent.

Back when Airbnb was still AirBnB, Paul Graham emailed Fred Wilson to urge him to invest. When Wilson said he was skeptical about the product in its current form, Graham told him to focus on the team, saying “Ideas can morph. Practically every really big startup could say, five years later, “believe it or not, we started out doing ___.”

Selling them on why your team is both exceptional and resilient enough to grow your company is critical to instilling confidence in your investors. For a great example of this, look at 500 alumni Headout.

How Headout’s Team Raised $1.8 Million

Headout is an app that handles same-day event booking for travelers. Their pitch raised $1.8 million at our February 2015 Demo Day. Look at their team introduction to see why.

HeadOut1Building a recommendation engine that covers vastly different cities requires a strong team of developers and business development. The team has a balanced skill set that made this a compelling investment to investors.

HeadOut2However, more than just being balanced, the team showed hustle and strength by tripling their revenue in just three months.

In just a minute-long pitch, the company was impressive to a lot of investors.

How To Walk Out Of The Room

Now that you’ve reached your pitch’s conclusion, you need to make a clean exit.

You’ll want to give a very brief summary of your presentation in a few sentences. Include what you do, how you do it, and your key metrics. As a closer, use a memorable phrase, possibly reworking your opening line to include metrics.

There will likely be questions as soon as you finish. Stay confident. Keep your body language and voice natural, and converse with investors as if you were talking to another founder. Always bring the conversation back to your company’s core value.

That value is what investors care about, not just the flair of your presentation. If you stick to this formula to showcase that value, you’re going to be having much more successful results when you’re walking into those offices on Sand Hill Road.

Lastly, you’ll want to have a strong call-to-action.  Find out what are the next steps and make sure not to leave the room without understanding specifically what is going to happen next and on what timeline.  Good luck!

>> Applications for the 500 Accelerator are open now. Apply for Batch 18 here. <<

The Career-Changing Impact of Learning How to Invest

Our flagship Venture Capital Unlocked investor training program is back! The 2 week executive ed. program that we co-run with Stanford Center for Professional Development is now accepting applications for its July 25th – August 5th cohort.

APPLY HERE

Getting the Inside Scoop

In the program, participants get an inside look into 500 Startups’ investment playbook and gain firsthand access to world-famous Silicon Valley VCs, angels, startups and entrepreneurs.

We are looking forward to another great session taught by Stanford faculty and 500 Startups partners, as well as top speakers like the ones who visited during the February cohort (below).

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Program Impact

At the end of 2015, we highlighted the successes of some of our VC Unlocked participants in a 3-part series on female VCs. You can see them on our blog:

Paula Schwartz, Founder of Startup Boat
Pocket Sun, Founding Partner of SoGal Ventures.
Katherine Hague, Creator of Female Funders

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Feb ’15 participants Diana Moldavsky, Elizabeth Galbut and Pocket Sun at 500 Startups Demo day

More recently, we caught up with a few other past participants and discussed the impact the program has had on their professional lives.

Many called the program “life changing,” and spoke about how it really gave them the confidence they needed to embark on a new chapter in their careers.

New Syndicates and Funds

Several past participants were inspired to start syndicates, which have turned into funds. Arlan Hamilton, a young black, female, gay woman turned heads in the largely white investing world after taking part in our inaugural class in May 2015.  

She started an early stage syndicate on Angel List, which turned into a VC fund called Backstage Capital which invests in “over-achieving underrepresented founders.”

Another example is Mohammed Mubarak Al Khater, who after meeting a founder while in Silicon Valley during the VC Unlocked program, felt inspired to invest personally. The founder was raising a bridge round and told Mohammed he would allocate him 10M in the round if he could raise it within a month.

Mohammed Al Khater with his certificate of completion from Stanford CPD
Mohammed Al Khater with his certificate of completion from Stanford CPD

Mohammed went back to Qatar, tapped into his network, partnered with a friend, and together they raised 11.2M in less than three weeks. They formed a new vehicle, MKaNN Ventures, in order to be able to invest in future opportunities.

The Network Effect

One of the greatest benefits of the program is the strength of the network that it creates among participants.

