Early-stage strategy for healthcare innovation | Kevin Colleran, TJ Parker

Well, this is [inaudible],
and I’m doing my MBA at Sloan School of Management. In the next set of
sessions we will be deliberating the
weirdest aspects of how to evaluate startups. First up is the
billion dollar question on how do you evaluate
seed stage startups? We have with us
here Kevin Colleran, who’s the managing
director of Slow Ventures. He’s an early stage investor
in Pinterest, and PillPack, and many more such
impressive companies. He’s also one of the first
10 employees at Facebook and is a regular contributor
to the Wall Street Journal. Joining him we have
TJ Parker, who’s the CEO and co-founder
of PillPack. The startup that’s helping
people across the companies get their medications on time. He’s also named one
of the “30 under 30” under Forbes, as well as in the
Inc. Magazine’s “30 under 30” in 2016. All of you join me in
welcoming both to TJ and Kevin. [music playing] Hi, everybody. Let’s make it awkward. Always keep your
founders this far away, investors and foun– all right. I can lie down. You could lie down. Want to talk to you,
my dog, he died. Anyway, who here does drugs? Yeah, well, he’s
got a coupon code. So I am Kevin
Colleran, as mentioned. I worked at Facebook
from 2005 through 2011, so one of the
first 10 employees. Started out of my
apartment in New York and ended up staying
with the company until it was about 5,000 people. When I left, I moved
here thanks to my wife being from here and
my family as well. And with a couple
of friends started investing, seed investing
or angel investing, in tech companies. A group of friends,
all from Facebook, we pooled about $15
million of capital. And wrote 175 checks,
between 2011 and 2015, into a whole lot of things,
this being one of them. Sorry, you– you’re
not a this anymore. And then recently,
beginning 2015 decided to
institutionalize the fund. And we raised
about $250 million, so far, to invest
larger amounts. But focused mostly on
seed stage companies. And who are you? I’m TJ from PillPack. So PillPack is a
pharmacy that makes it really easy for
people that take ongoing chronic medications. We sort and deliver certain
packages and medications based on when they take
them throughout the course of the day, we then
deliver them to their door. And we manage all
the coordination with their insurance
company, with their doctors, do all the heavy lifting, so
that it’s super easy for folks that take medications. We started the
company in early 2013 and we launched the
product in early ’14. To date, we’ve raised
about 115 million in capital,
including from Kevin. And we are now
servicing customers all across the country. We are located in Boston. Our office is in Somerville,
so right down street. And then we have
pharmacies across the US and then another
office in Salt Lake. Company is about 600
people at this point. Before that, I was in
school and did a lot of work actually helping run
things like this. I helped run $100K
at MIT, helped start Hacking Medicine at MIT. So I was really involved
in this community. And before that
I was in college. Keep going all the way back. All the way back,
the whole story. How many people here
have raised capital from institutional investors? How many people here see
that as being something they may do in the future? Cool. So I was at a dinner with
a bunch of MIT people the other night and many of
them were either had just or were about to start
raising seed funding. And basically the questions were
consistent of brilliant people, doing brilliant things and not
having much insight as to how the fundraising process goes. What you should do,
should not do, et cetera. And so we figured we
would take maybe 15 minutes or so to talk ourselves
and then open it up to you guys. Happy to answer any questions. TJ, obviously,
wants to talk about or is happy to talk about his
experience of raising capital, as I said over $100 million. It takes some work. And as I mentioned,
we’ve invested now in over 250 companies. And so I’m happy to
talk about things that have and have not worked. But why don’t you start. So going back to that point,
when you were doing things here to the point of actually
having a company that has 600 employees and
$100 million plus raised. There were probably a
few steps along the way. So going from you
have this idea– maybe even talk
about your background in terms of being a pharmacist
and seeing the opportunity. And then actually committing
to an idea and deciding you know what, I’m just going to go
be a CEO and start this thing. Instead of the typical career
path that you had planned on. Yeah. So it’s coming to– I am trained as a pharmacist,
I didn’t actually go to MIT. I went to Mass College of
Pharmacy across the river. And during school,
my dad had started this new kind of pharmacy
that actually sorted and packaged meds very
similar to PillPack. But delivered to
