The Cheat Code for Raising Money
Launching out of venture studios, targeting startups as your customer, & mental health during covid with Mike Preuss, CEO of Visible.vc
Welcome to Product Market Misfits’ email, where we help founders go from idea to product/market fit faster by extracting bite-sized knowledge from podcast conversations with venture-backed founders! To listen to the full podcast episodes, you can visit our website.
Company Overview: Visible.vc helps founders raise capital, update investors and engage their team from a single web-based platform. Visible is profitable, and has raised a little shy of $1.5M from some amazing investors such as High Alpha.
Since Visible’s customers are mainly companies raising money, the first two nuggets of wisdom are actually the core concepts behind Visible’s product:
1.) As a startup, you should always be fundraising, which means you should be constantly talking to investors because it’s a relationship building game!
2.) Raising money looks exactly like running a B2B sales funnel, and managing that funnel requires effort, organization, and thoughtful planning.
What is the Cheat Code for Fundraising?
Back in the day, only the best founders sent investor update emails, but those days are long gone! The habit of sending investor updates is a basic requirement now, and you can & should start that habit even before you have investors. If you don’t have investors yet, send your updates to friends/family initially! They’ll probably love to hear what you’re working on.
The Cheat Code: Having this historical record of your progress over time is something you can really leverage for fundraising in the future.
For example, one of Mike’s customers mentioned that he sent his past three investor updates to a potential investor, and they committed to writing a check on the spot, just through the narrative of what he was saying through those updates.
On the other hand, Mike mentioned several founders who had a difficult time raising money because they didn’t have historical updates, or they skipped months. Both send bad signals to potential investors.
The reason that this works is because the consistent monthly updates tell a story, and investors mostly invest in compelling stories, especially at the early stage. Another common saying is that VCs invest in lines, not dots. Read more on “lines, not dots” here from Upfront VC.
The Ups and Downs of Selling to Startups
If you’re planning on selling tech to other tech startups, there are pros and cons to consider.
Startups are usually on the leading edge.
They’re smaller teams with fewer decision-makers.
They’re willing to try a new product.
They are willing to buy a product online, meaning they 100% trust credit card check out.
All of these pros can result in more rapid customer acquisition.
But, Mike also shared that when you're dealing with startups, and especially when you're on the leading edge, product product requirements are pretty high. It’s got to be beautiful from day 1, Mike says.
“I think when you're dealing with startups, we're accustomed to great software. And so you really have to finish the product and have an awesome experience when you're servicing those types of customers.”
I would also add that you have to consider the fact that most startups fail! So that macro average startup failure rate will be baked into your churn rate, which may hurt your metrics later on. I personally think the trade off between rapid customer acquisition and higher than normal churn rate is completely worth it!
How Do You Balance Mental Health & Needing To Move Fast?
Work life balance is difficult to measure today when most of us work 10 feet from our couch/kids. Achieving a healthy balance today relies upon you realizing something that Mike points out:
”Just because you're working more hours or your butt is in a chair doesn't mean you're actually more productive, and we have a lot of bit data to back that up.”
Which lines up nicely with what our ole friend Socrates once said:
Harmony in managing teams is a secret weapon. It’s not really a science, but rather, it’s about “feeling out” your team’s mental state.
To Mike, this idea of Harmony at Visible doesn't mean, “yeah, we only work 30 hours a week, and life is chill”. For example, last product sprint, Mike asked a lot of everyone on his team:
“Look, there's three really big things we need to do this product cycle, and we want to do them now. I expect everyone to come with their best foot forward, and it's gonna be hard.”
They succeeded in meeting their goals, but that sort of big push is not sustainable. This is where the concept of Harmony comes in. After that push, Mike told everyone to take some time off, striking a proper balance.
If you’re currently a solo act, you need to treat yourself the same way you would treat your team. If you notice that your work load was tremendous this week, give yourself a day or two of time off. In the long run, maintaining Harmony will result in greater productivity gains.
One other tip I heard from Lenny Rachitsky (@lennysan) is a nootropic drink called MagicMind, which markets itself as the world’s first productivity drink. I’m excited to give it a try, and I’ll report back.
What’s a Venture Studio & Should I Join One?
Venture studios are a newish concept, sorta like accelerators, but sorta not. They started popping up 10 or so years ago with IdeaLab, RocketInternet and Betaworks. Today, we have studios like TechStars Studio and Pioneer Square Labs (PSL, not to be confused with pumpkin spice latte heh), and some have started to focus- High Alpha is a studio for B2B startups, Union Labs focuses on building deep tech, and Mach49 parters with corporates.
Typically, a venture studio offers experience, guidance, and actual talent to eliminate the inefficiencies of the startup process, to the greatest extent possible. They’re different than accelerators in that they don’t require a founding team with a solid idea. Studios can start with just an idea, or even just a founder who comes in the door. They can perform ruthless idea validation/market testing. They can run lightening fast design sprints. They can actually develop the technology, and they offer launch playbooks. They often also have a sidecar fund that can choose to invest in the company as it “leaves the nest”.
The deal various widely. Sometimes you, the founder, can benefit from the studio in exchange for a % ownership in your idea (I’ve heard anywhere from 7% to 35%). Other times, you join in on an idea/project that the studio has already started, and that results in a much different deal. Or, sometimes you simply pay $ for the benefit of working with them.
Mike shared that High Alpha’s studio offers a “sprint week”- the goal of the week is to come up with a prototype of that business and the pitch for it. Sometimes the sprint week is full of outside founders that are coming in with their own idea. Sometimes they are internal ideas from the studio, or maybe a big corporate or enterprise is behind the idea.
If you are a founder with an idea, then it can be a really effective way of starting a business. The simple idea behind it for a founder is, “Hey, High Alpha, I would love to be part of your studio, and potentially turn this into a business with you”. By the way, you can start the process of building with High Alpha at their sign up page.
Personal Learning - Reading with Raindrop, the all-in-one bookmark manager.
Visible’s Tech Stack - Metabase, the easy, open source way for everyone in your company to ask questions and learn from data. Anyone on the team is able to ask questions about the product or business and have everything accessible. If you can write SQL, they enable that too.