All of the participants regularly communicate with each other to share deal flow and advice, as well as organize and attend events together. Many continue to meet up with each other around the world.

Feb '16 program participants Lee McNutt and Carolina Canida met up in Miami in March to explore a company together.
Feb ’16 program participants Lee McNutt and Carolina Canida met up in Miami to explore a company together.

May 2015 participants Elizabeth Galbut and Pocket Sun even started a fund together (SoGal Ventures).

Some serve as LPs in each other’s funds and countless others have co-invested in companies together, many of which are in the 500 Startups portfolio.

Better & Stronger Investment Theses

The VC Unlocked program uses a project-based learning approach in which participants are continually refining their investment theses throughout the program with the help of 500 partners and Stanford faculty. Many of the participants we spoke to said this was an invaluable part of the course, since they continue to use their theses every time they evaluate a deal.

Stanford professor Michael Lepech with the May 2016 class.

Learning Directly From the Portfolio

One company that passed through the investment thesis filters is Piper, a DIY minecraft computer for kids.

Four VC unlocked participants invested in the company after seeing their founder pitch at Batch 15 Demoday during our February 2016 session.

Piper also scored a new PR representative in Masha Drokova, an angel investor and PR specialist who took part in VC Unlocked.

Participants look at Piper's product, a DIY minecraft computer, at Preview Day
Founder Mark Pavlyukovskyy showing Piper’s DIY minecraft computer to VC Unlocked participants at Preview Day

How to Join the Next VC Unlocked 

If you would like to be part of this fun and effective network of newly inspired VCs from around the world and take your VC career to the next level, join our next class on July 25th.

Seating is limited, so be sure to apply soon to secure your spot at 500.vc:

APPLY NOW

How to Grow a Startup, Marketing Hell Week Edition

Today’s post comes from guest author Lauralynn Stubler, a growth marketer who’s been helping out 500 Startups’ brand new Batch 17 survive our Accelerator program’s (in)famous Marketing Hell Week.

Batch 17 Marketing Hell Week is over, but the learnings from our startup resources have just begun….

Today we’re sharing some key takeaways on how to grow a startup from our recent Marketing Hell Week roster of speakers.

HOW TO GROW A STARTUP – THE QUICK TIPS

“Start with running A/A tests to test your tools.”

Hiten Shah on A/B Testing

Click-to-tweet: http://ctt.ec/hK6zd

A/A testing is often overlooked but it’s an excellent method of double-checking the effectiveness of your A/B testing software. A/A testing is the tactic of using A/B testing to test identical versions of a page against each other. In an A/A test, the tool should report no difference in conversions between the control and variation after enough conversions have been logged.

“Optimize ad spend for power users to maximize ROI with a limited budget.”

(Daniel Riaz on Customer Segmentation)

Click-to-tweet: http://ctt.ec/16N6t

By identifying and understanding your power users, you can optimize your marketing spend by targeting those who match their profile.

YOU ARE YOUR COMPANY’S BEST GROWTH HACKER

 

“Growing users without having those users complete the core action is the empty calories of growth. It feels good but it’s not good for you.”

— Sarah Tavel on B2C Engagement Hierarchy

Click-to-tweet: http://ctt.ec/ySc2c

If they nibble it doesn’t mean they are hooked. It’s not enough to drive traffic to your website, you actually need your users to take a specific action. And not just any action, but the ones that are in line with your objectives.

“The most important part of your dashboard is the janitorial work. The janitor updates the data every day and keeps the data clean. If you are going to build a dashboard and not keep it clean, don’t build a dashboard.”

— Susan Coelius on Remarketing

Click-to-tweet: http://ctt.ec/hyQeC

Pretty dashboards that tell all-the-things are great, if you need to know all-the-things. If not, it becomes a bloated daily chore that you begin to de-prioritize. Which makes the data, at worse, useless. And at best, something you need to spend time updating before you can see the whole picture. Keep it simple so you can update it on a regular basis.

INSIGHTS ON COMMON STARTUP RESOURCES

“People don’t go to FB to make decisions, they go to FB to avoid making decisions. Educating customers/generating leads is a better use of FB ads – give them value to build relationships instead of being aggressive and trying to make a sale.”

