Transcripts
1. Introduction: My name is Guy Kawasaki and I am the co-founder of Garage Technology Ventures with my colleague here, Bill Reichert, former Apple Chief Evangelist. I'm an author, I've written 12 books. Guy and I got together back in 1997-1998 to launch Garage. Prior to that, I spent most of my career as an entrepreneur, starting up four different venture-backed companies before we got together to put together Garage to help entrepreneurs make sure they didn't make the mistakes that we made when we were younger and hopefully gain a little bit from what we have learned over the years. We'd like to cover how do you start a company, building the very basis, the DNA, and how to get things right from the start. This sets the foundation for what any company has to do today. Guy is the big picture guy, he's the high level inspirational visionary, and I'm the guy who's got to make sure the trains run on time.
2. Make Meaning: Welcome to the first session. This is the art of starting a company. My name is Guy Kawasaki. The first thing I'd like to discuss is making meaning. Bill and I have met with literally thousands of entrepreneurs and we notice the pattern that there are certain entrepreneurs who their primary desire, their primary reason to start a company is to make money. And then there are a different set of entrepreneurs who you sense that their primary motivation is to make meaning, that is to make the world a better place. Our observation is the people who want to make meaning are much more successful than the people who just want to make money. So, this first recommendation is you ask yourself what kind of meaning can I make with my company, and the meaning of meaning is not money, it's not creating a cool work environment, it's not someplace where people have fun offsites those kinds of things, it's how are you going to make the world a better place? How are you going to make people's lives better? How are you going to perpetuate good things? How will you end bad things? So step one, kind of a real gut check, is how are you going to change the world? How are you going to make meaning? Now a lot of books and courses about entrepreneurship, they're talking about are you really an entrepreneur? Can you work long hours? Can you work with uncertainty? Can you work with the feeling that you might not succeed? And I think that that is largely irrelevant, that until you're in the middle of it, you can't possibly answer that question. You can talk about your good intention to work hard and work with uncertainty, but until you're in it you really don't know. And on the flip side, you may think, "No, I'm not willing to do those kind of things. I'm not an entrepreneur." But you may find that you're so sucked up into a course, into a product or service, that you lose all fears and you go ahead. So the most important question is, do you want to make meaning? That's lesson one. As an exercise, this is what I want you to do. Answer the question, if my company did not exist, why would the world not be as good a place? Answer that question.
3. Ask Questions: The second topic is to ask yourself some questions. Now, there's this concept that people who have created empires, they sat down and decided, "Someday Microsoft is going to be this humongous company and we're going to have operating system, this application software, we're going to have Bing, we're going to have Xbox," and it's as if Bill Gates, when he started, he had this grand vision. Our observation is, it never works like that. It has a much, much cleaner, simpler, almost nerdier beginning. Some simple questions. Questions like, "Therefore, what if?" I think it's a very powerful scenario. So let's say, you're sitting down and you say, "Cell phones are getting smarter and cheaper, therefore, what?" Well, if they're getting cheaper and more powerful, more people will use them. Therefore, what? If more people are using them, then they're going to replace computers. It's going to be the most common way to access data. Okay. That's true. Therefore, what? Well, then people will want apps to access data that has special functionality. Okay. Therefore, what? Well, then, if all these people are needing apps, then there's going to be someplace where people want information about apps, and they want, "How is this app rated? What app should I use?" Therefore, what? Well therefore, maybe we should create a service where we rate apps using the crowd and we recommend which apps people should buy for a phone. So using this scenario, therefore what? You can walk down this process where you come to an idea. So that's one question. A second question is, well, why doesn't our company do this? So let's suppose you're working for a large company and you're very well familiar with the industry, you know the right people, you go to the right trade shows, and you notice this niche market that your company isn't serving. So you go to your boss and you tell your boss, "We see this market, we could do this technology, we could do this product", and your boss says, "Don't bother me. I'm worried about this quarter, I'm worried about sales, I'm worried about making my boss happy. We don't have time for this. Nobody's asking for this." So, you ask yourself the question, "Well, we see it, we know it's there, our customers are telling us they need it, our company is not willing to do it, so why don't we do it?" A second great question to ask yourself. A third great question is, "Wow, this is an odd thing. I wonder what's happening here." So, the scenario here, I think, was used very well in the creation of McDonald's. So believe it or not, Ray Kroc was a mixer salespersons. So, he sold mixing machines to restaurants, and he noticed one day a large order for mixers from a restaurant in San Bernardino, California. So he went out to San Bernardino California being curious about this large order for mixers and he found a restaurant that was making nothing but hamburgers and French fries, and they were doing so well focusing on that. So what started as a simple question, why is this one restaurant ordering so many mixers, became the seed that created McDonald's. He went out to San Bernardino and he saw two brothers that had a restaurant, they made hamburgers and French fries, and that became McDonald's. So that's another great question. This is odd. Another great question to ask is, "Well, the technology exists, it's possible, why don't we do this?" I would make the case that that is the formation of Motorola. That engineers at Motorola saw, "It is possible that we could make a phone that is not tied to a copper line. We could have a phone that's mobile, so why don't we try it?" Well, at that point, no one was asking Motorola for a cell phone. No one was asking Motorola for a mobile phone. It was just not in the vernacular of people, but engineers in Motorola saw that, "The technology is this, we could do this, so why don't we try?" That's some great questions. Ask yourself these very simple questions. It's not about empire-building. It's answering simple questions by creating companies. As an exercise, a little follow-on project for this section, I want you to write down the question that piqued your interest, the question that made you want to start this company. Is it because you didn't understand why your existing company already did this? Is it because you looked at a development of trends, and you said, "Well, therefore what would happen?" Or did you ask yourself, "Why can't there be a better way?" So what question catalyzed your desire to make the company?
4. Make a Mantra: The third step in this art of starting a company is to make a mantra. But first, let me read you the negative example. This is a mission statement. The mission of Wendy's is to deliver superior quality products and services for our customers and communities through leadership, innovation, and partnerships. Ladies and gentlemen, that is the mission statement for Wendy's. I have nothing against Wendy's. I've been to Wendy's many times. I stood in line of Wendy's. I've driven through Wendy's. But in all the times that I've driven through Wendy's and eaten in Wendy's, it never occurred to me that what I'm participating is leadership, innovation, and partnerships. I just thought I was getting a french fries and Coke and a meal. So what I'm trying to point out here is that mission statements don't work. They're too long. They're not memorable. If I didn't tell you that was for Wendy's, you could never have guessed that was for Wendy's. So what I want you to do for your company as you start your company is to make a mantra. A mantra has two or three words, two or three words to explain why your company should exist. For example, I think that the mantra of Wendy's could be healthy fast food. Three words that would differentiate Wendy's from every other restaurant. If I were Nike, I would say that my mantra is authentic athletic performance. Just do it is their slogan, but why does Nike exist? Authentic athletic performance. So the message here is find two or three words, maybe up to four words, but find these words that explain why you should exist. Democratized computing, Apple. Democratized commerce, eBay. Democratized information, Google. Two or three words. Step three is to make a mantra for your company. The use of a mantra is not just for external parties. Yes, your customers should know what you stand for. Your vendors, your partners, everybody should know, but also your employees. I think one of the most confusing things for many employees is why does this company exist that I work for. So a very good test for your mantra is to go up to your receptionist, to your secretary, to your administrative aide, to your shipping department and ask them, "Why does our company exists?" I hope they say we exist to democratize commerce or democratize information or for authentic athletic performance or for healthy fast food. That's the test. It's not the test for Wendy's that if you went to the CMO of Wendy's and asked him or her what's our mantra. The test is if you went to the random Wendy's and you pulled up to the window and you asked this person working in a fast food restaurant, "Why does Wendy's exist?" If that person says, "We exist for healthy fast food," you passed the mantra test. The exercise for this section is give yourself a budget of four words, I'll be generous, and write down in four words why your company should exist. Then go ask your spouse, "If I told you these four words, would you say that it describes why our company exists?" A very good test, the spouse test. So I want you to get this budget of four words, and then post it to the classroom and then we'll beat up on you. We'll tell you that these four words don't make sense. These four words don't narrow it down. These four words are total BS. Get your four words, put it up there, and we'll all have at it. So Evernote is a company that I am working with right now, and they have a really great mantra. It's forgetting sucks. Two words, forgetting sucks. I think if you're basically familiar with technology and you said, "Whose mantra would forgetting sucks be," a lot of people would guess Evernote. That's a very good mantra.