nursing homes, assisted living facilities,
long-term care facilities. And I always knew I wanted
to start something, or work at a startup, or do
something entrepreneurial. I spent probably
three or four years running around here
trying to understand how this whole thing worked. Like, how do you raise money? How do you meet a co-founder? How do you start a company? How does all this stuff work? I was in a lot of that $100K
judging sessions, where you’d have, oftentimes,
venture capitalists and angel investors watching
someone pitch their ideas. Oftentimes, a student
pitched their idea and I observed
that whole process. And by the time I was on
the other side of the table, I had a little bit of
insight into how investors think about evaluating an idea. And then we first pitched
the idea of Pill Pack at a hackathon, that MIT
Hack-u-medicine hackathon. And we got a good response from
that, we won the hackathon. But we started the
hackathon, so it’s a little bit of a misnomer. Is there a conflict there. No conflict. I think, it was a
$1,000 prize which is a big deal at the time. And then, ultimately,
that started the snowball. And we would get together
once a week, as a team, to work on what the
company would be. If we actually built a pharmacy? If we built a platform? How much money
would need to raise? And within three or four months
had applied to Techstars. Got into Techstars,
which was early 2013. And from there the
whole thing snowballed. So it was a lot of build
up of understanding how investors think about
writing checks to just pitching it for the first time at a
hackathon to four months later we had a $120K from Techstars. And then within about
five months of that raised the first four mil–
$500K and then $3.5 million, so about $4 million. But really the biggest
thing was really just pitching it the first
time and getting feedback. And people around here
that really helped. How did you decide how much– that’s a large
round for that soon. So the trajectory
we usually see is– it used to be the seed round
was the first round, that’s now turned into the second round. So there’s this angel
round that happens first which, from my experience,
probably the average is $500,000 to $750,000
being raised. Usually, it’s friends, family,
and some strategic people– it’s $50K and $100K checks. That usually gets you
somewhere around a year worth of operating. Then there’s the
seed round which now you have a year
of under your belt, you’ve got some metrics to
show, you may have a prototype, you may be already in market. I think, the average
usually we see is probably a million
and 1/2 dollars raised for a seed round. Which then gets you another,
should be, 18 months. So now you’re 2 and
1/2 years in when it’s a series A.
Which we typically see as being a $5
million fundraise or so. So it seems like you did
that pretty accelerated. Yeah. Compared to a lot of
startups, we are asset heavy. So we had to build an
actual distribution center, we had to buy automation
to do the packaging, we had to get
licensed nationwide. So there is a lot of baked
in cost at the beginning. We followed that
trajectory somewhat, it was just really accelerated. So we raised the $500K about
two months into Techstars. And then tactically
what happened was that in Techstars you
have to buildup to demo day, or any of these accelerators
is build up to demo day. And it’s all, on some
level, operating off FOMO. And by the time
demo day happened, everyone felt like they missed
the first pre-seed round. And then that
parlayed into what, I think, we were going
out for $3 million and we ended up
closing 3 and 1/2. And the primary reason for
raising that much is again was that there’s just a
lot more infrastructure that we had to build
to even go to market. We couldn’t test the idea
with just a piece of software or half a dozen engineers. Did you find your
investors as a result of the Techstars experience? Some of them. We found our first
two angel investors as a result of the $100K
and Hacking Medicine. There’re actually
two of the judges that I used to
recruit to help judge. The first people
which oftentimes– So more conflicts of interest. More conflicts of interest
all over the place. I think the first couple
investors are always the hardest. And it was nice for
people that I knew, I didn’t know them super well. And then the first institutional
investor, my co-founder, had worked at
Founder Collective, so he knew them well. So conflicts of interest
all over the place. Right, yeah. So work at the $100K, work
at Founder Collective, and then you’re good. Yeah. Just start a business
plan competition, win that business
plan competition, stack the deck with
judges who will then invest in your business. Find a co-founder that
works at a venture capital. Get a co-founder that works
at a VC firm and it’s easy. Off to the races. It’s really like– all
these people talking about it being so difficult.
