ED ZIMMERMAN: I’ve been obsessing about choke points in the venture funnel since preparing for a talk I recently gave in Tel Aviv. Studies show that in the handful of major nations with vibrant venture markets, more than half the deals are “seed rounds” or “Series A” venture rounds (in plain terms, the first or second round of funding for a startup). For instance, in first quarter 2015, 55% of all American venture rounds were either seed or Series A, split almost evenly, while 19% of all rounds were Series B (the third round of financing), according to data from CB Insights. For the 12 months ended March 31 of this year, the statistics for tech startups show that seed and Series A rounds collectively accounted for 58% of all American venture rounds, 66% of Israeli rounds and a staggering 71% of all European venture rounds. In order to survive, most of those companies will need to raise another round within the 18 months that follow their financings. While you can sell your seed round on a founder’s dream and vision, you have to have a team and generally a launched product or service for your Series A round. Your Series B round, however, requires traction or, in fewer situations, some new telling of the tale. … Read More »

CHRISTINA BECHHOLD: I was introduced to an entrepreneur recently whose seed stage company was building a fascinating product in a space to which I was eager to gain some exposure. What struck and stayed with me far more than the innovative technology, impressive investor list and exciting plans was the defensive tone and snappy retorts thrown at me by the founder every time I asked a question or inquired about a statement – “Why are you even asking that?” A stranger hadn’t verbally attacked me like that since my last parliamentary debate. At one point I thought it might be an act, or at least a mistake, and I would receive an apology email by the time I got back to my office. No such explanation arrived, and I was left wondering whether I was overly sensitive. Why had so many people I respect backed the company if the founder was actually that difficult? … Read More »

MATT MALONEY: Over the years we’ve seen a lot of other companies enter, and work to innovate in, the takeout food space. This has been nothing but good; we’re thrilled that others see the massive opportunity to shape the $70 billion takeout food market, and firmly believe that innovation keeps us all on our toes and improves things for consumers and businesses. It is pivotal to our company and the industry that this innovation continues, and we spend a lot of time thinking about how we can help make it happen both inside and outside our walls. We’re currently doing so in two key ways. First, we build technology — such as our revamped GrubHub and Seamless platforms — that other entrepreneurs can leverage to help execute on their restaurant trailblazing vision. Second, we regularly share our knowledge and resources to help other entrepreneurs and small businesses get their ideas off the ground. … Read More »

ED ZIMMERMAN: Founders seeking liquidity in a venture round need to canvas the investors in advance of the board meeting to get a feel for how amenable they’ll be towards founder liquidity. Investors deserve some breathing room before they’re required to answer. Founders need to let the investors know they have time to react, coordinate with other board members and perhaps with some of the investor’s own partners. Unsurprisingly, founders should pose the question early in the process – rather than first floating it during the 24 hours in which a board is trying to respond to a live term sheet. Good governance also means founders need to let the board hash it out a bit without the founder present. … Read More »

Jason Spievak, founder of Invoca: No matter how good the situation, finding a new CEO isn’t easy. It takes time and a lot of planning and work. It’s also made harder by the fact that the process is kept private from nearly everyone in order to avoid disruption. The most challenging part of hiring someone for this role is to find the rare combination of strong operational experience and a clear sense of personal responsibility for the hundreds (eventually thousands) of people who rely on them. Recruiting someone of this caliber requires careful planning and significant investment. The first hard part was selecting the right retained search partner. This is essential, as we had several candidates tell us that they initially chose to learn more about our company only because of the trusted recruiter who brought the opportunity to them. We found an experienced, high-profile recruiting partner and ran a search process. It took six months, but it paid off. … Read More »

Jay Samit, serial entrepreneur: Startup founders and existing corporations can no longer survive by just adding new features or marketing product extensions. In today’s business climate, incremental innovation is like walking on quicksand – it will keep you busy, but you won’t get very far. To thrive, all businesses must focus on the art of self-disruption. Rather than wait for the competition to steal your business, every founder and employee needs to be willing to cannibalize their existing revenue streams in order to create new ones. All disruption starts with introspection. Instead of focusing the traditional planning cycles where companies benchmark their businesses against existing competition, teams need to be developed to foster internal change and disruption. Self-disruption is akin to undergoing major surgery, but you are the one holding the scalpel. Apple and Google continue to expand and dominate new industries because they strive to create a culture of risk taking, self-disruption and experimentation. Would anyone have predicted ten years ago that either of these companies would be going into the auto industry? Does anyone today doubt that they will be successful? … Read More »

Richie Hecker, Chairman and CEO of Traction + Scale: So you have the best investment bankers in the world and they think they can get you a great valuation and take you public right now. On paper your company will be worth $5 billion and you’ll be a billionaire. Yet, your last round valued your company at $300 million and you think your company is worth maybe $1 billion to an acquirer right now. Well, you may get your valuation today, but the markets eventually get smart — stocks that are overvalued eventually collapse unless they can clearly grow into their valuations. Be aware of your true value and the trade-off of a great valuation versus an accurate valuation. In the end, going public is an amazing experience, a great way to raise capital, get stock you can use to make acquisitions and establish yourself as a big player in your industry. It’s a signal that you made it — relish it. Just understand the risks and realities before you ring the bell. … Read More »

RYAN HOLMES: If you’re an entrepreneur, how do you quickly and easily gauge demand for your new product? What’s the best way to feel out the market before investing thousands of dollars in equipment, materials and office space? The smart kids have been using Google for years to suss out product demand. But as I found while bringing my standing desk idea to life this year, an integrated approach that also incorporates newer social media tools may be the best way to tell whether you’ve got a winner on your hands. … Read More »

Carter Cast, professor of innovation and entrepreneurship at the Kellogg School of Management: It may seem obvious, but in the intoxicating rush to an exit it can be easy to overlook the fact that selling the company means giving up control. The emotional and psychological impact of selling the company may be underestimated by the entrepreneur, even when gaining access to more capital resources appears to make sense, at least on paper. Though selling may be the right thing for the business, entrepreneurs shouldn’t jump to make a deal without first determining their own readiness. Entrepreneurs need to ask themselves: Am I prepared to hand over the reins or, at the very least, share control of what I’ve built? … Read More »

Jayson DeMers, founder and CEO of AudienceBloom: Ultimately, as you might expect, an IPO is a mixed bag. There are some real potential payoffs for entrepreneurs who have the time, patience and resources to put one together properly. But there are also some real risks, even if you do everything the way you’re supposed to. Keep in mind that IPOs are not all about glorious exits or “free” capital, and make sure you understand all the potential risks before you start talking to an outside consultant or lawyer. IPOs are not for every company, so do your homework, evaluate what you really want out of the deal and only move forward if you’re ready to face the challenges. … Read More »