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Mark Peter Davis

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2015-01-28

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2015-01-28

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1. “Your barriers to understand kind of what the opportunity really is there for them and how much capital you require. But there are a lot of companies out there, founders. On the opposite side, you want to make sure you take VC if you've got a big opportunity and you need a lot of capital to land grab, you have to take the capital and go for it. The key is to get alignment.”

   2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

2. “Absolutely. So, as I mentioned a minute ago, I wrote a book called The Fundraising Rules, which is a handbook for entrepreneurs to help them navigate the fundraising process. It's literally built in a chronological order of step-by-step, preparing for the meeting, what to do in the meeting, what to do after the meeting, and so on. The beginning of the book centers around whether or not you should raise capital from venture guys or angels or otherwise. And I think it's one of the biggest mistakes people make in terms of destroying their return as an entrepreneur is if you ask an entrepreneur, what's going to drive your value? They'll say, well, we've got to get the right team together, product market, all the generic stuff. Very few people talk about how they capitalize the company. Not how much money they raise, but who they take it from. In my view, the goal is to achieve alignment. You want to find investors that are interested in the economic opportunity, so looking at the cross-section of your market size.”

   2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

3. “Every entrepreneur should find one investor or one advisor who's a terrific person they trust. There's a good relationship. They can go to them with tough questions. And they know that the person's going to deal well with them when things are hard and when things are good, not be a fair weather fan and come down and be angry at bad news, but try to resolve things and be a partner in the business.”

   2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

4. “It depends on the firm. I mean, a lot of entrepreneurs in their first go-around will choose just on brand cachet. There is usually the firms that have big brands usually also have a lot of value to add. So there's some correlation there, but it's not always the case. I think the smartest entrepreneurs are picking first and foremost based on their relationship with the firm and the partner. If they find that they've got a VC investor who understands that they're not the CEO or the founder's boss, but that they're their minority partner and they're there to support them, they're pretty compelling and attractive partner to pick. But there's more than that. You might want to pick an investor who has worked in your industry. Or if you've got a sales operation that's quite complicated, who has built a sales operation either as an operator or in another company that they're involved with? So there are other strategic reasons to look for folks. I think ideally”

   2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

5. “I think in the kind of well-developed venture markets, the fat part of the bell curve is sitting around at 20% buy at every round. And for very hot deals, you're looking at something as low as 5%. And for less attractive deals as high as 30%. That's the gist”

   2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

6. “I think the best approach in the VC dynamic is to keep people at the table And then if there are a lot of people get interested, if the market's favorable for your company, then you let them drive the price up. So I think starting with aggressive asks can get people turned off pretty quickly and you can change the dynamic and take bidders away. Whereas if you get a whole bunch of people bidding at an average valuation, you may end up with a very high one at the end of the process”

   2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

7. “They show a lack of sophistication. It's not a crisis, but it's an opportunity to impress folks and position yourself to negotiate well. The trick is VCs don't look at it the same way. Focus on the other two of it. We ask ourselves how much of the company are we going to be able to buy for the investment that they need and the investment they need is 18 to 24 months of runway. So you do the financial model, you say we need a million dollars to take this 18 months out. Okay. And you look at the market norms for how much equity you can buy for that. And we use that to divide and back into evaluation and figure out what the pre-money would be. So the right way to answer that question is actually a little different. You wouldn't say, you know, write valuations five. I think the right way to say it is, hey, look, we need a million dollars to go 18 to 24 months. We know there's kind of norms around how much ownership the capital buys at this stage of the game. We're looking for a normal deal and therefore that implies a certain pre-money valuation.”

   2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

8. “So most people think about their valuation in terms of the general VC equation of pre-money valuation plus the investment equals the post-money valuation. And so that just on that is if your company is worth $5 million for everything that's happened to date, the team, the brand, everything you've done, and you raise $5 million, it will be worth $10 million afterward. And so when you look at that equation, we're all trained in grade school to work on the inputs on the left and deal with the output on the right. And it makes it quite confusing because if EC might say to you, what valuation are you thinking? And in that conversation, you'll look at this and say, well, I don't really know how to calculate my pre-money valuation. You can triangulate from market norms. Most companies don't have cash flows, so all the traditional valuation methodologies go out the door. But there's no real way to figure out how to answer that question. So people fumble with it.”

   2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

9. “Nuanced. And the reason I say that is because I think there's some misconceptions about how valuations are contrived. It's something I frequently talk about when I'm giving presentations at accelerators or otherwise. Would you mind if I elaborate for a minute here?”

