Founders, never pay for access

NYC was a desert when it came to startup investors. The year was 2008 and while there were some VC's like Union Square Ventures, RRE, and First Mark, the well was pretty small compared to Silicon Valley.

I was fundraising at the time for my startup and was desperate to raise some seed capital. Silicon Valley VC’s said we had to move to Silicon Valley before considering an investment. As that was out of the question for our team, this left us with searching for local VC’s and angels.

Once the full storm of the financial meltdown hit in September, reaching any VC was nearly impossible as every investor went into bunker mode.?But as investors were retreating, another group started to become more prominent in the startup world; the startup advisor.

Their pitch was pretty straight-forward. For a retainer and a percentage of money raised, the advisor would find investors to invest in their client’s startup. In a year when getting any access to investors was nearly impossible, this seemed like a lifeline for founders desperate to keep their dreams alive.

As one of those founders, I met with quite a few of these advisors. They pitched me on their pedigree, access from the exclusive schools they attended and prestigious companies they worked for, and their extensive network of deep pocketed investors eager to invest in innovative ideas. We decided to pass on their offers to help with introductions

The problem remained though; we still did not have any funding to support us. That’s when a “startup” organization reached out with an offer to pitch at their upcoming event. The list of attendees looked impressive, with several known VC’s confirmed as judges and speakers. The catch however was that we had to pay a small fee to participate.

After a lot of debate, we decided to go for it. We spent days refining the pitch, tightening up the story, polishing the slides, and practicing the flow before the day of event. The venue that morning was abuzz with founders and investors waiting to get into the pitches. Everything looked professional and top notch, down to the food.

It was our turn to pitch, and we crushed it! Through five minutes of pitching and Q&A, we were flawless. The judges praised our pitch and startup. We got a lot of investors coming up to us after our pitch and at the happy hour to exchange cards and schedule a follow up call to dive deeper.

Sadly however, we did not get a single follow up meeting. After weeks of hounding investors, not one of them returned our calls or emails. Perhaps it was not a surprise though, because later I found out that many of these investors were not actively investing. Some were VC’s that had already deployed all their capital and yet to raise a new fund. Some were family money and had no idea about startups. And some put themselves out there as investors without making even a single investment!

I vowed never to make that mistake again. Luckily the startup world has changed a lot over the past fifteen years. The VC and investor world is a lot more well-known and transparent. It is easier to find and vet investors through LinkedIn, Crunchbase, AngelList, and other sites. Unfortunately, with the funding winter and lack of a strong startup investor class in emerging markets, the charlatans enticing founders with paid intros and pitch events are back on the rise.

Maybe however you are feeling desperate and think that paid intros or pitch events could shortcut the time taken to secure funding for your startup. If you are leaning in that direction, consider the following:

• Genuine Investor Relationships Can't Be Bought: True investment partnerships are built on mutual respect, trust, and alignment on vision and values. Paying for access often lands you in rooms with financiers more interested in fees than funding future innovation.
• Authentic Networking is Key: Meaningful connections between investors and startups are cultivated over time, through shared experiences, common values, and mutual respect. These cannot be fast-tracked with a transaction mindset.
• Misallocation of Resources: Every dollar spent on paid pitches is a dollar not invested in product development, customer experience, or team growth, the things that genuinely enable a startup to build traction and attract good investors.
• Negative Signaling: Paying for access can signal to potential investors that the startup lacks the network, resourcefulness, entrepreneurial drive, and compelling value proposition necessary to navigate the fundraising process organically.
• Opportunity Cost: Time spent chasing paid introductions and pitch events is time not spent engaging with customers, iterating on products, or building meaningful networks that lead to real opportunities for growth and investment.

What's the alternative? Lean into the hustle and connect with communities of other founders. Build your network the old-fashioned way through industry meetups, online forums, and willingness to help other founders with your expertise. Learn to be more confident pitching investors cold. Yes, the path is slower, but the relationships you build will be based on mutual respect.

Genuine connections, with investors or otherwise, are the cornerstone for long-term success. Paying for shortcuts might seem tempting, but the foundation they lay is far from stable. If you focus on building a scalable business and strong relationships, the right investors will listen, no admission fee required.

What is your experience with paid intros, advisors, and pitch events? Have you had success with them, or have they turned out to be a waste of time?

Mark & Basil

As a start founder, you might be the boss, but that does not make you a leader. We read a post from a founder complaining about how hiring B and C players led to the downfall of their prior startup.

What is more likely is this founder failing to be a leader on multiple fronts:

• Hired without understanding the skills needed
• Ran a poor fundraise leaving the startup undercapitalized
• Misunderstood that hiring A players is not all about money
• Lacked the ability to train and inspire the team
• Did not roll up his own sleeves to do the work
• Created a blame rather than an ownership culture
• Avoided hard conversations to take corrective action
• Refused to take ownership of his own failure to lead
• And humiliated his former employees needlessly

There are a lot of founders that think the best way to lead is to push their will onto others. This is the surest path to burning out the team, tanking the culture, and killing the startup.

Founders do not earn the right to be leaders because they launched a startup. They have to be willing to eat their ego, be empathic, inspire greatness, and be hands-on so that the whole team succeeds. And most importantly, they have to take ownership for failures.

Becoming a leader is not an easy journey. A lot of it comes down to experience, but there are also resources that can help. Some books mentioned by founders that helped them unlock the secrets of leadership, inspiring teams, and taking ownership include:

• Leaders Eat Last
• Crucial Conversations
• Extreme Ownership
• Team of Teams
• The Culture Code

No one starts their career understanding how to be a leader. It will come with lots of mistakes along the way. But the best investment you can make in yourself is to invest time to grow as a leader.

Mark headed out to Bangkok this week to dive into cybersecurity at Cybersec Asia 2024 ! While not a region known as a hotbed of cybersecurity, growing digital transformation and cloud adoption coupled with a large uptick in startup activity is increasing the need for cybersecurity solutions.

The cool part was bringing officials from various countries across India, Israel, Thailand, Canada, and the US to cooperate on spreading awareness for more cybersecurity practices and technologies. And our favorite part of the discussion was highlighting the need to support startups in creating the next generation of cybersecurity tools to combat growing threats.

Next week Mark winds down his Asia tour and heads back to the US for awhile. But before he does that, Basil and Mark will be in Dubai planning some amazing content for the rest of the year. If you will be in Dubai the week of February 12, let’s catch up!