We struggle with this because we’ve seen the trends. It used to be that there
were very few accelerators, incubators. Then there all of a sudden were
hundreds of companies a year– Y Combinator and Techstars
in multiple cities and so many more. And I think there’s
been points of view on both sides as to
whether it makes sense to go into one of those
accelerated learning environments. Rapidly– 90 days–
typically go from idea to some sort of prototype,
try to raise as much money as possible afterwards. What do you think about– obviously, your experience
was little while ago, but do you think that
you being a first time founder, at that time, coming
out of pharmacy school, not being an entrepreneurial or
business trained person was– do you think that
experience helped? It definitely helped for
me and for the company. I think every
instance is different. So for some companies it’s
been a good experience, some it hasn’t been. I think being really clear about
why you’re doing accelerators– so for us we did the accelerator
primarily to accelerate the process of raising capital. And that’s what we
hoped to get out of it and we got that out of it. And I think in
the process we met a lot of folks in the community
that we didn’t know before, so, for us, it was worth it. I think, for us
the decision point at the time was do we do one
of these healthcare specific accelerators? Do we do [? a rakel ?] through
a health box or something like that? Or, do we do a tech specific? And we found that
capital raises typically go better at the
Techstars-type accelerators. But that was four
years ago, I don’t know if the market has changed. At the time, it was a
pretty no-brainer decision. At this point, Y
Combinator feels like a no-brainer decision. And then, I think,
all the other ones are very dependent
on the company and whether it makes
sense for them. So one of the
questions I was getting the other night, at that dinner,
which was surprising to me is– my fund has a policy against
doing uncapped notes. So typically a seed round– instead of having to go
through the hassle, paperwork, and legality of creating
a true equity round, there someone will use the
Y Combinator safe agreement. If you’re familiar with that
or a simple debt instrument. And the only thing that
really needs to be determined is what is the cap
of the valuation. Which is not really
a true valuation now, it just means when we
raise again in the future– as you know, we will be
adjusted to that valuation with usually some
sort of discount for having come in early. And it was interesting that
the students– not students, but the alumni that
I talked to from here had said that the lawyers
that they had worked with and the ecosystem that
they’d worked with around here told them, never
put a cap on the note. And basically what that means,
for me, as an investor is– it’s been too hard for
me to overcome that. Because if you’re
going to come in early, usually a year before
other investors, and take much more risk when
the idea is still just an idea, and there’s really no
infrastructure of business, the idea of just
getting a 20% discount to the next person
that may come in a year or more later when there are so
many more proof points, so much of the idea has
been de-risked, it doesn’t make sense
to me unless there is some sort of cap on the upside. And basically my
concern, the reason why we’ve pushed for it is the
misaligned incentives I feel between an investor
and a founder, if there’s an uncapped
note is significant. Because the founder
wants the valuation to run as high as possible
before that first investor that believed in them
gets their equity. And of course,
the investor wants the lowest possible valuation
which means that should I be as helpful as I can? Should I make as many
introductions as I could? Et cetera. Because reverse incentives,
so you guys, how did you? –put on the valuation
in the future. So how did you guys handle
figuring out how to– being first time– was it the Tech– I assume Techstars taught you
certain things about that. But figuring out what
your valuation should be and how to set up
valuation along the way? So that it didn’t
become a problem either between your relationship
with your investors. Or a problem with your ability
to raise money in the future if you didn’t achieve certain
goals because of a down round is perceived to
always be a bad thing. I think we got very lucky,
not just with Techstars, but getting a really good,
experienced early stage investor involved. That’s not Kevin. Just kidding. You’re great as well. There’s good investors
and there’s not. So the first
institutional money in was David Frankel at
Founder Collective. And we navigated all of these. Do you do an uncapped note? Do you do a party round? Do you do a strong lead
in your next round? And leaned very heavily