   2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

10. “I suppose it depends on the firm, but I think there's a little bit of strategy for a firm to build out its team to get diversity, to help it be better at investing, but also to help it tell a better story to investors who invest in their fund, their limited partners. So I think a firm of investor, just pure investors might be quite keen to get an operator or a domain expert.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

11. “And I think one of the keys to it is the idea that the VCs don't always have extent of recruiting departments So, the goal is to be standing outside the door when it opens. So, you need to have already taken the initiative to get in front of folks.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

12. “I do think it is for ITVCs. I think it's a very good medium. It demonstrates cultural integration in the community because we're obviously all using Twitter quite a bit.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Now I think you can tweet at people, you meet people at events. I think it is okay to email them, but it's hard to get the meeting if you're just sending a cold email. But if you send, if you send in, hey, I came across this deal, I thought you'd want to look at it, and the person says, you know, it's not for me and you write back great, you know, would you mind have a picture brain a little bit on the career, you're not going to get 100% conversion on that, but they might forward you to one of their colleagues. That was a great way to fly.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

14. “There's investor types who have done investing as a background coming into the role. There's operators who have worked in startups or other companies and kind of built that skill set. There's domain experts, so they might be in the IT world, the PhD in computer science, or someone who's been a CTO, which kind of crosses both operations as well. Or there's a generalist who's done a little bit of operations, a little bit investing, all of those things. So I would start by saying asking myself who I realistically could be and be successful at being, and start building a career roadmap to take me along the path. The second thing I would say is this is very much a game of being in the right place at the right time. And the way to make that not completely random is to be a lot of places a lot of the time. So getting coffee, just meet and greets, informational sessions with lots and lots of folks and then staying in front of them by adding value, sending them deals.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

15. “So, I think there's a couple things I'd say to this. First is there's a handful of types of these seas out there, and I would pick one of those VC types and build your skill set accordingly so you kind of fit the mold.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

16. “General communication day to day, people missing emails for the founders out there that have who don't know how to get to zero inbox, I'd encourage you to try to work on that skill. I think that is massively productive. If you can't follow up with emails for your team, your customers, your investors, how are you going to optimize your success?”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

17. “I would say if it's more than a day or two, sometimes you should send an email and say it's going to be a little bit, it depends on the situation. I think if someone's submitting a business plan into a black hole, sometimes those get done in batches”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

18. “Sure, and I think there are times where it transcends and becomes reality. And I'm not against it. I just don't think, I think there's lots of types of founders out there that can be quite successful. I think you obviously want someone as motivated, hardworking, and honest. I think the thing that's overlooked most often in business is basic organizational skills. And I know that sounds like a trivial thing to offer. Can someone respond to their emails in a timely fashion? Those basic things that are required for all operations for managing people, increasingly in my career, am finding that to be a pretty high bar that filters out a lot of folks. And it's shocking because it's some of the easiest stuff to get right, but it's separating a lot of the best operators from the worst.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

19. “Yeah, I mean, I think everyone talks about the visionary founder. I think that's important. You can have people with kind of lighter visions that are good operators that can be quite successful.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

20. “Yeah, okay, great. So I'll add one thing that's an easy one that you'd be surprised how often it happens is founders fighting during the meeting It's kind of a fun one to talk about because it seems a little bit shocking, but you get into one, you ask the right question, there's some strategic question, and they start having a debate in maybe an unproductive way. Healthy debate's great, but you get a little sense of the founder dynamic. And obviously, if you've got a team that doesn't gel perfectly together, that's just a time box.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Yeah, I agree with that. I think it's a dangerous zone. It's a higher beta scenario. It's either going to make you worse off or far better off. If you've got high emotional IQ integrity and pretty good social skills, you're almost always going to be better off.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

22. “Sure. But I think there's a different level between picking someone who's confident that you can trust and who you can do business with and trying to find folks that you actually want to spend your free time with beyond that. And I find that the personal relationships overlaid on the business enable more transparency, more honesty, you end up spending more time together because you enjoy it. So everyone helps each other in a more productive way. And it just a hell of a lot more fun.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Market traction for us is also important. It's not important to everybody. The last thing is most people who are looking for a team are looking for a very competent team. That's what I used to do at some of the prior venture firms I'd worked at. I am very much focused on people I want to hang out with. Taking it to a new level, a personal relationship.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

24. “And it turns out all three are real companies that were massively successful and were public, are publicly traded. And so you really can't pick a loser. The game, though, is to figure out what type of investor you are, right? And some people really bet on markets, some people bet on teams, some people bet on technology are more broadly barriers. I look for it all. I try not to sacrifice. I think the thing, which makes me a little bit more picky than average, I think the thing that sets apart my thesis, and which is not entirely unique, there's probably nothing unique out there in the investment world, is we really focus on two things. Companies that have the right fundamentals, which fit into the prior buckets,”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

