September C2V Notes From The Trenches
Welcome friends! It’s our absolute favorite time of year at C2V - leaves changing in the Northeast, perfect weather, the start of football season, our kids back to being someone else’s problem Monday through Friday, and, of course, our annual LP & Founder Day (now only days away).
In the spirit of that event and our overall philosophy on the positive ROI generated by providing consistent, hands-on support for our founders, both directly and by leveraging the decades (centuries really) of experience, knowledge, and domain expertise of our wonderful LPs, we thought we’d share some of the broader tenets we find ourselves consistently repeating when we talk with founders.
A Founder Framework
As you all (hopefully) know by now, few things irk us more than when VCs try to distill the difference between startup success and failure into Tweet-length cliches (which is both absurd because every situation/company/founder is different and tone-deaf in its minimalization of how hard this is), so view these as general guidelines you can take or leave rather than iron-clad rules that every founder must follow.
Fundraising
First, you need to come to grips with the fact that much more of your success/failure at fundraising will be out of your control than you’d like. It’s not easy for any founder (or emerging VC, for that matter) to come to grips with, but it’s true, and you’re better off accepting it and focusing on increasing your odds.
Two things we’ve mentioned in this space before are a good place to start:
Make sure you absolutely nail the things that are in your control. Your deck, for example.
Cast a wide net. The wider, the better. Hit up your whole network, and then hit up your network’s network. Not only is hope, not a strategy, even if it was and you were (for example) four times more successful than the average founder, that still means getting one check for every ten people you pitch. Fight the math at your peril.
Second, whether it’s your first or fifth round, before setting out to raise money, it is worth reminding yourself of two broader startup themes:
You need to be able to do quite a lot with very little, so the more efficient you can be with your resources, the better your odds of success, and one of your most critical but too often overlooked resources is your time. In fact, we would argue it’s more valuable than your capital. There’s always more money, but your time is finite (and don’t let the Gary V-ites convince you otherwise).
Beware your own optimism. By definition, early-stage founders are among the most optimistic people on the planet (because who would subject themselves to this otherwise), but the line between optimistic and over-confident is thin and dangerous to cross.
Putting these concepts into practice:
Start raising earlier than you think you need to (and we mean months earlier). If a founder friend tells you it only took her 2 months to close a $2mm seed round, hang up immediately and call another one. Repeat until you find the friend who barely survived a 6-month slog and take copious notes.
Raise more than you think you need. Take your “base case” revenue projections, cut them in half, then double your spending projections. The resulting number is what you should raise… plus 25%.
Do not chase valuation. Don’t aim for the top of the market; aim for the middle, and if 3 of the first 6 people you talk to comment on the valuation, lower it. For every founder who gets the stretch valuation, there are 10 who went out of business trying. Fundraising takes away from every other aspect of your business; the quicker you wrap it up, the more successful you’ll be.
Sales
While there is universal agreement that you should invest heavily into sales, especially early on, this often gets misinterpreted as indiscriminately throwing money at growth. Notwithstanding the pontifications of a few high-profile folks (who have spent more of the past decade tweeting and podcasting than investing), this is a great way to blow yourself up in spectacular fashion.
What we mean by investing in sales includes (among other things):
Do lots of experimenting. Different channels, different customer segments, cold emails, warm intros, content pushes, etc.
Collect every single scrap of data on your process: what you spend, where you spend it, leads you generate, conversion rates, timing, etc. Even if you have no idea how you’ll use the data today, down the road, you’ll be happy you have it.
Solicit as much customer feedback as you possibly can. This is the best way to refine your process, and it’s invaluable for iterating your early product and refining/prioritizing your tech roadmap.
Focus on low-hanging fruit, and don’t chase big enterprise accounts unless you can afford to do that while also picking up the low-hanging fruit. Remember, the bigger the customer, the bigger the bureaucracy.
In the best case, these customers will monopolize your time for months and make you jump through all manner of hoops before they sign.
Worst case, they do all that and then tell you they don’t have the budget, but you should call back in a year (when you’ll be out of business because you already blew half your runway pursuing them).
In addition to your ticking cash clock, every day your product isn’t being used in a live environment by a paying customer is a day you’re not getting valuable product feedback.
Which fundraising pitch sounds better to you, A) “We have 10 customers at a $10k annual ACV and are looking to gradually move upmarket over time”, or B) “We’re targeting $100k ACV customers and are really close to closing our first one”?
Hiring & Team
Again, with an eye toward managing your resource limitations:
For any early hires who are more senior (read: expensive), if you can start them on a consulting basis with an agreement to make it full time after a mutual trial period, that’s a great way to mitigate some of the risk.
Of course, that’s not always possible and even if it is, at some point you’re likely to end up with at least one expensive full time hire who turns out not to be a fit. Don’t beat yourself up, it happens. What’s important is that you cut bait quickly and move on; it doesn’t get easier with time.
Don’t hand out senior titles to your early hires, even if they’re awesome. It’s possible that your first rockstar salesperson could end up also being great at CRO things (hiring and managing a team, implementing structure and processes, etc.), and if they are, great, give them the title then, but odds are you’ll have to hire for that role later, and it’s a lot easier to do that and retain your rockstar if you don’t have to take away a title from them in the process.
Seeking Counsel
Running a startup is really hard (write that down) and you’re going to need all the help and support you can get. To that end:
Figure out which investors you can be vulnerable with, and don’t hold back. The good ones (like those guys at C2V) will have far more respect for a founder who’s comfortable not having all the answers than one who tries to pretend they have it all figured out. Plus, bottling it up will only serve to burn you out well before you reach the promised land.