5. Don't Worry Be Crappy: So the next topic we're going to cover is the art of launching. We're going to cover three areas with that, first one has to do with getting your product to market, getting it into the hands of customers and figuring out how it is you're going to hit your key critical milestones. Then we're going to talk a little bit about sales and marketing, how to tell your story out to the world in a way that will be most effective and get you the most loyalty among your customers and then we're going to end talking about some tricks that you can do to make sure you are most successful, a model for making sure you avoid making mistakes. So with that let's talk about getting your product into the hands of your customers and this section is in honor of the singer Bobby McFerrin who is famous for a song "Don't worry be happy," which is pretty good advice for most people but for entrepreneurs our advice is, don't worry be crappy. So what do I mean by that? Well the problem that most entrepreneurs have is they are so in love with their product, are so in love with their technology, they want to make sure that it's perfect before they release it to their customer base. So they tweak and they add features and they add capabilities and time goes by and money goes by and they're not learning anything about their market by doing that. So instead of that we say don't worry be crappy, get the product out, get the product into the hands of your customers, use your prototype to do your market research and learn what's going to work and what's not going to work. The problem with traditional market research we all learned back in business school, I at one point learned at McKinsey and Company, I worked at Wall Street, I went to Stanford Business School and there I learned when you're starting up a company, when you're starting up a product, what you do is you go out and do market research, you do customer interviews, you do focus groups, you read reports, you buy surveys and gather all this market research so you can make sure you hit the market right. That doesn't work for a startup company. When you've got a startup company, if you've got a new technology and you're creating a new market, it doesn't make sense to try to research the market by buying reports. The key is to get the product out into the marketplace. Bill Gross who was the founder of Idealab, was a master of this. Back in the 90s he started Idealab around being an incubator for new ideas and what he would do is he would come up with a new idea for a new company and instead of building out a product, what he would do is create just a simple simple website, a landing page, he would drive traffic to that page and find out based on the behavior on that page if people wanted this product or that product or this feature or that feature, there was nothing behind the landing page. He would then if they were clicking through he'd say thank you we're just about to release dot-dot-dot. So what he was able to do was quickly within days of coming up with a concept for a product or a company, he could get out to the marketplace and start testing the idea to see if the market was going to respond to it. If the market had no interests or it wasn't sufficient interest he just shut the company down and moved on to the next idea. If they generated some interests then he'd follow up and find out more. Okay, which path are they interested in going down, which aspect of this company are they most interested in. He would do his market research by getting product into the hands of customers and learning from customers. So when we say don't worry be crappy, we're not saying be intentionally crappy: That's not the meaning here. What we're saying is, if you've got something that's going to really make a difference, something that is going to change the lives of your customers, then your modest effort is going to be brilliant by comparison with the competition. You might be anxious that it's going to be crappy but don't worry it's going to be fine. If you're anxious initially that you might burn some customers by putting out a product that's not everything it can be, you're probably wrong. Probably your customers are going to love the fact that you trust them enough to bring them inside, to help you develop the product to perfect the product rather than being put off. So don't worry about getting the product out, ship then test. Now what we mean by that is get the product out there and start testing your assumptions. If you have perhaps a medical device or a pharmaceutical, that may not apply. But for software, the great thing about software is you can get it out quickly and therefore start tweaking as soon as customers start giving you responses. So when we started Garage we were encouraging entrepreneurs to follow the 24-hour rule of business planning, which was to say don't spend months doing market research and buying reports or stealing reports off the internet and trying to believe that you could create this elaborate business plan that anyone was going to believe. We have what we call the 24-hour business planning rule which is, once you come up with your idea you've got 24 hours to map out what you're going to do and then get out to the customer base and start talking with customers. So since we started Garage several years ago the academic community is kind of caught up to what is good entrepreneurial practice and now they've come up with a somewhat sterile academic phrase called, minimum viable product, but that's what we mean by ship then test. Get your first prototype out there, test it with customers and learn from them, and then you continuously improve the product. Now a piece of continuous improvement that is important to consider, a lot of engineers, a lot of product managers they get the product out there and they get feedback, you know people like this and people don't like this and the natural human instinct is we all want to be liked. Right? So we take the stuff they don't like and we say, "Ooh, let's fix the stuff they don't like", wrong idea. Focus on the people who like you, focus on the features that people like. Don't worry about what people don't like, you want to build enthusiasts around what they like. So get your focus on the right topic. So now you're getting the product out to market, you're trying to build a company, how do you put together your plan? As I said you've only got 24 hours before you have to get out to customers. What's the planning process for startup companies. What we suggest, instead of building these elaborate corporate strategic plans that you might have gotten in business school or at a corporate and training environment where you might have had an earlier career, instead of big strategic plans, instead you should weave a matt. Weave a matt, M-A-T-T. So that stands for milestones assumptions tasks and tests. Weave a matt, M- Milestones. There's a lot of stuff you have to do as an entrepreneur when you get started. You're overwhelmed with all the things that have to get done and a lot of them seem like priorities but they aren't. There're just a very few things that you absolutely positively have to make sure you get done over the next 12 or 18 months. Focus on those priorities, figure out what the critical milestones are that you've got to hit in order to survive. So those milestones are going to be things like, your product releases and what are the deadlines you've got to have and continuously improving your product. Things like validating the model, does your pricing work? Can you reach customers? Will they buy your product? Things like raising capital, you might have to raise a seed round from some angels and then a VC round later on. Hiring talent, you probably have some gaps in the team you've got to fill if you're going to get to the next level and then figuring out how to scale your business. These are critical big milestones that you should focus on. So get those up top high-priority focused on, your milestones. So the second letter in Matt is A, your Assumptions. So underneath your business model, you've got a bunch of assumptions about how the world is going to work, how you're going to perform, how your product's going to perform, how the customers are going to react, what the competition's going to do. You've got a whole bunch of assumptions that are as yet unproven. One of your jobs is to clearly identify what those assumptions are and then test them and prove them and validate them. So you're going to have assumptions about your product, about the product's performance and how it operates whether it's its speed or its latency or whatever you have about product performance. You've got some assumptions you want to lay those out and test them. You're going to have assumptions about sales, about your sales metrics, how long does it take to get customers, how many customers can you get to, what's their click-through rate, what's their