By Noah Jessop
I recently spoke with the founder of a pre-seed startup — no office, no business cards, and certainly no ability to afford to hire even a single junior sales rep.
But his new Fortune 500 customers weren’t focused on that. On every major sales call, the founder was joined by VP-level execs, who lent his startup priceless connections and credibility. These senior industry veterans were recruited to the entrepreneur’s board of advisors. Once they were aboard, the founder didn’t merely ask for their advice—he put them to work!
This is an example of what I call a “packaged deal.” The founder of this startup is technically brilliant, but relatively early in his career, making the prospects of commercialization a bit riskier. By enlisting the help of old hands, he was able to patch his major weakness. The framing of his story was no longer “ambitious technical wunderkind with a company that’s equal parts potential and risk” it was “Determined founder who balances personal technical brilliance with scrappy recruiting and commercialization acumen.”
When raising venture capital, founders are selling a product — a chunk of equity in their company. It’s as much a product as a SaaS license, but often founders fail to consider the “UX” of their startup.
One of the first things I’ve learned about the Venture Capital since joining Founder Collective is the importance of “packaging” your startup and how much more quickly they move forward in our process.
What is “Packaging?”
It’s important to note; packaging shouldn’t be dressing up your startup to meet the expectations of a VC. But from what I’ve observed, packaged startups share a few key themes:
They have a complete-ish team. A strong founding team with entrepreneurs who have known each other for years and create a Ying-Yang balance are table stakes. There are always some gaps that need filling, but well-packaged teams have a pipeline of candidates who are just waiting for some capital to hit the balance sheet to give notice to their current employer. Ideally, founders should be able to convince investors that the core team will be assembled a month after the first VC check clears. In this case, investor questions quickly shift from “who” to “what” (is this a valuable market to go after?)
They demonstrate true industry support. If you don’t have a tremendous amount of personal credibility in a space it’s important to find ways to establish trust. When I first sat down with the Stripe founders, (know as dev/payments at the time, well before becoming the multi-billion dollar behemoth of today), I knew they must have had something very important when they noted Peter Thiel and Elon Musk were investors. The question they left with me (and many others, I suspect): What do I know about payments compared to the PayPal guys?
Whether you are 1) selling VCs on the prospect of an entirely new market/tech or 2) showing a compelling approach to attack a seemingly unbeatable incumbent, it’s important to be able to write a compelling script and cast it with industry luminaries.
They get a lot of credible investors circling. Seed investors tend to be very collaborative — there’s a stunning number of companies at this stage, enough that not every firm can do the homework to lead every deal they do. Seed investors also have a competitive streak, and if they hear about a company from many of their peers, it forces them to focus. The best way to create this dynamic is to have impressive metrics, but it also helps to build relationships with VCs years before you need to raise capital.
What Does This Mean for Entrepreneurs?
If you’re getting interest, but unable to close the deal, ask why?
Is it lack of credibility? If so, find the ten most influential thinkers in your space and network your way to as many of them as possible. For an investor who didn’t build a company in your industry, they’ll look to the presence of luminaries (even if it’s a shortcut). And if they are interested in your space, they probably will meet founders who were Ph.D. students from the best labs or were early employees in the canonical earlier generation of companies. Who do you have in your court?
Address your weaknesses head on. Your CTO may not have a box-checking academic pedigree or highly relevant work history: so find another way to showcase their skills. That failing, at least demonstrate that this person will not hold you back and show the support network you’ve recruited to help them level up.
And I don’t say this as some dispassionate vest-wearer across the table. While raising my second company, the little voices in my head always said things like “Maybe Noah isn’t enough of a closer to be CEO of a high-ACV enterprise software company at-scale.”
Is it a lack of a team? Who would the best possible person to join your efforts? Have 100% of the people you know said no to a role? Can you get them to work part time for equity? Or offer upside in the customer revenue they help bring in? Joining an early stage thing isn’t easy, especially when you have a family, or a bay area personal burn rate. But you, as a founder, need to show you can assemble a crew of believers to join your cause.
Struggling to convince investors? Convincing early investors to believe in your vision and your team is certainly a way to help “package” your seed round. But pitches and coffees may not be enough to build real momentum without the pieces in place.
Can’t convince people to come aboard? Get more customers to show why your company matters. Remember, venture capital is a hell of a drug, and it’s getting cheaper and cheaper to find product validation. And as I’ve said before: “everyone else can afford to sit and wait long enough for you to die.”
Can’t Hide It? Flaunt It.
If you can’t hide it, flaunt it. Embrace the “flaws” in your business the way boutiques sell distressed denim for a premium. If you don’t have experience, find trusted leaders who will vouch for your prowess. If you’re pushing technical boundaries, surround yourself with area experts (prowling MIT and Stanford are popular choices here).
Don’t let yourself fall into deal limbo: entrepreneurs seeking capital know how frustrating it can be to get an invitation to pitch a top-tier VC and then hear nothing but radio silence. Some investors will soften the blow by saying something like “sounds really early — why don’t you call us back in 6 months?” But for a founder struggling to make payroll, this is cold comfort.
Just as a founder would carefully consider the way a hardware product would look on the shelf of the Apple store, they should consider the impression their startup will have on VCs. Investors know the early days of a startup are a chaotic mess, even in the best cases. However, great founders manage to show their company its best light through smart “packaging.”
If you read this far — or think this post might help an entrepreneur you know — consider hitting “👏” below to help spread this piece. Hey, you don’t have to listen to me, I’m just the bottom of a package on a shelf somewhere.