on David for advice through that period as well
as the folks at Techstars. Katie was super helpful
working through all of that. But, I think, getting
an early stage investor that both knows other folks
in the community that will be a good fit for your next round. Helping educate and
walk you through what makes sense and
doesn’t make sense. I think, we wrestled with
this, it was four years ago. We wrestled with doing
an uncapped note, or pricing the round,
or during a cap note. And Dave and other folks
pushed pretty hard on the fact that you want to align it
with all of your investors. We’re seeing this
even later stage, now you’re seeing uncapped notes
and weird debt instruments that seem great at the time, but
then have all sorts of potential for downside. And that was really
just leaning on people that were super helpful,
whether that was early investors or folks at Techstars. At what point did you
decide a board of directors was necessary? And it sounds like
Dave Frankel probably operated in that capacity
whether he was officially one or not. How did you go
through that decision? Yeah. So we didn’t do a
board on the first half a million which I
think is pretty normal. The capital and the
timing of the business– that oversight didn’t
feel necessary. And we had one institutional
investor, which was David. And, I think, he acted
in that capacity, but it didn’t need
to be formalized. We raised the price round
that was $3 and 1/2 million, it made sense to put
a board together. I think, you’re not
always, but oftentimes at that amount of
money you’re going to get pushed by the
investors and it’s a pretty standard thing to do. And it made sense
for us, I think, made a five person
board at the time. That was myself, my
co-founder, and then the two that– we
basically split that $3 and 1/2 million round
between Atlas and Founder Collective. And they each got a board
seat in that process. Oftentimes, I think, it’s more
on what have two plus one lead. For us, I think,
five was a nice size. I think, five is a good
size in perpetuity. And it was nice to have
more than one personality on the board, so
they get some balance and some different opinions. But, I think, you experience a
breath of this in a way that I don’t. But, for us, at that capital
amount, it was pretty logical. What have you seen
from– is it dollars in? Is it timing? Yeah. I would say the
majority of company– first of all, at that angel
round the 500, the 750– there’s no reason
to have a board. Fast forward a year,
now you’re a year in, you’re going out
for the seed around. As I said, usually a million
and a half dollars or so. I have seen it go either way. We typically don’t
ask for a board seat when we write one
of those checks. And if we do do it, it’s
usually with the incentive of getting off the board
as soon as possible. Taking the seat in order
to be a mentor-advisor, to make connections,
to be helpful. But in reality we
want to just be there until the bigger funds
are around the table the people who are– our models we write a lot
more checks than a typical VC. We will do probably 30
or 40 investments a year among five of us. And a typical
venture capitalists will write one or
two checks a year, which allows them
to be on boards. A typical VC is on 12 boards,
usually, at any given time. That’s the max
when you can do it. But, for us, we were
much more interested in making more
bets without having to make the long-term, decade
long commitment of the board seat. And we don’t think
our strength is being part of your
Series B or C, and preparing for
an IPO, et cetera. We think, it’s really to get
you the initial capital you need to get the business started. And to make the introductions
to who will likely become your first board member,
being your Series A lead investor. Conflict between
founder and board– or founder and investor. I think, has a lot to
do with who you choose as investors and vice versa. I think, ideally you
have the same people that are willing to write
checks you actually like, which is always helpful. I think, a lot of board
and investor management is really just keeping
folks in the loop in a very real-time manner. There’s lots of
mechanisms to do that, but, I think, no one likes
significant surprises. And, for me, that’s
been less about formal monthly or bimonthly
monthly investor updates. And more, sort of, ongoing
short snippets and texts, or hop on the phone,
or just keep people in the loop about
what’s going on. It’s not like
everything has been rosy and everything’s
been great news, but, I think, in the process
as things are developing– keeping people in the loop,
and not obfuscating stuff, and being as transparent as
possible has limited conflicts. But, I think, if you
choose the wrong investor you’re starting off