conversion rate, how much should they pay, what's the value of a customer. So you're going to have some sales assumptions, you'll have some operational metrics and you'll have some financial metrics. So get your assumptions laid out and organized in terms of the different categories of assumptions and then proceed to test them so that's the A, M-A-T-T, the first T is tasks. As I said there are enormous number of things you've got to do as an entrepreneur when you're starting up your company, all of these tasks. You've got to make sure that they're clearly identified and clearly assigned to the person or people or team that are going to execute them. So while the milestones are your absolutely critical priorities, you've got tasks that are also important that you have to execute if you're gonna make it but aren't critical priorities, things like renting the office and getting furniture, making sure that taxes are paid on time, these things are really important but they're not overarching milestones. Make sure you identify the tasks that have to be executed, keep track of them make sure they're assigned and that people are responsible for them. So finally the last T, M-A-T-T, is Tests. Test all of your assumptions, test your product, test your team, make sure that you have a process for systematically taking each of your assumptions testing them and validating them. So that's a continuous iteration you're always going to have to new assumptions and new things to test. As we said ship, get your product out there in the hands of customers, then test continuously, iterate continuously improve. So that's the first lesson for entrepreneurs. Don't worry, be crappy, get the product out there then weave a MATT and test your assumptions to get to your critical milestones
6. Tell Your Story: So, the second lesson under the art of launching is about sales and marketing for your startup company. It's about how you get the word out, how you tell your story. Now, when I was young early in my career, as I said, I worked at McKinsey & Company, I was trained at Stanford Business School, I thought the key to sales and marketing was about developing a value proposition with logic and data that were so tight and so compelling that any rational customer would have to cave to the superior logic of this sales message, and therefore buy the product. That's what I thought sales and marketing was all about. But what I learned is that people don't make decisions with their brains. People make decisions with their hearts. That's the way most people buy things. It's not buying. It's not a rational process. It is an emotional process. So, when you're building your company, you need to frame out the story of your company in terms that connect emotionally with your prospective customers. This epiphany came to me early in my career when I was working at a company called the Learning Company. This was actually my second venture back company. The Learning Company developed educational software games for kids to be sold into homes and schools. So, there I am a MBA McKinsey-trained analytic type of guy, and we're calling on a school. My partner and I are in this classroom full of second graders, and the second graders are playing one of our games, which is called Reader Rabbit. After they fit, and we're watching them play the game, after they're done, the teacher says, "Those two guys standing over there in suits and ties", which was a little bit odd, a little uncomfortable standing on a second grade classroom with our suits on, but the teacher points to us and says to the class, "These gentlemen are with the Learning Company." The kids look over at us. I didn't know what to expect, but a little girl in the back of the room, all of a sudden, she looked at us and she says, "Thank you." Then all of a sudden, 30 second grade kids turned to us and say, "Thank you." We just melted. Then I had this epiphany that your relationship with your customer is not about logic. It's not about rationality. It's about love. Ever since then, I've been coaching entrepreneurs, focus on what makes you lovable, not necessarily the rational analytic process of selling things. So, when you're building your company, most entrepreneurs have this tendency to tell their story in one of two ways. Engineering entrepreneurs tend to like to emphasize the technical specifications and capabilities of their product. We've got an algorithm that uses a 256-bit Diffie-Hellman permutation that enables us to encrypt a terabyte in 352 milliseconds. You kind of go, "Okay, that's cool." But that's not what builds an emotional connection to most customers. Now, maybe some customers get an emotional reaction from that, but most don't. The other extreme of the entrepreneur trying to tell the story is the entrepreneur who gets up there and says, "We have a curve jumping paradigm shifting disruptive technology that's going to transform our $56 billion market", and they're so full of passion, they're so full of hyperbole, they're so full of, you know what, that they're not connecting with their customers, even though they think what they're saying is emotionally powerful. Find the middle ground. Find what it is about your product, about your company that does indeed create an emotional connection. Emotional connections include things like creating a sense of awe. Tesla does a pretty good job of this. Tesla has this technology that is astonishing. So, you look at a Tesla car, and you see technology, and you see beauty, and you have an emotional reaction. Tesla has a mission as a company that in essence they want to save the world, going from fossil fuels to electricity will help create a better planet. So, that's the messaging, that's the story you want to tell. Another on the low technology side is Toms Shoes. You may know the story of Toms Shoes. For every shoe they sell, they give away a shoe to an underserved population. You have this feeling of appreciation for their charity, for their interest in helping people who are deserving, and that builds an emotional connection to that company. So, people want to buy things from companies that have some bigger mission than just separating you from your money. This is what guy refers to as making meaning. If you have meaning in your company, if you're truly oriented toward creating value for the world, then your customers, whether they're enterprise customers or consumers, they'll have a closer emotional connection to you than if you just speak of your product, service, or technology in technical specifics or technical terms. So, what I've been saying is it's important to formulate your story in ways that connect emotionally with your prospective customers. In terms of how you tell the story and how you reach out to the customers, you can't use the old traditional corporate top-down marketing model. Traditionally, marketing has been about going to the top and trying to get to the person at the top to try to get your message to the top with the hope that it will trickle down. Instead, when you're talking about a new product, a new technology, and a new sector, you've got to plant a lot of seeds all the way across the market. Let 1,000 flowers bloom. That's actually a bastardization of a phrase that Mao Tse-tung came up with, that is let 100 flowers blossom. Guy likes to use that in talking about reaching out as well. What you want to do is plant a lot of seeds, get to as many people in different corners of your market as possible, and then embrace those who respond to you. Again, as I said, people want to be liked by everyone. So, there's a tendency if you get a bunch of people responding and then a bunch of people you were hoping would respond not responding, your tendency is to say, "Oh my gosh! We got to work harder at those guys who aren't responding." Again, bad idea. You want to focus on the people who are responding. Embrace those people. They might be no-name bloggers who are just starting their blog and they don't have a big following yet, but for whatever reason, they love you. Embrace those people, make them feel special, reach out to them, and they will fall in love with you. They will tell your story, and they will tell it authentically. Even if it's to their initial small audience, if you embrace a lot of these smaller bloggers, these smaller players, these smaller corners of the market, eventually, you will build a groundswell of enthusiasm for your company. So, when you think about it, if you're going after a big brand name blogger or media person, they're getting bombarded all the time and maybe grudgingly, they'll put something about what your company is doing somewhere in their material. But if you embrace a new blogger who's struggling, who's trying to become successful, they're much, much more likely to become evangelists for you than the brand name blogger. An evangelist can be incredibly powerful in getting your story out there, in reaching your customers.
