The bigger concern I would have with applying to YC in your case is the existential question, "Should I take VC money or not?" What I don't see above is an understanding of the why behind financing. How will financing accelerate your business? If I give you $1M, what will you do that makes it worth $10M in X timeframe? While not necessarily a deal breaker for a lot of seed funds, I think anytime one is looking at taking on multiple hundreds of thousands of dollars of investment, they should have some basic answer to that question.
So it goes back to my earlier point about a baseline for getting accepted which my application would not cut since I don't have hard data to show CAC, LTV and other relevant metrics. It's certainly not set in stone as a small number of very early stage companies do get accepted, but in general products have to be much further along to have a serious chance of acceptance, or at least that's the impression I get.
Your solving a big problem: having commenting that protects user privacy. We are happy to pay if the product works in our use case.
Totally off the parent topic, but you do seem to be building something that is incredibly useful, at least for us.
This is the kind of reaction you want to see in your customers.
Most of Patrick's excellent advice can be lumped into these three buckets. Specifically:
1) You have to establish the credibility of the team: you've done impressive things before; you have a deep understanding of what you're working on now; you can read your audience and know how to communicate effectively; you can get a strong intro (nice-to-have); etc.
2) You have to establish the viability of the market: it's big; it has a real problem; the existing competitors are not doing a good job in a clear way; etc.
3) You have to establish the quality of the idea/product: you have a unique insight or approach relative to competitors; the prototype/early validation is strong; etc.
A lot of the pitches become mediocre when founders are handwavy in one or more of these areas. For example, if the founder spends a lot of time talking about the market and the product idea, but not enough time explaining why the team is uniquely/extremely qualified to succeed. Or the founder has good answers to product/team/market questions, but their answers show they don't know how to read the audience or explain their idea. (Example of not reading the audience: the investor is non-technical and the founder, who is productizing their PhD thesis, spends 90% of the pitch geeking out about technical details.)
Also, I'll add a few tips:
- Don't exaggerate or mislead. An investor will pass if they doubt one of your statements ("silverware is a $150 billion dollar market!") or realize that you're spinning facts (e.g. you say Dropbox is a customer, but later it turns out you meant that one of your free users has an @dropbox.com email). If it turns out that one statement you made is false, then investors will assume there might be more.
- Understanding risks is better than sweeping them under the rug. If your competitor landscape is missing key companies (mentioned in Patrick's post) or you dismiss some $1b+ company as a competitor without any rationale, your audience will become very skeptical. Admitting something is a problem and explaining how you will address is it much more compelling.
- Really know the ins and outs of everything about your company -- at least relative to the audience. If I ask a question or make a product suggestion that the founder hasn't considered, that's a yellow flag. Someone who has been living and breathing their startup for several months should have a much, much deeper knowledge of their domain than an investor who is hearing about it for the first time.
I've also worked in VC and would add that you really need to understand the motivation of the potential investors you are pitching.
Early stage Founders often waste a lot of time by pitching anyone who says they make investments.
This will save you a lot of time and energy focusing on funds that you believe can add more than money to your business.
Also, funds with a proven track record are important. I've witnessed outright fraud from a VC fund that claimed to have $50MM to invest and signed contracts to invest over $11MM when in reality they had no money at all.
Don't start hiring or otherwise committing your company to expenses just because a VC fund signed some paperwork.
Wait till the money is actually wired over to your account.
You want to vet your investors as much as they are vetting you.
The OP is significantly about applying to YC: From what I've heard, YC doesn't much like sole, solo founder startups!
Why should no VC need call? For my startup, a PC server from $1500 in parts kept on average half busy 24 x 7 should generate well over $200,000 a month in revenue. Thus there would be plenty of cash for more PCs at $1500 each. Even $10,000 a month in revenue would yield plenty of cash for more servers.
SUSA Ventures claims to want "technical founders". Alas, it doesn't look like the SUSA partners are very technical!