in a really bad place. So it’s really about people
that you can get along with and be real with. I think, different people
have different personalities. And that ongoing
communication about what’s going on with business. I think that there’s two sides
in terms of founders who just really want the dollars and
want the dollars at the highest valuation versus founders who
actually want the mentorship advice of a true partner. And then there’s the
pitch that me as a VC and, then I see, the pitch
that the VCs make to founders, especially founders
in competitive rounds as to why their firm is
better than the others. Andreessen Horowitz’s
is now famous because of the mass, mass
infrastructure that they have– they’ll handle your legal,
and your CFO responsibilities, they’ll do your
recruiting for you, et cetera, versus other funds
that completely focus on, we are just a small
group of partners and we are here for
advice and mentorship. But we don’t have
infrastructure tools. What do you think makes sense? And, how have you seen, other
than a source of funding and a source of
quarterly meetings, investors playing
an active role? I think one of the benefits
of being a first time entrepreneur with an
experienced lead investor is that you truly
want the advice, you want the perspective. And, I think, choosing the
right investor that can help with that is really paramount. But, I think, most of the
time that, for me, has really been about personality. And, obviously,
there’s lots of things that go into who you
pitch and whether they’ve done similar companies
before and things like that. But it really came
down to personality. There was two instances of
funds that delivered really specific things. Kevin was one of those,
was super helpful. At one point in time, getting
us approved on Facebook and helping us work
through that process. But, as a general
rule, it was more choosing a generalist and a
personality that, I thought, I could actually learn from
and truly wanted to learn from. And if that wasn’t the
case, it probably just wasn’t the right fit. But I wasn’t looking at
things like Andreessen’s infrastructure, or first
rounds like Founder Portal. But those were all
things that were pitched. I think, it really became
who I wanted actually spend time with and deal
with when things are good and when they’re bad. So 10 minutes left
any questions? Yes. Did you raise money from
university endowments? You’re asking me, I assume? Oh– I did not, no. Yeah. So Slow we are. Sort of. Indirectly, I did. Yes. You did. Not directly. Most VC dollars you get come
from university endowments. Our philosophy for Slow is much
different than a typical fund. Because it was started as
the personal capital of about 10 friends that all
worked at Facebook, when we expanded,
to become larger, we end up raising money from
about 100 other individuals. Who were all CEOs
of tech companies– well, founders, CEOs, key
executives at tech companies. And our request to them
was we wanted everyone to play an active role in
the investment process. And the reason for that is, we
think, that you can take money from universities,
but the university is not going to play
much of an active role in helping you find investments,
diligence investments, et cetera. And we felt that
at the seed stage the most important thing is
getting expertise and network. And we thought, OK, if we
have the CEOs of companies from social media companies, to
payment processing companies, to virtual reality
companies, et cetera, when we see stuff that seems
really interesting we then ask those LPs to meet the
company on our behalf. And so we can be generalists. And our rule is, I don’t
necessarily, as the investor, have to be a master
of understanding the business that’s
being pitched to me as long as someone
in our ecosystem, which is usually one
of those 100 LPs, is an expert in that ecosystem. And they can say, listen– and we see this all the time– most founders are so
busy being founders that they likely
don’t really have time to be angel investors, also. But just through the day to
day of running their business, amazing people come
into their office. And they say, wow, if I actually
had the time, or bandwidth, or interest in
doing the paperwork, I would totally
invest in this company because you’re building
something incredible. But I’m so busy
running my business. And so our request is
basically the hundreds of people that see those
types of founders– come into their office we say,
when you get that inkling that, man, this person that just
came in for that meeting is incredible. If I actually had
a little more time, I would have written the check
myself into this company. We ask them to forward it
to us and call that out in the subject of the email. And so basically–
we do now have, only now in the most recent