7. Tips and Tricks: So, the third lesson in the art of launching, is a tool that we recommend you use to improve your chances of success. It's called a pre-mortem. Not a post-mortem but a pre-mortem. When you think about it, most people wait until after they fail to learn from their mistakes and what we're saying is imagine your failure and see if you can learn from those mistakes in anticipation of them. So, that's what's called a pre-mortem. So, the big idea of a pre-mortem is to try to create a situation within your company where you sit around a table and you say, "Okay, let's imagine this scenario where this product launch has failed. Let's take that as a given and that's what's happened. Now, guys, let's everybody around the table figure out what went wrong? Imagine it failed, what went wrong? What do you think we did wrong?" The big idea in this model is you want to create a scenario where you can break out of the standard politics of a company which says you got to be positive, you got to be enthusiastic, you can't criticize other people, you can't be negative. So, unfortunately even in startup companies, you're subject to the risk of groupthink where everybody is so in love and enamored with the vision that you all start assuming that everything's going to work. By creating this artificial pre-mortem scenario, you free people from that groupthink, and you get them to start thinking about well, wait a second maybe we haven't covered this off or maybe this assumption is wrong, and you get those ideas out on the table. So, you then take all of those ideas and then you have a follow on brainstorming session that says, "Okay wait, let's rank these ideas, let's identify what we think might be higher probability than other of these issues that might cause us to fail, and let's see if we can prevent them. Let's see if by addressing them today, we can make sure that these issues are not going to be a cause of failure. We're being overly ambitious in how long it's going to take to code this. We're being excessively optimistic about the cost of doing this. Maybe we're assuming that we're going to get these Beta sites earlier than we're going to get them or we're going to get these relationships." So, think about what could be the cause of failure, and see if you can preempt those potential causes of failure in advance. Do a pre-mortem. The big idea here is to let it all hang out. Let everything get out to create an environment where people feel free to say things that otherwise because it's not the right thing to say, people aren't saying. We all know this happens in every group. There are people who behind the scenes, they're worried, they're critical, they're pointing fingers, but they don't want to say it in public. Give them the opportunity to say it safely in public, so you can identify these hidden issues before they become problems. Otherwise, if the problem does crop up, somebody's going to say, "I knew it. I knew this was going to be a problem." You don't ever want that to happen. So, figure out a way to get it out and get this discussed early on. So, that's the third key tip in the art of launching. So, what we've talked about now is getting your product into the hands of customers, don't worry, be crappy, figuring out how to tell your story that connects emotionally. It's about love not logic, and a tool, the pre-mortem, to make sure that you're most likely to be successful. The biggest challenge when you're launching a company is getting the most out of your team. At the end of the day, it comes down to your people, so you've got to create an environment where people can be productive and effective in this phase of this incredible uncertainty that you've got as a startup company. All these things you just don't know you hope will be true, but you know some of them aren't true. That can be challenging for a team. So, you want to create an environment where that team can be productive by weaving a mat and effective and successful by letting it all come out in this pre-mortem, and that is the key to the art of launching.
8. Know What You're Getting Into: So now, we're going to talk about The Art of Fundraising. We're to cover four different topics here. First of all, knowing what you're getting into, is venture capital right for you? Then, getting the basics right; make sure you set up your company correctly. Then, we're going to talk about getting your act together and pulling the pieces together before we then talk about asking for money and talking to investors. So, let's talk about knowing what you're getting into. A lot of you, who are listening to this video, probably are thinking about raising venture capital. Whether you're raising it from angel investors or from venture capital firms, you might be thinking about raising capital for your business. The question you've got to ask yourself is, is venture capital the right path for me and for my company? Because the reality is, most companies are not venture-fundable. Even wildly successful companies, eventually, may not be venture-fundable at the front-end. If you think about it, look at the Fortune 500. What you'll discover is most of the companies, almost 90 percent of the companies in the Fortune 500, were not venture-backed when they started. So, now my VC friends will tell, thus, say, "Bill, that's because these companies are more than 30 years old, and so there wasn't venture capital back then, so how could they be venture-backed? So, okay. Fine. Go look at the Fortune 500, and go find the companies that are less than 30 years old, the period during which they could be venture-fundable. What you'll find is still a majority of the highly successful companies are not venture-backed. Why is that? Well, it's because venture capital is a very unique form of funding. Venture capital has different requirements than a lot of other sources of capital. The key to being venture-fundable is three elements. The first thing to be venture-fundable, you've got to be a high-growth company. You've got to be able to get a product to market, and then grow that company fast. Ideally, within a few years, but absolutely, you've got to have a business that can get really big in just five, six, seven years. So, you've got to be able to grow fast, and that's the second factor. You've got to be able to grow to a big scale. It doesn't matter if you've got a great company that can get to be $5 or $10 or $15 million in revenues, that's not good enough. If you're going to raise venture capital, you've got to be in a company that can get to hundreds of millions of dollars of valuation. So, ideally, if you want to raise a lot of money from a big venture capital firm, you've got to be going after a billion dollar company opportunity. So, you've got to be high growth, and you've got to get to a big company. Then, the third thing, that is a little controversial, but fundamentally, there's got to be something disproportionately profitable about the business that you're in. Now, generally, that means that you're a technology-based company that can extract premium prices because you have a unique offering. That's the traditional sense of disproportionately profitable. If you're a typical low-technology company and you've got thin margins, you're stamping out chairs or you're selling groceries, those kinds of companies aren't venture-fundable because their margins are so low. It's so hard to create a high-value company with margins that are that low. The flipside, though, is, people say, "Okay, wait a second. There are all these companies, they're not profitable at all. Why are they venture-backed? Why are they venture-fundable?" Because, the opportunity there may not be traditional profit and loss profit margin, the opportunity there is to sell a company for a lot of money, with only a little bit of money put into those companies. So, that's another kind of profit, which is called capital gains. So, if you can create a huge capital gains, or you can get to disproportionate profit margins, then you can be venture-fundable. So, that's the first part. You need to find out whether or not you're venture-fundable. There are alternatives to venture capital. You can bootstrap the company. The best way, ideally, if this can work for you to build a company is through revenues. Generate your capital by having customers, by generating revenues; that's a great way to build a company. You can use friends and family money, sometimes angel money, grants, corporate partnerships; they're all sorts of ways to build a company without necessarily using venture capital. So, think about those alternatives because, one, they might be preferable to going after venture capital, and two, you might not be able to get venture capital, and that might be your only alternative. So, as a venture capitalist, I want to say that going down the venture capital path is a wonderful path, and all us venture capitalists are wonderful, kind, generous people, highly supportive of entrepreneurs. Having said that, the challenge is that the venture capital model is not always aligned with your personal interest as an entrepreneur. What you have as your personal mission, what you have as your ideal role, what you have as your ideal outcome, may not be aligned with what a big venture capital firm is focused on. So, you have to take that into consideration. If you're going to go down the path of venture capital, you have to make sure, first, that your vision is aligned with the investors, and that vision is got to be a big vision. You also have to make sure that you understand your role. Your role may be to be the CEO in the early days, but it may not be the role you take over the long term. It's not that venture capitalists want to kick you out; it's that venture capitalists are focused on the success of the company, not on your personal desires and personal development. So, it's important for you to understand that you may need to take a different role, as you go down the path of building a company using venture capital. I learned very early on in my career as an entrepreneur, I overheard a VC telling another VC, "I back my CEOs 1000 percent, until the day I fired them." That's kind of chilling for most entrepreneurs to know that that's the point of view of venture capital. But that's the reality that you're getting into. No harm in that, there's no shame in becoming the chief technology officer for a billion-dollar company, even if you thought you were the CEO when you started out. So, the question, of course, then becomes, "Bill, if this is such a dangerous path, why would I want to raise venture capital?" Because, it's one of the best ways to build a really, really big company. So, you look at just some great companies that have been created over the recent years. Facebook required hundreds of millions of dollars to become what it was. Google required hundreds of millions of dollars. Amazon, billions of dollars. Tesla, hundreds of millions of dollars. And they made it, and they built great world-changing companies by taking advantage of venture capital and building highly successful companies. Now, in a number of these companies, you see that the guy who's CEO today was not the founding CEO. Elon Musk was not the founding CEO, John Chambers, at Cisco, was not the founding CEO. But the founders did phenomenally well in those companies, even if there was a transition along the way. So, that's the first lesson for fundraising is make sure you know that venture capital is the right path for you.