25. “I think the usual answer to this is the pretty generic stuff. It's a market size team, everyone talks about that stuff. In fact, there's a business school case study that a lot of the MBA VCs have done, where you read about three different companies and you're asked to pick the one to bet on. Now, one of them has a huge market. One's got an”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

26. “who is living and breathing the startup community can make introductions, provide advice, warn people about pitfalls, DevSpark, software development run by former venture-backed CTO and CEO sold his company. Same type of thing on the development and product side, everything under the sun on the product. Truman James, same thing around real estate, Venwise, an educational platform. It gives you a little sense”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

27. “Are designed to support entrepreneurs, not just through providing the core service, but also providing the business advice that connective issue, the knowledge, the introductions to help people actually run their companies. So to give you a little sense of the types of companies, we have a company called Founder Shield, which is a very prolific insurance brokerage focused on startups. They serve a whole lot of companies at this point. And the guys who run it are freely from the start of community. They're tech entrepreneurs. They're making introductions. They're doing all sorts of things that are outside the scope of just getting the insurance right, which in and alone is a differentiator. We've got a company called Nomad Financial. Nomad is a similar thing focused on everything from bookkeeping to CFO service and beyond, and it's run by the former head of Finance of Vimeo. So clients come in, they ask they get their bookkeeping, but they've got a team they can do.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

28. “I think the way to hack all of it, if you don't have either of those available to you, is to surround yourself by tier A service providers. There are a tremendous number of service providers in the market, and I'll talk to you about something I've actually done to the Santa enable this. But a lot of them actually, you know, they don't really understand startups. You might need insurance, and you can get insurance from the guy who sells insurance, but he's never been around a startup. He usually works with law firms or different types of businesses. And he doesn't have the wisdom or knowledge to really be a useful advisor. But there's traditionally been a dearth of folks out there who go into the services space with the goal of not just providing a great service and delivering the underlying ask, but also becoming advisors. There hasn't been much of that. So one of the things we've done at Interplay is we've actually started about eight companies that”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

29. “There's a couple answers to this. First is, I think getting out there and going to networking events, if your community is a robust startup ecosystem, you get out, you go to events, you'll meet people. I think obviously attracting interesting investors can help you, not all, but a lot of investors have a lot of operational experience. And the folks who have started and managed companies can provide for medicine.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

30. “Established industries where players are going to head to head. It's much more dynamic of building something new, expanding the markets, expanding the opportunities, and so the culture and the nature of it is a lot more supportive and helpful.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

31. “I think it's tenacity people who are truly passionate about entrepreneurship, who love the process of creating, tend to gravitate towards each other. And the entrepreneurial game, while it can be emotional roller coaster for a lot of folks, is a very inspiring one. And so if it's something that runs in your blood and you really enjoy it, once you find yourself in one of these communities and talking to folks, There's a lot of people who want to help. I think uniquely the startup community, unlike most of the other business worlds I have experienced, are actually motivated and incentivized to help each other. In the startup world, we're not fighting over zero-sum games like three companies chasing one client. We're creating new products, new businesses, so that competitive nature, while it's there, is less robust than”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

32. “And each step represents one simple, small, usually easy decision to make a pretty high hit rate of making a good set of decisions against those small decisions. And if you do that consistently pretty well, if you're 80 or 90 or better percent of the time making the right choices, you will stay on the true course and build a great company. But it's an accumulation of very small trivial decisions that can take you off course, which if you have the right people around you, you can avoid.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

33. “When I first started out, this is back in college quite a long time ago, mixed ideas. Some ideas were good, some were bad, but consistently terrible execution. And I think one of my biggest takeaways from that era was that there's a tremendous amount of knowledge required to be a successful entrepreneur. It is truly a mentorship sport. And if you don't have the right advisors around you, the right people will support you. You can fail for things that are very avoidable. The way I think about it is people like to say starting a company is like a marathon, but it's a little different. In my perspective, it's not a marathon, it's 5,000 steps.”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source

34. “I've been a lifelong entrepreneur. It was never something I really chose as a career. It's always been a hobby and a passion. It started as early as elementary school where I was selling candy or baseball cards, candy and junior high and computers in high school to graduating seniors. I tried to start five companies in college. The list goes on and on. And eventually through the course in my career, I fell into the venture game in an attempt to become a better entrepreneur, learn a different side of the business, start to pattern match across companies, see what works, what doesn't, and learn a lot of the pitfalls so I could avoid them myself. And then through that process, I just enjoyed it and have continued on with it”

    2015-01-28 · The Twenty Minute VC · 20 VC 008: Startup 101 with Mark Peter Davis · IDENTIFIED FROM THE TRANSCRIPT · source