fund we brought in a couple of university endowments– but other than that, it is this
group of these 100 individuals. And then what we also did is
we brought in VC firms, which is not very typical. We’ve got a couple
dozen VC firms that have invested either their
own partner capital or fund capital into Slow because we
see stuff much earlier than they typically want to invest. And so we’ll do the seed
around and then we’ll make the introductions
to those people to lead the Series
A or Series B. And what we find is
when you can tell a founder at the very beginning
the reason why you should take money from us is not
just because it’s money, but because you’re
getting now the access to these 100– so he mentioned– we
helped him with Facebook, we have a lot of
ties to Facebook. They had a problem
there, we were able to rectify that problem
which most other firms may not have had the direct path
to helping with that. And we have that with basically
100 different companies. And what we say
to most founders, you don’t know who you’re
going to need help from. At some point when
you’re building your business there
is going to be– you’re going to need help
getting on to Facebook, or becoming a beta test
of some sort of product to a big company that’s being
tested, or whatever it may be. Finance help, et cetera. We say, we have all
those introductions. And so you know think of us much
more as a network rather than a pool of capital. So, yes, in order to
grow now in further– individuals do have a
natural kind of threshold as to how much they can invest
into a VC fund continuously and so as we want
to grow the fund we do start taking outside
capital from endowments. But we do keep that network
of those 100 individuals and those VC firms
and those are the ones who play an active role. Yeah. Thank you. What’s your median
size of investment? And you said you
don’t do uncapped, so what’s your maximum
cap in the north? How do you do that? I just wanted to learn
about the process. What we see in the
seed round, again– typically we are the second
time a founder is raising. And they have been doing
their business for a year. And they’ve been doing
that on this angel money that they’ve raised from friends
and family, or angel investors. So they are further along than– and this is very different
than what it used to be. It used to be the seed round
was two kids and an idea. And there was nothing
more than that idea. Now, I think, because the
opportunity to make progress without much capital– whether it’s through because
of Amazon web hosting or just other things– we really want to sit back at
and see how scrappy were you and how far did you
get on either the money in your own pocket book or the
money from friends and family. And so for us, typically,
that is a $1 and 1/2 million, $2 million seed round. It’s typically at some
sub-10 million valuation. So it’s a 1 and
1/2 on a $7 million cap note or an $8 million round. And we will write a check of
any size from the full amount down to usually $500,000. The difference that we
have from most funds is most VC funds want to
get 20% ownership of a deal. Because, as I mentioned,
that VC is only doing one or two deals
a year, he or she needs to have enough equity to
make sense that they are going to spent so much time on It. With us were doing five, six,
seven, eight deals a year. And we are fine being the
second largest check which is very different than most. A lot of times its a zero-sum. Someone is going to win
the lead position to write the lead check of a company. And the other people
will have lost, the other VC firms will leave. And then you’ll fill whatever’s
left with strategics. We say, listen, you can either
choose us to lead or choose someone else to lead. We’ll just take whatever’s
left because we’d much rather be part of
this company going forward. Instead of saying, we couldn’t
convince that founder back on day one and so we
now have no ownership. And so it’s different
and time will tell. As a result, we end
up doing probably three times more
investments per fund. And we probably have
one third the amount of average ownership
per company, but we think the quality
of all of the companies is higher because we don’t
have to actually win zero-sum. We can be in all of
the things that we see, that we think are great. Do you stay with the company
for longer term or you exit after like– Yes. So our policy– and this
is basically we ask, as many investors do,
for pro-rata rights. So if we’re buying 7% of your
company at the beginning, we want to be able to
maintain that going forward. With a small seed fund, there’s
usually a limit to that. If you get into a company
that becomes a rocket ship, just maintaining your ownership
is going to be a $10 million check when our whole fund is
not much bigger than that. And so we asked for