9. Get the Basics Right: So the second topic in the Art of Fundraising is to make sure you get the basics right. There are a lot of very nitty-gritty details that you've got to make sure you cover when you set up your company, before you go out and ask for funding. So, in this lesson, I'm going to talk about things like how you set up your company, how you issue founder stock, how you protect your intellectual property, making sure that when you hire consultants and contractors, you'd do it the right way, how you grant options, the issues around raising seed capital and regulatory compliance. So, in the rest of this lesson, I'm going to give a lot of detail on those topics. If you are not interested in that much detail, you can just skip to the next lesson, where we're going to talk about getting your act together. So, the first thing is how you set up the company. So, the reality is that venture investors, they want to invest in a C corporate structure. It's not a partnership. It's not an LLC. It's not a Subchapter S. They're all these tactical structures you could use. But if you want to raise venture capital, it's got to be a C corporation that will issue preferred equity. So, make sure that you set that up correctly. Secondly, when you set up your company, what you're going to find out if you haven't already, is there's this thing that happens at the beginning when you start the company, where you allocate equity interests or founder stock to each of the founders. So, there are a few ways of doing this right and a lot of ways of doing this wrong. A lot of entrepreneurs we see fall into two different camps. The first camp is the passionate inventor entrepreneur who has been thinking about this company for the last six years and finally, somehow, they figured out how to get it off the ground. So they hire a couple of other people into the company as their co-founders, and they allocate the equity of the company as 90 percent to me and five percent to each of you. Because after all, I've been thinking about this for all these years, and I'm the visionary, and that's really my company, and so I deserve 90 percent of the founder stock. When we see a company like that, we know that is not a team. That is a feudal lord and serfs. So, that's not going to be a successful company because it's fundamentally, A2A symmetric at the beginning. The other end of the spectrum are the three guys. They come into a conference room. They started the company together, and they decided that they're going to allocate the founder stock a third, a third, a third. Because that's fair, and we're good guys, and we like each other, and so why not? Let's just do a third, a third, a third. That would seem to be a fair and equitable model, but it turns out that companies that do that, frequently, those teams fall apart over time. Why? Because you're setting the wrong expectations as to the roles of the different individuals. Almost always, in a team of three people, you're going to have different levels of contribution to the success of the company because of different backgrounds, different skills, different capabilities. It's almost always the case that somebody should have a different allocation, either lower or higher. But when you decide as a team upfront, we're going to just do it even a third, a third, a third, what that says is, you guys are not clear on the expectations about your separate contributions and you're not willing to have the hard discussions about what your roles are going forward. When those hard discussions have to happen, then all of a sudden that team breaks up. So we want to see that you have had the hard discussions, that you understand the expectations out of the founding team, and you have a rational basis for allocating the founder stock. Then once you've allocated the founder stock, it's important that you put in place a vesting schedule, even for you as founders. Now, vesting generally applies to options, but it can also apply through what's called a buyback agreement to founder stock. If three of you are starting the company, one of you gets hit by a bus, you want to make sure that that stock by that founder is not lost to the company. You want to make sure you can recover that stock, and you do that through a buyback agreement. So, putting in founders vesting is a nuance that if you do that, when you start, you're going to show investors that you really have your act together, you really get it, and you understand how to startup a company. The next thing you got to pay attention to is protecting your intellectual property. So, the rules on patents have changed a lot over the last few years. If you haven't been focused on patents recently, you might be out of date. Make sure you understand what it takes to get an initial patent filing and to protect your intellectual property across the company. When you're hiring contractors and consultants, you got to make sure you have the proper agreements and documentations. You got to make sure your intellectual property is protected. You got to make sure you're going to be in compliance with laws regarding paying salaries and 1099 Forms. So, make sure all of that documentation is done properly right at the beginning. A lot of our people say, "Bill, I'm so busy. I don't have any resources. We'll solve that when we raise money." The reality is, a good investor is going to peer down into how you've been running this company. If they see you've been running this company by the seat of the pants and you haven't been paying attention to these details, they're going to say, "This guy might be a visionary, but he's not a business person. I'm not going to trust my money to this team if they don't know how to run the company the right way." There are some other things you got to focus on with regard to how you grant options, how you price your options, when you sell preferred stock, making sure you don't accidentally sell common stock, how to raise seed capital using a convertible note versus raising a series using preferred equity, making sure that you're in regulatory compliance with things like sales taxes and employment law. All of these issues are details you wish you didn't have to worry about, but you've got to pay attention to it. The way to solve this problem is to hire a venture lawyer. Do not hire your uncle Marty, who happens to be a real estate lawyer, who will give you a special deal. God bless uncle Marty. He doesn't understand startup venture law. You want somebody who is experienced in that. The great thing about venture law now is in most technology clusters around the world and regions that have entrepreneurship, usually, as part of those ecosystems, there are lawyers who understand all these details. Grab one of those guys or girls and make sure that you do things right from the start.
10. Get Your Act Together: So, the next topic in The Art of Fundraising is getting your act together and the beginning of that, of course, is it's all about your team. When you go out to raise money, it's key that you have a team that is fundable. Frequently, we see entrepreneurs come into our office who are lone entrepreneurs. Individuals who have got a great idea, but they don't have a team around them. We never fund lone entrepreneurs. If you talk to the venture community, what you'll find out is nobody likes to fund a single individual entrepreneur in starting up their company. Building a high-technology company is a lot of work. It's very hard work and it's very complex, so you have to be able to build a team around it. We want to see that you have the core of a team. We don't expect you to have a world-class team at the beginning, but at least, you've got to have something like an initial team. We like to think of the initial team in the parable of the optimist, the pessimist, and the engineer. So, you might have heard this before, this is a little bit different. The optimist is the person who looks at the glass and says, "This glass is half full." and the pessimists looks at the same glass and says, "This glass is half empty." and the engineer is the person who looks at the glass and says, "This glass was engineered to be twice as big as it needs to be." So, the point of the parable is same facts in all three cases, but different perspectives. When you build a team, you want to have complimentary skills and you want to have the ability to see the world differently. Everybody needs the visionary, the person who's the optimist, the enthusiast who goes out there and knows that nothing's going to stop them. But it's still valuable to have someone on the team who could look at things in terms of the contingencies, the pessimists, maybe not pessimistic, but the person who could say, "Well, what happens if we slip or what happens if we run out of money or what happens if this customer doesn't show up on time?" So you want somebody who's paying attention to those contingencies and is thinking about how to make sure the company survives if things slip. Then you need the person who sees the world the way it really is. Now, I've referred to that person as an engineer. Maybe that person isn't an engineer, but it's someone who sees the truth, who can hear the customers, and instead of saying, "Well, those customers, they don't get it." Can hear the customers and say, "I understand where that person is coming from, they have a point that is relevant to us." You need someone who can see the world objectively inside your organization. So, we want to see that kind of team, a team of complimentary skills and complimentary perspectives. Then once you have your team together, you've got to figure out what makes this company so special, so compelling, so amazing that when you stand up in front of an investor, that investor is going to say, "Wow, I really want to hear more. I really want to get involved with this company." So, this goes back to the point we made before about how the key to building a company and getting customers is not logic and rational thinking, it's about emotional connection. That's what you need to get with investors. You got to get that wow. You've got to be able to communicate what it is that makes your company extraordinary. It's not good enough to be good enough. It's got to be something that causes people to say wow. Then finally, when you're going to go up to investors, you got to make sure you get the numbers right when you put your company together. So, we hear all the time entrepreneurs who misunderstand what their market opportunity is. They think it's way bigger than it really is. Figure out how to segment the market to identify truly what your market opportunity is. We come across entrepreneurs who don't understand what their capital needs are. They assume, with a few $100,000, they can take this company to profitability. That almost never is the case. You have to make sure that you understand the capital needs in the very short term, during that period of your initial critical milestones, and then in the long term as you scale out and build out your company to cash flow positive. You need to be able to articulate what are the driving metrics of your company. We talked about assumptions before when you weave a mat. Some of those assumptions are the driving metrics that investors want to understand as being the key factors that are going to cause your company to grow. It's like customer acquisition, product release dates, some of these metrics are critical to understanding how your company is going to grow. Then finally, that feeds into your financial projections. Most entrepreneurs are not financiers. Most entrepreneurs are not that comfortable with profit and loss, cash flow, balance sheet, Excel spreadsheets. But if you're going to raise money, you have to show that you have a deep understanding of the economics of your business. You've got to show that you didn't just ask some consultant to put together your financial projections. So, make sure you understand exactly how you're going to grow this company and you can defend your financial projections. All of that is key to getting your act together before you start talking to investors.
