I have recently received several requests for help in preparing trips to the Valley from startup founders. I want to share my observations about the strengths and weaknesses of startups from the former Union. I am talking about early-stage startup founders, who do not have much experience in the US.
Weaknesses
Lack of understanding of the American mentality
And often, as a consequence, inability to communicate effectively, even with good English. Lack of ability to make you feel at ease: a smile, small talk, sincere interest in the person you are talking to. And this is super important: if you do not like you as a person, the chances that you can interest the angel investor is minimal.
Arrogance in communication
This is a very strange point and at first I thought I just had “luck” with these kinds of funders. Unfortunately, these are not isolated cases. One story in particular is memorable. I arranged a meeting between a funder and an angel investor. Everything went more or less well until the moment, when the investor, at the end of the presentation, asked to explain once again what was the advantage of the startup over its competitors. The founder replied that if the investor did not understand it from the first time, it was not a good fit for his startup, because they were only looking for smart money. This sounded very rude in English. Angel and I were slightly shocked and the meeting ended there.
When I later tried to explain to the Founder that it is much better to be nice than rude, he told me that he was not going to make me crawl on my knees and explain the obvious things to the stupid investors a hundred times over.
Expecting freebies and manna from heaven
Particularly true for founders, who won various contests and grants in European startup development programs. When they arrive in the Valley, they suddenly see that information about these grants and prizes, as well as articles about their successes in the media, have no significant influence on investors – they are not impressed. Some founders are surprised to learn at all that gas pedals in the Valley invest their own money, not grant/free money, and receive a percentage of the company’s capital in return.
The Valley is a place where a lot of founders come unprepared, hoping to figure it all out on the spot
If founders are coming for a serious and long time, it might work. If they come in on the spur of the moment, just for a few weeks, they’re often very disappointed.
I remember a conversation I had with a team from Ukraine just before Covid. The guys came here for three weeks. They complained that they didn’t get to talk to many investors and that the time was effectively wasted. Most of the events they attended turned out to be almost useless.
I asked them how much time they spent on their homework:
- How many hundreds of emails did they send out beforehand?
- What was the response, how many of those hundreds of emails were answered, and who showed interest?
- How many meetings did they set up in the Valley while they were still elsewhere?
- How many preliminary talks did they have via Zoom/Skype?
In response, they looked at me with surprised eyes and said that apart from watching events on Meetup and Eventbrite and talking to their programmer acquaintances working in the Valley, they hadn’t done anything. This is a prime example of the famous “mighty well” approach. You guys spend several thousand dollars and weeks of your time on the trip itself, but you didn’t have time to painstakingly prepare a program to stay in the Valley? What kind of result can you expect? Only one, the same one: come with the money, leave with the experience.
Ignorance of the basics of investing
Not all funders know that in the vast majority of cases, investors only invest in startups registered in Delaware C-corporation form. Many have no idea what SAFE, convertible note and term sheet are and how they differ from each other.