the ability to do it and then it allows us
to at some point say, OK, the valuation is too high. We are happy with
our ownership, we’re going to get diluted
down a little bit. But we still own enough
that we’re happy. So, typically, if we
start at the seed, we’ll do one more round. So we will do our pro-rata at
the A. And then by the time he gets to a Series
B or C we usually are just on the sidelines
cheering for the company, but not actually
writing new checks. In the back, yep. So, I guess, having worked
with a lot of founders, have you ever had–
because we hear about a lot of the experience
that you guys have been talking about has been fairly positive. Have you ever invested in
someone and, for TJ, have I ever taken capital from
someone where after the fact you realize, oh,
crap, I don’t actually want to work with this person? And, how does the situation
play out because you already have capital invested in them? Yeah, he tried to send ours
back about three times, I think, it was. And so we had to hire a lawyer
and it got pretty nasty. No. I don’t think you
would participate in any of our rounds
after the first one. Well, they’re out. That was our old model. We are fortunate that
the amount of capital we are putting
into a company, as a percentage of the entire
fund, is pretty small it means usually less than 1%– almost always less than 1%. And so if things
don’t go well we can part ways and be OK with it. We’re never going to sue
or try to fight legal– you try to diligence a
founder as best you can. And you try to make
sure that it is a match and you trust that they are
going to do the right thing. And if you find out that they
didn’t or that for some reason that’s not working, we
will, politely, say, hey, we’re happy to just
forego our pro-rata rights. And we wish you best of luck
to continue raising capital from other investors, but
clearly this relationship– we’re not being helpful
to you or you’re not receptive to that help. Absolutely. And with 250 investments
there are certainly founders that we said, wow,
that person didn’t do what we thought they were going to do. Or didn’t behave
in the way that we hoped they would have behaved. Or there has been
some signs that make us think that we
probably shouldn’t put more money in this business. But, again, when you’ve only
invested $500,000 or a million dollars it’s a lot easier
than if you are a later stage investor and you just wrote
a $50 or $100 million check. And then find out that– how about you? I have not. I think a lot of it is
“diligencing” your investors, and spending enough
time with them, and being super transparent
about the business. So luckily, so
far, I have not had any sort of bad relationships
or things that went south. But– It al– –my breath is not
the same as Kevin’s. I know we’re out of time. But it also helps when you have
a company that many investors are trying to get into. I think, when you have choice
you can do that process. I think, it becomes
much more difficult when one investor is willing
to actually take a shot on you and you don’t seem to
be feeling a great vibe. But it’s, well, I’m either
going to have a business that’s funded or not. And those are the
tough scenarios and if you can have
choice among investors at each stage of your
company, I think, your likelihood of success
goes up dramatically. Because it gives
you the opportunity to do some diligence or
make an A versus B choice. And not have to– you’re getting
married– especially if it’s a person that’s going to
be on your board for 10 years, potentially. It’s really hard to be in
that position with someone that you don’t necessarily
get along with. It’s also, I think,
why not just choosing to do a deal because
it’s an uncapped note if the valuations
meaningfully higher than the others becomes
more and more important. I think, if you work with
these folks for, hopefully, a long time. Do not try– always the
investor that say this– do not try to optimize for the
deal terms or the valuation. If some relationship
feels a lot better and they’re offering you
something a little bit less attractive
monetarily, but it’s a person that’s going to be
able to help your business or that, you think,
you can scale with. It’s crazy to me
when you find out– and that’s actually
a big indicator, a red flag for a founder– you know you’re
the right person, they’ve already told you you’re
the right person and because someone else– that may not for whatever reason
came in with over the top offer and they choose that
even though saying, that’s probably not
the right VC for me, but the offer was so good. And that’s when
you say, whew, I’m glad we didn’t end
up getting married because your incentives
may not have been aligned. Cool. Thank you, very much everybody. Appreciate it.

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