11. How to Ask for Money: Now, the fourth lesson in the art of fundraising is asking for money. Generally, what entrepreneurs find when they go out to raise money is that asking for money for their companies is an unnatural act. It's really uncomfortable for most entrepreneurs to have to go out and say, instead of saying, "Here's a product, buy it. Here's a company give me money." it's a pretty different experience, but you've got to learn how to do it. And fundamentally, just as with, "Here's a product, buy it," raising capital is a sales process, and you need to organize it and manage it as if it were a sales process. So, the first thing to do is make sure you do the research on who are the appropriate target customers, that is to say, investors. You've got to go out to those investors, talk to them, listen, make sure you understand their objections, understand where they're coming from, figure out how to derive the process, and then get it to a close, just like any other sales process. So, step one is once you figure out who are good target investors for you and you can do that with research on the Internet, asking friends, asking your venture lawyer, asking other entrepreneurs, figure out who would be good, and then the key is to make sure that you get an introduction. Investors are constantly hit on by entrepreneurs to get money, so you need to separate yourself from the rest of the entrepreneurs that are hitting on those investors. The way to do that is to elevate your credibility by getting a warm introduction from somebody who knows you who also knows the investor. Ideally, another entrepreneur that has made money for that investor or some other person who's got a close relationship with that investor. So, get that introduction, get that warm introduction to get you in the door. Immediately, that elevates your credibility. Immediately, you has stand a better chance, then understand the fundraising process is not a one call close. It takes a lot of meetings to raise money, and so what that means is, it's going to be weeks, if not months, before you get to an answer from any given investor. Hopefully, if you can get an investor who's eventually going to say no, to say no earlier, that's to your benefit. It's hard to know though, whether or not this investor is eventually going to say yes or eventually say no. Most entrepreneurs don't want to force a negative response too early. So, the challenge for you is you've got a lot of plates spinning with all these conversations going on. You got to keep track of it, and you've got to keep driving. So, focus on it as a sales process. Keep driving it to a close. A key is that, during this process, you want to make sure that you keep the momentum going. Make sure that you give them the impression that this is a moving train, and if they don't get on the train, they're going to miss it. So, keep on giving them tidbits of progress that you're making. You know you've added this person to the team, you've got this person as adviser, you've raised some money from this angel, you got a better customer. You want to plan this out, so that every week as the process is going along, those investors are hearing good things about the momentum you've got in the company. So, the standard recommendation to entrepreneurs at this point is make sure you underpromise and overdeliver. You want to make sure that you don't say something like, "Well, I expect that this big investor is going to give me a term sheet next week." The investor is going to sit back and wait to find out if it happens. If it doesn't happen, you've already demonstrated that you're not a reliable entrepreneur. So, generally, instead of over promising and under delivering which is what most entrepreneurs do, entrepreneurs are coached to under promise and overdeliver. So, I'm going to tell you something a little bit different than that in this particular case. While it's generally true, you should under promise and overdeliver. When you're talking to investors, you have to over promise and overdeliver. You've got to separate yourself from the rest of the pack. You've got to tell them a story that is astonishing, and then you've got to actually deliver at a higher level. So, don't satisfy yourself with underpromising and overdelivering. You've got to overpromise, you've got to make them say wow and then you've got to beat that promise. That's a tough bar to get over, but that's what it takes to raise venture capital. So lastly, the challenge for a lot of entrepreneurs is, they're so enthusiastic about what they're doing. They're so committed and passionate and excited about what they're doing. Sometimes, entrepreneurs have a tendency to exaggerate a little, maybe stretch the truth. So, my last piece of advice when you're doing fundraising is please, make sure you don't lie. Now, one person's lies another person's exaggeration, but over the years, we've heard them all. Over the years, we've heard entrepreneurs exaggerate and misrepresent all the time, and it gets into a pattern of things that entrepreneurs say, and so we've collected a list of the top 10 lies of entrepreneurs, and just briefly, let me share them with you. Every entrepreneur walks in the door, first lie we get is our projections are conservative. Second lie, our market is $56 billion. Probably, it's not that big, but if you take the entire market, maybe you think it's that big. Lie number three, we expect Google to sign up next week. Never happens. You've had a good meeting with Google, but they don't sign up next week. Lie number four, if we only sell 40 percent of our company, we'll still have control. Entrepreneurs get really hung up on this concept of control, but the reality is, if you sell one share of stock to an investor, you've lost control. You now have a fiduciary responsibility to protect that investor. So, don't focus on control as a percentage of equity owned. The next lie is we have no direct competition. Now, if you don't really have any competition, then maybe you're not doing anything interesting. But most likely, the truth is you do have competition. You just don't understand the competition well enough to tell us. The next lie is all we need is two percent of the market because two percent of a $56 billion market, that's a $1 billion. How hard could it be to get two percent of any market? Well again, it just shows your naivete, that you don't understand your market, you don't understand how hard it is to sell to customers. The next lie is we have the first mover advantage. We hear this all the time. First of all, it's rare that anybody really does have a unique and novel idea that isn't already somewhere out there in the marketplace and has been tried, and maybe it's been tried and failed, but you're probably not the first mover. But even if you are the first mover, it's not at all clear that being the first mover in a new market is necessarily the best place to be. If you look at most successful companies, they weren't the first mover. Google was not the first search engine. Facebook was not the first social network. First movers generally don't survive. So, don't tout that as being your competitive advantage. The next lie is, we have a world-class team. We hear this all the time, and I know you love the fact that your roommate or your cousin got together with you to start this company, but that doesn't make you a world class team, and that's okay. You don't have to have a world class team day one. We just want to make sure that you can attract a world-class team over time. The next lie is, we'll be cash flow positive in 18 months because that's what the Excel spreadsheet says. The Excel spreadsheet can't be wrong can it? The reality is nobody makes that. Nobody hits their business plan. It always takes longer, and it always takes more cash. So, be careful about making a promise like that, and then the last lie. The last lie is I'll be happy to turn over the reigns to a new CEO. So, you know you're in the venture capital game. This goes back to the original point. Know what you're getting into when you go down the pathway of venture capital, and that probably means at some point in time, your job is going to outgrow your experience and your capabilities. So, we coach entrepreneurs to make sure that they understand they may not play the role of CEO forever, but the reality is we know you're not going to be happy when the time comes. That's okay as long as we grow a great big company together.