— Armando Biondi on Facebook Ads for Startups

Click-to-tweet: http://ctt.ec/H66d2

While our ultimate goal with paid acquisition is to land the deal, it’s a truth that most consumers need more than one touch before making a decision. Providing valuable content to your Facebook audience, rather than pushing a product, is a great way to nudge them through your activation funnel quicker.

“Avoid money in Referrals: Bringing up money changes context for users from social norms to market norms.”

— Ivan Kirgin on Referral Marketing

Click-to-tweet: http://ctt.ec/xVaNf

If you’re unclear about social vs market norms, consider this from a different angle. What would happen if you asked your dinner guests to bring a specific cash donation instead of a bottle of wine?

So, in other words, by offering money your referral incentive goes from “I share because I’m a caring person” to “Is this worth taking advantage of my network?” Figure out the best motivation for your customers to share your product, and capitalize on that thing. Sharing is actually a pretty big ask, and not everyone cares about a couple of bucks off.

Case in point: Twitter. If you don’t fix retention, you’ll run out of Internet to acquire.”

— Casey Winters on Retention

Click-to-tweet: http://ctt.ec/inwH7

There has been a shift in focus recently from acquiring new users to retaining existing users. It’s more costly to convince a new lead to become a user, and it’s downright agonizing to reactivate a churned user. Keep your customers, find out what makes them happy about your product. Then you can focus on acquiring new users who will undoubtedly stick around longer.

In the coming weeks, we’ll be publicly releasing all our Marketing Hell Week videos.

>> Sign up to be notified when the videos are available <<

The Two Biggest Challenges For Beauty/Fashion Startups

Many founders in the beauty and fashion spaces mistakenly think growing a successful company is all about having a big following. They think the first step to a million dollars in revenue is having a million followers on Instagram.

That’s not the case. Some fashion entrepreneurs have amassed massive followings, but as a result of their work building a great business, not as a prerequisite.

Whether you’re building a name brand or a revolutionary piece of technology, the business model and the product always come first. But getting those right is not easy. Fashion and beauty are uniquely challenging verticals—they’re all about inspiring feeling, about capturing a sense of magic, about conveying a certain charm. You’re often not competing on cost or efficiency, traditional startup differentiators, at all. You have to do things differently.

There are two particularly difficult things about building a company in these spaces that founders thinking about going into beauty and fashion urgently need to know.

You Need to Test Monetization Early

When you get 1,000,000 Instagram followers, a zillion likes on your Facebook page or tons of traffic to your blog, you get great at content and branding. The problem is that you’re merely good at what everyone else is also good at. And you’re no closer to turning that traffic into sales.

The real gap and opportunity for fashion entrepreneurs today is in figuring out how to monetize your audience. That’s one of the most powerful ways to take a business to scale because it lets you grow revenue without large increases in operating cost.

Testing monetization early—even as you continue fast growth—forces you to understand what your audience is really worth. A couple of considerations:

  • Growing your following first can turn follower count into a vanity metric that encourages spammy tactics and results in low engagement from your following. Low engagement means it will be difficult to monetize your audience.
  • Testing monetization forces you to build a loyal following, which is based on delivering an awesome experience and creating real value.

Curate the audience that you target from the very first day. That audience may be much smaller, but if it’s very, very active, you’ll have the foundation you need to scale. And quickly figure out the business unit metrics behind this audience so that when you turn your focus to product and sales later, you’ll already have a strong sense of what to sell.

Why Glambot Built a Product

500 Startups alum Karen Horiuchi started her company Glambot (Batch 13) around the offbeat idea of buying and selling pre-owned makeup.

Amazon and eBay had policies against preowned makeup. Craigslist and random web forums were sketchy and full of fake or unusable makeup. You can imagine that, to disrupt the supply chain by circumventing middlemen like big e-tailers and department stores to sell used makeup straight to the consumer, you would need to build a considerable social media following.

Screenshot 2016-04-22 at 1

Coming out of 500, Glambot was doing over $1M in annual revenue run rate, growing 30% month over month with 60% gross margins.

