Meraki, an established West Coast startup funded by Sequoia Capital and Google, kindly loaned us their Chief Evangelist for a flying visit (almost literally as we were his final stop before the airport). As a former investor and now part of a startup that’s taken $40m of investment, what wisdom did AJ Goldman have to share about investments and evaluations?
The truth is that it’s all about balance. The moment you put a price tag on your company, that’s the price both angels and VCs think they can get you for. If you aim too low, you’ll be gobbled up at an underrated price. If you aim too high, no-one will take you seriously, the same way Yahoo failed to consider Google when they offered to be bought for $4bn, cash. You know, casual.
For founders as young as at EF’s start-ups, it’s crucial to remember that, at an angel round, you’re selling a vision and a strong team. Founders should look to give away 10 – 15% of their startup and should remember that young founders are set apart because of their willingness to build what others can’t see.
A final bit of advice from AJ was that if the startups could, they should keep on bootstraping for the time being, but again it’s important to find the right balance– ‘You’re in a position of strength if you manage to bootstrap for a long time. But if you take it on for too long, you might encounter problems down the road and have no money to hire. Look into the future, try to anticipate when it is you’ll need money and raise money only once you have a decent version of your product.’
Errol Damelin, founder and CEO at Wonga, a digital finance company, met the start-ups that same Friday (in a very natty pair of mustard trousers) and offered another perspective. Wonga took VC money early on (£3 million), even before their business model was concrete, partly because Wonga’s business model consists of advancing money (it also helped that Errol was a proven entrepreneur, not a recent graduate!)
Yet, both Errol and AJ agreed on the importance of scaling. In Errol’s terms – ‘It’s the same amount of effort and time to build a big business as a small one. The most constrained resource on earth is time, so it’s worth investing the little time we’ve got into building something big.’
Lucky enough for the EF cohort, who are, as Errol put it, "an experiment in artificial insemination", it’s the eagerness and candour of young founders that pushes them to excel. Both AJ and Errol piqued the start-up’s impatience to scale and take on investment down the road, so things are bound to remain interesting for the next few months! Stay tuned!
A big thank you to AJ and Errol for their time.
Meraki kindly provide the EF cohort with their wifi network at the Cannon.