12. Define Your "WOW": So those are the four lessons around the arch of fundraising. Again, know what you're getting into, get the basics right, get your act together, and figure out how to ask for money in such a way that you don't have to lie. So, that's the key to be at successful fundraising. So, what I'd recommend to you as an exercise following up on this, you remember I said part of getting your act together is to figure out what is your wow. Part of being successful as I said was to figure out what makes you unique and special. Figure out if you can in 20 or 30 seconds, in 20 or 30 seconds, can you tell anyone a customer an investor your friends what it is you're doing that is compelling and exciting and is going to cause somebody to say, "Wow"? So, you should be able to say what your wow is in 20 or 30 seconds. I strongly encourage you to practice that, figure out how to tell the world what makes you special in just 20 or 30 seconds. Try it out, write it out, upload it on Skillshare, and let other people take a look and see if they get it and see if they say "Wow". So generally, we only invest in companies where we get there wow, where they come in the door and they tell us something that makes us go "Wow, that's amazing we want to be involved". Great example is a company called Delight Design. Delight Design is a team of graduate students out of Stanford that has developed a rechargeable solar lantern that is going to replace kerosene for the bottom two billion people on the planet. They came in the door and they said we've got a lantern that's cheaper than kerosene that could provide light and power to two billion people on the planet. We sat back we listened to them and what their vision was and we said, "Wow, we've got to be involved with this company. That's the kind of thing you want for your company, something that makes investors that makes customers say, "Wow, I really want to be involved with this company". Try it, let's see if you can get there.
13. The Art of Pitching: The next topic is the art of pitching, which is one of my favorite subjects because if I'm breathing, I'm pitching. I love to pitch. So, step one with pitching is, you have to set the stage, you have to set yourself up for success, and the way you do this, is you prepare. So, you get to the meeting early, you bring multiple laptops because if you have only one laptop and it's not working, you're host. You bring multiple cables. If I were you, I would bring my own projector. Projectors are small and cheap, so you absolutely know everything works together. So, set the stage. You don't need to get in there like one minute before the meeting is supposed start and try to make everything work. Set the stage, prep yourself. My second tip for pitching is, to explain yourself in the first minute. Bill and I have sat through literally thousands of pitches. In fact, I'll give you a little violation of Hippo. I have a disease called meniere's. The three symptoms of memiere's are tinnitus, hearing loss, and vertigo. That's defines meniere's. There are many theories about what causes meniere's. Too much salt, too much alcohol, too much stress, which basically describes my life, but my theory about meniere's is the reason why I have this disease is because I listened to so many crappy pitches in the last 20 years. So, now I get dizzy, my head is ringing, I can't hear. It's because of these crappy pitches. So, the crappy pitch that we always get starts with a CEO who wants to explain his fricking life story from the moment he was born to the moment he got here, because he read someplace that people invest in teams. So, he wants to build this case that he's a great team leader. So, he tells his whole life story, and frankly we don't really care about your life story. So, 50 minutes into this presentation, the CEO has explained his or her life story, they're talking about the opportunities in this market, they're citing all these great consulting studies, and no one has ever come in to a pitch to Garage and say, "Well, we have this crappy team in this crappy market, everybody says it's great. So, 50 minutes into the presentation, Bill and I are sitting there and we're wondering, "What the hell do these people do." We know that their ancestors came in the Mayflower, we know they went to Dartmouth, we know they took.net classes at Microsoft, we know that 1% of $100 billion market is a big number, we know all of that. But we still don't know what they do. Is it hardware? Is it software? Is it a service? We have no clue. So, in the first minute for God sake, explain what the hell you do. We are enterprise software, we are servers, we are a website, we make hardware, tell us what you do. Because until you tell us what you do, we're sitting there wondering what the hell do these people do. If we're wondering what the hell you do, then honestly, we're not listening to you. We're still trying to figure out what the hell you do. So, that's tip number two. Explain yourself in the first minute. Is that not true Bill? Absolutely. Okay. The third tip for me is called the Guy Kawasaki PowerPoint rule 10, 20, 30, 10, 20, 30 rule is that you should use ten slides, you should be able to get those ten slides in 20 minutes and you should use the 30-point font. Let me explain each point. Ten slides. In a meeting if you can get 10 thoughts across, well, you said well, your audience understand it, you're doing very well. It's hard to get 10 points across. So, don't show up with 60 slides. If you believe that pitching is about shock and awe, it's simply not true. You're not supposed to show up with 60 slides and bludgeon people into seeing your vision, seeing your passions, seeing why they should invest in your company, work for your company, do whatever with your company. Ten slides, 10 very basics slides. Limit yourself to these 10 basic slides. If you're pitching to investors, a slide is like, first all what do you do, who's on your team, who's the competition, what's your business model, how are you going to introduce your product? This is very basic questions. Don't go off into the weeds, 10 slides. The 20 of the 10, 20, 30 rule. Why 20? Well, most meetings are 60 minutes. I grant you that. But, unfortunately, 95% of this world still uses Windows laptops, and if you use a Windows laptop, you will damn well that it takes 40 minutes to work with the projector. So, if everybody use a Macintosh, this would be the 10, 60, 30 rule, but such is not the case. So, it has to be the 10, 20, 30 rule because many people need 40 minutes to work with the projector. Now, previously already said, well, set up yourself up for success. Come with two laptops, come with your own cables, come with your own projects, make sure everything works, but I know some of you are not going to listen to me. So, the great discipline is, can you give your 10 slides in 20 minutes? Hallelujah if you have more time, but limit yourself, test yourself. If you can do it in 20 minutes, you can certainly do it in 60. But if you can do it at 60, it doesn't mean you can do it in 20. The third part of this rule, the 30. The 30 stands for the point size. So, you want big fonts. The reason why you want big fonts is it's a disciplining force. If you use eight, 10 or 12 point, you are going to put a lot of text. If you put a lot of text, you're going to read the text, and when you read the text one slide into your presentation, the audience is going to figure out this bozo is reading his slides verbatim. I can read silently to myself faster than this bozo can read it to me. So, why don't I just read it to myself and then you lose your audience. So, 30 is a nice size font. Take your existing PowerPoint slides and select all and make everything 30 points and then see how much texts gets off the page. How much text would you have to remove. Remove all that text. A good rule of thumb if you don't like 30 as it's too dogmatic, figure out who the oldest person is in your audience, divide his or her age by two. Talking to 50, 60 old people 25 to 30 points. Someday I grant to you, you may be pitching to a 16-year-old VC. Okay, that day use the eight point font, but until that day, 10 slides, 20 minutes 30 point font. Now is a very good exercise. I want you to take your existing PowerPoint presentation. I want you to count how many slides you have, I guarantee you it's not 10. So, now limit yourself to 10. Take those 10 slides, select them all, change everything to 30 points and see how much text you can really have. Then, practice in front of a camera giving those 10 slides in 20 minutes. So, if you really have courage, upload to the community your 10 slides and we'll have at it 10 slides, 20 minutes 30 point font. The third part of this great pitch is, during the meeting, essentially, you should shut up, you should take notes. Towards the end of the meeting, summarize what you heard, regurgitate what you heard, and then follow up later. Most entrepreneurs don't do this. They get into the passion, and they get into this mode where they want to argue, they want to explain. So, rather than letting the meeting flow and using it as an educational process, they want to argue. That makes the meeting or longer and less productive, you probably won't get to the end. So, my recommendation is not that you avoid questions or not that you don't provide additional illustrations or additional insights, but generally speaking, you should shut up and take notes and then answer these questions later. After you've had time to think about it, after you've had time to really build a case. But don't try to face off one-on-one in the meeting. Let the meeting flow smoothly. If nothing else, the people in the meeting will think, "This entrepreneur is very smart, this entrepreneur listened to me, this is an unusual entrepreneur." You may just may shutting up but they're going to view it as this entrepreneurs smart, this entrepreneur knows how to gain knowledge. It's a very useful tip. So, shut up, take notes, regurgitate, clarify later. Do all that. Having said all that, let me tell you what I think is the best pitch. Bill might not agree but I think the best pitch is no PowerPoint at all. The best pitch is you come in and you show us a product, a service, a website that's working, you show us that the dogs are already eating the food, a 1,000 people are signing up per day, you show us this stuff that we don't have to imagine, we don't have to listen to your fantasies about how great you are going to be because you already have a prototype, you have a working model. That's the best pitch. Because now, we don't have to listen to all your bullshit. We can just see that, yeah people are doing this and that is the best pitch of all. No PowerPoint at all, just pure demo. That's my ideal pitch.
