So everyone is sharing this great memo by Airbnb Co-Founder and CEO Brian Chesky on how the disruptive giant's super generous early stage reach-outs got so casually rejected.
Now that every struggling entrepreneur on earth has read it, let’s take a moment to reflect on the lessons learned. The deal flow ecosystem is sluggish, outdated and inefficient; and it hurts everyone involved. Entrepreneurs should be careful not to quickly jump to the cliché conclusions. If we do, we risk doing ourselves damage far more painful that the bitter sting of a rejection email.
So when is rejection an indicator of an investor problem? When are we interpreting rejections the wrong way and continuing to bang our heads against the wall? And what needs to change? I've taken the liberty to offer 7 of each.
- We think you're great but we can't help you. Truth be told, entrepreneurs don't really need investors' "help". What they need is your friendship, support, character and yes, money. These are all a matter of your decision, not your capabilities.
- We're not convinced about the opportunity size. Off course you're not. However if you were convinced you'd be just as wrong. Being convinced about the future is a fallacy by definition. This is why it is called the future. The closest we can get to predicting the future is doing good analysis and trusting our instincts.
- It's not a good fit for our model. Don't mistake "model" for philosophy when, in fact, it is just another name for bureaucracy. If you see a great opportunity, adjust your model. That's what smart people do.
- Ramp up & legal challenges seem too intense. True, but that's what disruption is about, right? Disruption ain't a walk in the park. It's about fighting the old, rich, connected incumbents.
- It's too early for us. If it's too early but you like the opportunity why don't you invest a symbolic amount. Say...$50k? imagine the confidence boost you've just bestowed on the entrepreneurs and who knows, this may become an investment decision so lucrative you will tell your grandchildren about it.
- We can't reach a consensus about this. That's another way of saying, "We're actually so conservative we're scared of making a mistake."
- You'll need much more money than you're asking for. Probably. But maybe not. This is something that can be worked out. Always.
- They don't get it. Newsflash, investors and VCs understand what it takes to make a profit much better than you do. The rejections can be the best advice you get. Make no mistake, you learn more from those who don't 'get you' than from those who shower you with compliments.
- If Airbnb made it so can we. No. They're Airbnb. They figured out something great and executed it so well it made them a topic of a global discussion. You're among the other 99% who haven't proven anything yet. Always remember that, it will keep you hungry.
- We don't need the money they're saying we do. Could be, but keep in mind you cannot beat your giant competitor with half the money, half the people and half the time unless you figure out something really, really groundbreaking and that you can own.
- We're not selling ourselves well enough. You are who you are and people see what they see. Practicing your sales skills is an important exercise, but that, too, should already be part of who you are.
- This is how it goes, we need to reach a tipping point. No, it's the other way around. Focus on the tipping point and always understand every little step en route. When the ingredients reshuffle, and that happens almost everyday, recalculate your course. Yep, every day.
- Trust no-one but yourself. The ultimate zinger. Yes, trust yourself, lead your path, control your decisions, but claim all that after you succeed. For now your bigger task is still convincing others, not just yourself.
- Success is all about persistence. And the ability to adjust, listen, charm, add value, develop, manage, sell, support, react, lead, manage crises, overall environment and sheer luck. There's no single recipe for success, but don't confuse persistence with simple stubbornness (or with being a dumbass).
So what are the lessons learned?
- Dealflow processes must become much more efficient. Thousands of VCs, angels and investors and you need to reach all of them individually? and vice versa? They need to find you? Oh, and each time its that same process all over again? Meetings, analysts, negotiations, term sheet, due diligence and contract? Is that really possible in such a hyper competitive environment? How have we gotten to the place where the only ecosystem that hasn't undergone any real disruption or innovation is the one that's financing disruption and innovation?
- Opportunity analysis needs to get better and faster. Buying an apartment or a car is quite a complicated decision for most people, simply because most people are not super rich and most of them know very little about apartments and cars. If most people can analyse, decide and execute so quickly, then professional investors should also be able to quickly and inexpensively analyse investment opportunities.
- Look for the real insights in unusual places. A part of what makes our era so beautiful is the abundance of versatile analysis tools. Services that rank founders based on their friends and colleagues, semantic analysis tools that dig into the founders characters, forums of technology experts that can truly testify about innovation, systematic use of Google and more. These perspectives are extremely important and can tell you much more than another casual meeting with another "friend you trust for an opinion".
- It's about the harmony, not the single ingredients. There were tons of social networks but there was only one Facebook. There are tons of shared economy initiatives but there is only one Airbnb. The X-Factor? The harmony between the different ingredients. The UX, the killer feature, the team, the name, who knows? There is no model for drawing the Mona Lisa and no formula for the perfect startup.
- We're in a bubble. In an environment fed with fantasies, investors want to find unicorns and entrepreneurs want to ride them. A $150K investment in a super cool, early version of Airbnb seems like a great investment if your expectations go "only" as far as making a "good" profit.
- Use Venture Capital only for what it's for. Bootstrap, self fund, take a loan, finance your business through consulting. If you can, these are better alternatives than a load of money pushed to be spent fast on competing with ghosts. Make money the old fashioned way, by earning it. Earn it the old fashioned way, by providing value.
- Ask the crowd. Whether an investor or an entrepreneur, don't trust single individuals - or yourself - without consulting with your potential customers, partners or users (AKA the crowd). These are now accessible to you via many tools, from polling to more structured processes like the ones offered by Zirra.
Our vision for Zirra is to become the investment rating platform everyone appreciates and trusts. Our commitment is to always be keep professional, unbiased and independent. Our algorithms utilize crowd wisdom and predictive analytics to produce deeper insights than investors have ever had in the past and on a greater scale than traditional consulting firms can produce. Investors, entrepreneurs, and journalists can find Zirra extremely helpful in gaining deeper understanding of any company. Zirra is set to become an inherent part of the deal flow processes, but also of other rating-derived needs which surround private companies.
We encourage investors to submit investment candidates for a Zirra review at whatever level of discretion they choose. We also encourage entrepreneurs to submit to be covered on Zirra. They can gain exposure to our investor community and be matched efficiently with the most relevant investors. This saves tons of time, mistakes, and frustration.
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