Karen started by building Glambot as a separate site. When you’re building a marketplace, you can’t outsource your audience to Instagram or Facebook, because that’s at the very core of what you do. Over time, she built its reputation into that of a trusted dealer of used goods, not an easy feat for something as personal as makeup.

That she built her own marketplace and network totally separate from Instagram or Facebook is the key to her high margins and non-linear revenue growth, and it’s what makes the revenue she does have all the more valuable.

“Although an impressive following on Instagram is nice to have and gives the appearance of success,” Karen says, “what really matters is money in the bank. An ecommerce start-up needs to focus on revenue through conversion. Survive first then flaunt later.”

That attitude is precisely what’s given her a foundation for blowing past the $1M to $2M ARR ceiling that other beauty startups, built on top of flimsier distribution, hit.

Product First

Look closely, and you’ll see that most fashion and beauty startups are really just Shopify stores. That can be a problem if the shopping experience is critical to your user experience.

The best companies in the beauty and fashion space look a lot like their fellow tech companies—they’re 100% focused and obsessive about product, because they want to deliver a unique user experience that delights customers. They:

  • Build their own tech. If you have no full-time technical people on your team and you’ve outsourced your technology, how can you iterate quickly based on customer feedback to build a product that people love?
  • Lead with a demo. It shows your focus is on product, not customer acquisition, and that’s what you need to build a novel product that people will try.

In fashion and beauty, it’s in creating an original product and changing consumer behavior that you find massive opportunities, because people still buy and sell clothes pretty much the same way they did 30 years ago, and this needs to be disrupted.

Despite the rise of online shopping, most people still prefer brick-and-mortar shopping for all kinds of reasons. They like seeing clothes in person, touching them, seeing how they move and putting outfits together. The startups that win in this space incorporate that experience into their products.

How Glam Street Built on Bbrick-and-Mortar

Glam Street (Batch 13) cofounder Agustina Sartori started off her Demo Day presentation with a slide that explained her company’s value proposition in one image—a drugstore’s makeup aisle. “Imagine trying to find the right makeup,” she said, “In this place.”
Screenshot 2016-05-05 at 4.36.43 PM

Glam St is a B2B beauty company with a simple yet powerful product: virtual makeup try-on.

The app lets users virtually try on a number of different kinds of makeup via webcam, while Glam St’s main business model involves using brands to get that app onto huge e-commerce sites and onto tablets in the hands of in-store stylists.

Glam St is a great example of a company that recognizes the power of the brick-and-mortar experience and doesn’t try to fight against it. You can use their app at home, and in that case you’re getting what’s valuable about the brick-and-mortar experience—the process of trying makeup on and seeing what it looks like—while ditching the drive there, the parking, and the crowds.

When you use the Glam St app in-store, it’s just a layer of software on top of a traditional brick-and-mortar experience. It augments normal shopping, but it doesn’t try to replace it.

KmNagJiQSr2YkvqN3mbM_imagen2 (1)

There’s very good reasons to work with, rather than against brick-and-mortar. Buying beauty products is an inherently participatory and social act—you touch, you feel, you try things on. Instead of trying to completely change the way people shop, what Glam St is doing is simpler and more valuable. They’re using software to improve the way people already shop.

That’s part of the reason that coming out of 500, Glam St was doing over $400k in annual run rate with 60% margins. That’s in an industry—beauty—worth a global $50 billion.

Despite the value of that market, a lot of people still believe that you simply can’t sell high-margin goods online. Or, they say that the brick-and-mortar experience is static and unchanging. Both are wrong. You just have to understand what you’re selling.

Beauty isn’t something you can sell the same way you sell USB cables. You won’t win if you use technology simply to make something cheaper or faster. You have to use technology to actually improve the experience and deliver value.

Growth Style

Some people look at beauty and fashion companies and just see vanity, surface, and gloss. They see celebs lending their likenesses to market-clunky, Pinterest-clone apps and think that the whole field is just backwards.

But in reality, beauty and fashion are incredibly difficult verticals to crack as a startup, and the people that are doing it are some of the most ambitious and intelligent founders out there.