14. The Art of Socializing: That's far we've learned about starting, and launching, and pitching, fundraising, and now the final topic is socializing. That is to build a social media platform for your company. I think we're very fortunate to live in a time where just about everything you can do for marketing that you should do for marketing, is kind of free or cheap. So, this is because of social media. So, now we have Google Plus, Facebook, Twitter, Pinterest, Instagram, to spread the word. Before, you had to advertise in The Wall Street Journal, you had to buy an ad in a newspaper or magazine, you had to kill trees to do that. But now, we can do this all free, all fast, and all ubiquitously. So, let's talk about socializing. The first step is to understand you need to build a platform. Social media is not about getting more friends, you probably have enough friends. Social media is about building a platform, and you build a platform in order to promote. Lots of people, lots of experts don't agree with me when I say that, but they're the people who are not succeeding. So, I'm telling you that social media is about building a platform. Now, there are certain ways to go about building that platform that enable you to both serve a useful purpose as well as a commercial purpose, but it is about building a platform. So, lesson number one is, get it in your mind you want to build a platform. So, to build the platform, you have to understand how to post. That is, how to find stories and then get them out so that you generate interest in what you post. So that people follow you, so that people like you. So, there's definitely a kind of a best way to do post. I think the best posts are brief, they are not long essays. This is a kind of an ADD world. A tweet is 140 characters. A post, you may have 100,000 characters on some of these services, but I would say keep it down to five sentences. You could build the case that the shorter the post, the more effective it will be. Obviously, if you had just one word, it's not an effective post but certainly, it's not in the thousand word and beyond stage, it's less. So, be brief. You need to post this regularly, figure out what the best time is for your audience, for me it's always pacific time, 8 a.m. to noon and then maybe 5-7. It's definitely not late at night in Pacific because that's when it seems to me all the spammers are awake in other parts of the world. So, I never post late at night, but post at this optimal time, post frequently. Many many experts especially agencies, if you were to ask them, "What's the ideal number of posts you make a day?" They would tell you one, and that is just so stupid. I just cannot even wrap my mind around why someone would tell you post once a day. If you think about it, the CNN run a report once a day and assume that everybody who's interested in that report has seen it, right? Does ESPN run the highlights of last night's basketball game one time figuring that everybody who's interested in it has seen it? Absolutely not. They repeat the story over and over again, and I mean the same story, not an update to the story because the game happened last night. Score is not going to change. So, don't be afraid of posting multiple times. I post on Twitter, you may find this astounding. I post on Twitter between 25 and 50 times a day. I don't assume that anybody who is interested in my tweets are scrolling back, or they're all awake and they're all paying attention to their computer at the same time. So, I'll repeat my posts, and I post 50 times a day on Twitter. On Google Plus, I post between five and 10 times a day. Facebook, five and 10 times a day, and yes, some people will complain that you post too much. On the other hand, I would make the case that, if you're not pissing somebody off on social media, you're not using it to its fullest potential. So, the object with social media is to not never piss off anybody. It is to build the platform and to do that, you have to post regularly and you have to post frequently. Another tip with post is, I think almost every post you make should have a picture or a video with it. That a pure text post even in Twitter, is just not as effective. It is a very noisy busy world out there and one of the ways you differentiate yourself, is to have great pictures or great video. When I say a picture, I mean something that's 500 pixels wide, I don't mean something that's a postage stamp. So, big picture, YouTube video, you need eye candy, you need to attract attention from all the other things that are sort of pure text and little pictures. So, that's how to post like a pro. My final tip for socializing your company, is that you need a sort of big picture philosophical framework. The big picture philosophical framework is to think of, if you're in America, NPR, if you're in other parts of the world, public radio. So, in America, NPR provides great content 365 days a year. They have shows like Wait Wait Don't Tell Me, Fresh Air, Tech Nation, This American Life. They got Click and Clack talking about car mechanics, right? Great content, they've such great content but they don't have a business model that is predicated upon advertising or subscription. So, their business model is to seek donations. So, every once in a while, they run the public radio telephone, and during this telephone they are hammering you. If you like public radio, if you like what we do, call this number now, you can use a credit card, donate money. This other company is matching your donation, so if you give us $10 a month, they'll give us $10 a month, and they're just hammering at you. I can't say that I enjoy the telephone, I don't think anybody enjoys the telephone. But, the situation is that we are so appreciative for the great content that NPR provides all year, that not only do we not mind the telephone, we actively may give money. So, I want you to think like NPR, that your goal in socializing is to provide such great content that people will not mind when you promote your product or service every once in a while, one out of 20 times, one out of 20 posts are promotional for you. So, let's go through some examples. Let's say you are a restaurant and you want to use social media. So, you want to at some level, say that Thursday is Martini night and Friday is Shrimp night, and say that you saw this tweet, or bringing a copy of this tweet, and you'll get a free drink or 10 percent off. Okay, I understand that. But that's not enough to keep people following you, it's also not enough for people to re-share you're posts. So, what could a restaurant do? Well, by definition if you're a restaurant, you're appealing to people who like to eat. So, what would interest people who like to eat? So, you need to constantly be curating great content, look for content that would appeal to a foodie. So, if travel and leisure magazine runs an article that says, "This is 50 restaurants that you should eat at before you die." Even though those restaurants may compete with you, I would post that. I would say, we understand that people who eat at our restaurant really appreciate great food, this is great article about 50 other places that you should eat before you die, run that article. If real simple magazine has this article about food hacks, this is how to make sure that your hard-boiled egg shell doesn't stick. This is how to remove the husk from garlic. This is how to wash a head of lettuce in the optimal way,post that kind of stuff. If you are an airline or a hotel, post stuff about, well, this is what's happening in Las Vegas this weekend. There's a great new exhibit at the MGM about Egyptian art, so if you're in Las Vegas you should, well, I don't know if they would come if you're in Las Vegas to see Egyptian art. But I'm making a point here that it's not just about your airline, it's not just about your hotel, it's not just about your restaurant, it's not just about your company. Think about the people who love food, the people who love to travel, the people who are into these subjects that you can provide great content so that you earn the right to promote, think like NPR. So, as an exercise for this section, put up a list in the community. Say that, okay, I'm a restaurant and these are the kinds of links that I posted, what do you think? We're looking for great content so that I feel an obligation to eat at your restaurant, that I feel an obligation to re-share you're content, I feel an obligation to tell people to eat there. Think like NPR.
Guy Kawasaki, Chief Evangelist, Canva