Do the same exercise with other founders. No matter what public face you see, every founder is struggling as much as you are, probably with many of the same things. In the best case, you get some great tips from each other; in the worst case, you get some free therapy (which is still a win).
That’s it for now. Hang in there, founders. You’ve got this (and you know where to find us when you don’t).
New Investment
Though it’s been a while since our last robotics investment, we’ve remained bullish on the sector and we’ve had a number of companies that just missed making the cut, so it’s with great pleasure that we announce our investment in Rigorous Technology through our pre-seed Tributary Fund.
Rigorous builds advanced automation software and integrated robotics that solve for some of the most complex industrial automation gaps. While the use of robotics in industrial automation is not new, the initial wave of large-scale development focused on the lowest hanging fruit (i.e., tasks could be automated with the most rudimentary software), but there remain a large number of gaps that still require human labor and many of these roles not only fit the traditional three Ds (dirty, dull, and dangerous), but also require high levels of precision and speed (which would be the fourth and fifth if they started with “d”), making them both expensive and difficult roles to fill.
To date, the only option manufacturers have for automating these tasks (which require software capable of handling complex ranges of motion guided by advanced vision and LIDAR sensor systems) are custom builds that are not scalable, are hard to operate, and even harder to maintain, and are prohibitively expensive.
While the company has successfully designed and deployed prototypes for a number of different applications, their initial focus will be on robotic arms designed to feed box hoppers (pictured above next to co-founder, Dianne Abruzzini). This application is particularly well suited to automation, as:
It is a monotonous task that also requiring a high degree of precision (not an ideal combination for the human brain)
It involves constant lifting of loads so heavy that each shift requires two employees per box hopper so that they can rotate on and off the floor to mitigate injury risk.
Despite this rotation system, it remains among the highest injury rates at these facilities, leading to costly worker’s comp claims and high staff turnover.
Due to speed limitations, the machines are only able to operate at 80-90% of their throughput capacity with humans feeding them.
Future plans beyond the box industry include applications for several other complex automations, as well as designing operating software for large-scale robotics manufacturers (which may eventually allow Rigorous to evolve into more of pure SaaS company).
C2V Watercooler
Chris made an off-the-cuff comment on someone else's posts, and then he decided to repost it for further discussion. WOW, this thing blew up. The one hot topic was point #2 about being a founder before being a VC. Take a look and leave your comments on the post if you agree or not.
Portfolio Highlights
Phalanx 2023 Startup Battlefield Top 20 onstage at TechCrunch Disruptor
TechCrunch editorial hand-selected 200 startups out of thousands of applicants to comprise the Startup Battlefield 200. This year, TechCrunch saw the highest number of applications across the largest spread of countries and industries. Of the 200, 20 companies, including Phalanx, will pitch on the Disrupt Stage. Come watch these companies compete for the Disrupt Cup and a $100,000 equity-free grand prize.
Read the full articles here and here.
Female Founders in Climate Tech
We're kicking off Climate Week early! Join FFF for a virtual panel featuring three early-stage female founders building in the climate tech space: Eloa Guillotin of Beyond Aero, Meredith Danberg-Ficarelli of WATS (Waste Administration and Tracking Software), and Maricel Saenz of Compound Foods.
ChrisFix breaks down the eFlexFuel e85 conversion kit and how to install it. Renewable E85 is an economical solution that reduces dependency on fossil fuel and, as an added benefit, improves vehicle performance. After years of growth — from a small operation in a garage to our current global business, Step One still oversees and manufactures all of our kits in Finland. Maintaining affordable, fast shipping has helped us expand our reach throughout North America —eFlexFuel is investing in growth for the long term.
How this robot janitor is cleaning toilets and doing the dirty work
In a time when AI is being used in everything from sneakers to music and movies, it’s interesting, perhaps even surprising, to see it tackle some of the less glamorous tasks, such as cleaning toilets.
From New York’s backstreets comes Somatic’s autonomous toilet-cleaning robot, revealing that robots can roll up their metaphorical sleeves for the less coveted gigs.
Driver Technologies Launches Driver Trucking
Driver Technologies, Inc.(Driver), an AI-based mobility tech company that delivers a safer driving experience, today announced the launch of Driver Trucking, the first fully cloud-based video solution for commercial vehicles, leveraging its No. 1 rated dash cam app, Driver.
The new Driver Trucking service will provide fleets with a dedicated smartphone device, pre-configured in Kiosk Mode, for employees to run a no-touch version of Driver's top-rated dash cam and safety alert app. The device has an unlimited data plan, so once installed, the camera will auto-start and auto-stop recording when taking a trip and automatically upload the full video to the Driver Cloud for remote viewing.
Blutag Co-Founder Shilp Agarwal attended The Leading Conference for Natural Language and Generative AI. “One of my favorite events of the year - VOICE & AI! I love reconnecting with the OG's and meeting new faces! I also had a blast sharing the stage and discussing conversational commerce with a couple of experts in the space - Dominique (Philipp) Essig & Christian Wuttke!
Thanks, Peter Erickson and the entire VOICE & AI team, for all your hard work in making this community stronger!
3 legal tech founders share their perspectives on raising money in the current environment
Ross Guberman: Legal writing has been a longtime passion, and I have delivered workshops on the topic around the world for law firms, courts, government agencies and legal departments. In 2017, I created a prototype product called ContractCatch, and then we replaced it with our signature tool, BriefCatch, in 2018. It is an editing product similar to Grammarly, specifically tailored for lawyers and with many explanations and examples. We recently introduced our third version [of BriefCatch], which is cloud-based and boasts a range of advanced features. Our subscribers range from individual practitioners to the world’s biggest firms and to many judges and governmental agencies.