Some companies can grow on the merit of one competitive advantage, but beauty and fashion startups need to combine structural efficiencies with the kind of effortless cool that their customers expect. They have to understand in equal measure two things that couldn’t be farther apart—the cold logic of achieving non-linear growth and the emotional desire that drives fashion.

>> APPLICATIONS TO BATCH 19 ARE OPEN NOW <<

Rethinking The Accelerator: What You’ll Achieve At 500 Startups

Before Avanoo arrived at 500, they were making about $2,000 a month selling self-help videos. But after a spell of stardom on Reddit, their social marketing channels had pretty much dried up. As cofounder Daniel Jacobs put it, “you can only do so many #1 posts before the Reddit people want to throw pitchforks at you.”

They had a plan to move from consumer to B2B and pivot from self-help into ongoing employee education for large corporations, but they were having trouble starting conversations with the execs they needed to reach. That’s when Jacobs and his cofounder got accepted to Batch 12. Less than six months later, Avanoo was an enterprise company worth $15M.

Avanoo’s success wasn’t about changing anything about their product or their plan. It was about taking the success they had already achieved and compounding it through rapid iteration, pushing forward through every failure:

  • They tried paying databases for leads: they turned out cold (virtually no opens)
  • They cold emailed decision makers at big companies: 3% open rate
  • They went to LinkedIn to source leads, wrote better subject headers, and implemented domain keys: 60% open rate!

Within months, Avanoo went from hearing silence to hearing excited responses from HR leaders at Fortune 500 companies, and they did it by experimenting—they turned their growth into a 320240_10151056687829601_721557914_n (1)process they could continue long after Demo Day. Avanoo followed a pattern of success that we’ve seen happen time and time again at 500: they came in with a product, a market, and a team that was ready to grow. All we did was pour some fuel on the fire.

We want to help more companies in that same way, and that’s why we’ve recently re-oriented the accelerator around growth. We’re working with companies ready to scale rather than focusing on companies in the pre-product or idea stage. And we’re modifying our accelerator schedule to cultivate more intense, productive relationships between companies and their growth coaches.

How You Spend Your Time At 500

When you only have four months to work with, time is of the essence. We’ve made changes to the way we run our accelerator as we’ve narrowed our focus and identified ways to pack more value into less time.

Our four-month program at 500 is split into two parts:

  1. Growth and distribution: For two and a half months, you learn the ins and outs of acquisition and retention from the industry’s best growth marketers.
  2. Fundraising: For the last month and a half, you practice fundraising, meet with VCs during office hours and nail down your pitch for Demo Day.

Every batch kicks off with Marketing Hell Week, an intensive week intended to teach you everything you need to know about building a systematic process for growth.

After Marketing Hell Week, we put that knowledge to work by pairing you with a growth coach tailored for your business. You work with them on a weekly basis to develop, run, and refine experiments aimed at tackling your company’s big problems.

Then, with a month and a half remaining, you shift into fundraising mode. We have mock investor meetings, go over how to tell a compelling story about your company in two minutes, and after Demo Day, we bring 100 investors in for office hours to help you start your raise.

Each section of the program is carefully designed to build on the last. Growth, from top to bottom, is the ultimate goal: and it starts on Day 1.

Marketing Hell Week

Every company we accept into 500 Startups is there because we believe they have the potential to build something amazing. But because a lot of our founders come from engineering or design backgrounds, they often don’t have the sales and marketing experience they need to get their amazing product into the hands of customers.

During 500’s first week, we fly some of the best founders and growth marketers in the world to the accelerator. Through classes and workshops, our batch companies learn about everything from the basics of marketing to more advanced topics (examples from Batch 16):

  • Building a Growth Machine with Brian Balfour
  • Validation Through “Smoke Tests” with Dominic Coryell
  • Sales Hacking with Matt Ellsworth
  • A/B Testing with Hiten Shah

In the past, we had speakers come in throughout the program and talk on every topic you could imagine, from design to engineering, hiring, legal, product, operations and more, but we realized that those talks took up way too much time and actually distracted founders from running their businesses.