"Warm introductions"? SUSA and many want "warm introductions": But VCs and I do not have associates in common. So, I can't get a "warm introduction" to a VC, and no VC can get such an introduction to me. E.g., I might be able to get a "warm introduction" from one of my Ph.D. dissertation advisers, at one time President of one of the world's best known research universities especially famous for their STEM field graduate programs, including computer science and AI. However I doubt that that person knows any information technology VCs. E.g., recently Tom Magnanti, Dean of Science at MIT, gave a technical lecture on the foundation of the Internet at a lecture series named for Professor X. Well, Professor X was the Chair of my Ph.D. orals committee; maybe I could get a warm introduction from him; but likely he knows no information technology VCs. Net, my background is technical, but VCs are not qualified to be my technical colleagues or associates -- VCs don't measure up.
For the people I know, the best form of an introduction is a good peer-reviewed paper of original research in a STEM field, preferably applied math complete with significant theorems and proofs. It appears that there are few or no such information technology VCs anywhere in the US and similarly few who could accurately evaluate such a paper.
SUSA Ventures claims:
"We seek out highly defensible companies that leverage data, economies of scale, or network effects to build value and achieve longevity."
"Seek out"? My experience is that SUSA ignores such things even when they land in their e-mail inbox.
IMHO, for the OP again, all the advice on pitching information technology VCs is noise and filler and useless except just one word, "traction", preferably in the form of after-tax earnings significantly high and growing rapidly. But for a sole, solo founder startup, by the time the business has traction enough for a VC to write a check, the founder likely will no longer accept such a check.
1) $10k/mo is not even close to enough for most US companies that want to grow quickly. If it were enough, then way fewer founders would want to fundraise.
2) I'm a partner at Susa and I'm technical. And even if I weren't, being technical has little to do with being a good partner to technical founders. Most basketball coaches can't dunk, but they are still good coaches. Furthermore, if a founder is technical, then a non-technical VC/advisor/mentor/friend that can help in other areas can be more useful than someone who is technical. Most technical founders I work with have no problem with building tech, but many struggle with the business side.
3) Our website says we prefer warm intros. We don't require them, we just prefer them. I reply to cold emails frequently and often meet people after they cold email me. But the cold emails should be good/well-targeted, and unfortunately most are not.
4) Traction is not the only thing that matters. For example, I just did a quick calculation, and over half of our investments in the last 12 months had $0 revenue when we invested. Many of those investments hadn't even launched yet.
Good grief: Why would a startup, prior to equity funding, want to be a Delaware C-corporation instead of just an LLC?
Disclaimer: happy Atlas user who did previous C-corps the old-fashioned way and did not enjoy doing that.
I thought revenue was a "protected" term, like how it's described in the books. In that case isn't GMV the same as revenue? Since that's the money you actually invoice. And your cut is "net revenue", profit or something instead.
The GAAP guidance instructs companies to make the determination whether they're the principal or the agent with the following criteria:
1. You are the primary obligor in the sales transaction. This means, are you responsible for providing the product or service, or is the supplier? If you’re doing the work or shipping the product, you can probably record at gross.
2. You have general inventory risk. If you take title to the inventory before you sell it to the customer, and you take title to any returns from customers, you can probably record revenue at gross.
3. You can select suppliers. This one is important, since it implies that there isn’t some key supplier operating in the background who’s actually running the transaction.
4. You have credit risk. This means that if the customer does not pay, then you absorb the loss, and not a supplier. However, if you’re only at risk for losing a commission if the customer doesn’t pay, then you’re probably looking at recording the revenue at net.
5. If you get to set the price, then you probably have control over the entire transaction, and you can record the revenue at gross.
6. The amount you earn is fixed. This indicates a commission structure, which is sometimes set up as a fixed payment per customer transaction. If you earn a percentage of what the customer pays, this is also an indicator that you report revenue at net. In either case, you’re really just an agent for someone else.
7. The other two guidelines for reporting at net are just the reverse side of some earlier guidelines. If a supplier has credit risk, or if a supplier is responsible for providing products or services to the customer, then you’re probably looking at reporting revenue at net.
There's a pretty comprehensive document from the 'Emerging Issues Task Force' of the FASB here:
http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=121...
It isn't mindblowing, but insightful enough to take a look. "Focus on nascent greatness" is particularly a great section, because tries to solve some misconception about bizplan and ideas