When you’re trying to take your revenue or user base and 10x it, hiring isn’t going to be your main concern. Patenting your software won’t make or break your business. Marketing and sales are the problem, and Hell Week is the beginning of the solution. Eventually, if we’re successful, hiring will be a problem—but growth has to come first.

That’s why we’ve taken all the speakers and workshops we used to have throughout the program and—mostly—put them into a single week full of growth and distribution.

Use Your Breaks Wisely
Use Your Breaks Wisely

Marketing Hell Week is the foundation of everything that follows at 500, and it’s accordingly intense. 500 founder Troy Sultan documented his own Marketing Hell Week this winter in an article that was tellingly short on personal commentary: “leaving the office at or past midnight were common themes for most of us… so memorable (and exhausting)… did indeed live up to its name.”

Calls will be taken during lunch. Meetings will be held while walking. But at the end of it, everything that companies need to know about distribution will have been covered. It’s then that the “real work,” that Sultan mentions having no time for, can really begin.

1:1s with Coaches

With Hell Week over, each batch company has a little over two months left before fundraising. When we look back at which companies accomplish the most in that span of time, we find that the best founders do two things:

  • They experiment relentlessly, and
  • They never get distracted

That’s why we’ve removed distractions by condensing our speakers and workshops into Hell Week. It allows us to optimize for experimentation throughout the rest of the program by giving each founder a customer acquisition coach.

Our coaches come from the marketing and sales departments of companies like Lyft and Hulu, and they’re oriented towards speed: try stuff, measure it, learn. Growth is never one-size-fits-all, but that method and the mindset behind it can be learned.

The Growth Scientist At Work
The Growth Scientist At Work

Your coach will start by helping you take what you learned during Marketing Hell Week and put it into practice. Many companies, for instance, come in without having tools like Google Analytics and Mixpanel set up properly, and the most basic foundation for starting a growth process is being able to take measurements of what’s happening in your app.

From then on, you’ll meet one-on-one with your coach every week to run experiments:

  • When the week starts, founders will meet with their coach, decide on their #1 metric that matters, and plan for upcoming experiments. Agreeing on the #1 metric brings focus to the founders and gets you aligned with your coach on what’s important.
  • During the week, your company runs the experiment. Knowing that you’ll meet with your coach at the end of the week adds a bit more discipline to tracking and making sure you’re growing your #1 metric.
  • At week’s end, you’ll get together with your coach to discuss what happened, what you learned, and how to design an experiment for the upcoming week. It’s a lot easier to craft new experiments when you’re working with a growth coach. You probably know about Google AdWords and Facebook Ads, for instance, but your coach will know about channels that many new entrepreneurs are unfamiliar with, like YouTube or Instagram influencer ads. They’ll be able to suggest the appropriate channels based on intimate knowledge of your business.

You’ll learn how to drive growth by doing it. Growth as a process isn’t about lectures or lists of prescribed actions that are supposed to grow startups—it’s about methodology, a state of mind that lasts long after 500. It’s one of the most valuable things you’ll have when you leave 500.

Grow To Raise

Ultimately, one of the best ways to set yourself up for fundraising success in the last month and a half of the program is to grow your business. When you turn growth into a process that you can control, your investor story becomes irresistible.

Richard Werbe, founder of Studypool, came into 500 with thousands of users and a business that was already generating a profit. He would have been able to grow his company without the accelerator, but working with 500 coach Andrei Marinescu helped him turn Studypool’s growth into a rigorous, sustainable process.

Richard Werbe

What Werbe and Zhong realized was that running experiments off intuition and gut inclinations had won them a few wins here and there, but it wouldn’t set them up for long-term sustainable growth. Marinescu helped Werbe be ruthless about systematizing the work and pursuing those really hard wins, and very soon Studypool was seeing consistent 25% MoM revenue growth.

At the end of Batch 11, Studypool raised $1.2M.

It wasn’t necessarily the 25% figure that set alarms off in the heads of investors: it was the consistency. Systematic growth as opposed to the “one-off lift” tells investors “this founder and team know what they’re doing.” It shows them that you’re in control.

When you have control over your growth and your revenue, your company’s trajectory is in your hands, and you’re on track to build a company that lasts.

Apply to Batch 17 here.