8 August 2013. San Francisco is the place where I’m spending the summer of 2013 to find investors for my own idea. My time here has been an incredible learning experience that is worth sharing with everybody interested in the American way of startup business.
- Listen to advice and don’t be scared to pivot.
When I arrived in San Francisco I had a totally different idea in my mind than the one that I ended up pursuing. Your idea might sound great in theory, but be sure that you discuss it with experienced entrepreneurs before you start spending time and effort on it. Experienced entrepreneurs have a different perspective on ideas. While novel entrepreneurs approach ideas with very idealistic and theoretical minds, experienced entrepreneurs have dealt with the difficulties posed by having to generate demand for their products and know real customer behavior. What you think would be great for customers might not be what they actually want. Many startups begin with a different idea than the one they became successful with. Before you start talking to investors, get accustomed to the Silicon Valley scene first. A lawyer from WilmerHale said to me, that many European entrepreneurs meet him with good ideas that he has heard dozen times before already. What’s new in Europe might not be new in Silicon Valley!
- It is immensely difficult for startups to change customer behavior.
Customer behavior and habits are difficult to break if your startup doesn’t add a significant improvement to existing solutions or show a significant advantage over competitors. The best advice that I got here was to “build a painkiller, not a vitamin.” Customers will not change their habits for slight and incremental improvements. They want new solutions! However, don’t be too radical with your new solution. Your customer might not understand it. Here you must find the right balance between novelty and something that the customer can still relate to.
- Don’t be afraid your idea gets stolen.
Go out and tell as many people about your idea as possible. You will have to have the confidence that you are the best person to execute this idea. If you are confident about this, you will not have to fear copycats. If you realize that you might not be able to compete against others executing the same idea, you should definitively sit down and rethink your approach. Feedback and advice are the most valuable assets you can get in entrepreneurship. However, it’s always your choice whether you want to follow the advice or not. You don’t have to bend over backwards just to make everyone happy. If you feel the advice is going in another direction that what you would want for your startup, then discard it!
- Advice is not limited to the people you know!
Find experts in the field that you are working in and cold email them. You will be surprised how many of them will actually respond as long as you are able to draw a strong argument why it would be of their interest to do so. San Francisco is very different in this point from Europe. Quoting a Swissnex employee I met over coffee: ”In Europe you need a protocol to meet somebody. Here having coffee together is enough of a reason.” Cold emailing people should not fail because you don’t find their email addresses online. LinkedIn is a great tool to contact people you don’t actually know. As a last resort you can always try out different variations of their name combined with the company email address.
- If you want money ask for advice. If you want advice, ask for money.
This statement is self-explanatory and a great example of how human psychology works! Ask for advice and if they like you and your idea they will help you. If the help you need includes investment, they will do what they can. If you ask for money from the very beginning they will treat you with more caution and be more critical. This often resorts to receiving more advice on how to improve your concept and asking you to come back again once you’ve implemented their advice. In these cases be sure that you take good notes of all that they have asked you to do, make a checklist and complete all their requirements as soon as you can. Then follow up on them, thanking them for their great advice and tell them it’s all implemented! This leads me to my next point…
- Be persistent!
Persistency is not frowned upon here in San Francisco. It is also not considered impolite. It actually shows that you actually mean it! It shows that you are not willing to give up easily. Therefore, don’t be afraid to follow up with people frequently. Don’t spam them, but a friendly reminder every once in a while is necessary when talking to people that are always busy. Sending out updates to everybody on your mailing list is also a good idea.
- You need to network.
The San Francisco community is very tightly knit. If you want to find investment or advisors you need to be introduced by somebody they already know. This means that you will have to spend a considerable amount of time networking on entrepreneur meetups. With everybody that you meet there is the potential that they can refer you to a big shot, you never know. This also means that you have to be an outgoing person and not afraid of talking to strangers, pitching on the spot and engaging in random conversations. This is something that Europeans might find difficult at the beginning… but after some practice, it becomes less awkward and more natural. Events in San Francisco can be found on Eventbrite and Meetup.
- If you want to approach investors, approach their portfolio first.
If you have a particular investor in mind that you would like to talk to, a good way to approach him is to go through one of his portfolio companies. The founders of startups are much more approachable than investors who receive hundreds of emails every day. Emails sent by one of the CEOs of companies that he has already invested in will be definitively read while a message sent by you most likely will be deleted. Therefore, you should look through the portfolio and identify the startups that are similar to your startup and email them for advice. After you have built up a good relationship with them, you can ask them to refer you to their investor. If they really like you, they will offer it themselves.
- Your pitch deck needs to be “Silicon-Valley-ready.”
When I met with the German Accelerator here in San Francisco and mentioned that I had a pitch deck ready to be sent out, the first question was: “Is it ready or is it ‘Silicon-Valley-ready’?” Our European standards for pitch decks are not enough for Silicon Valley investors. Design and visualizations are essential. You can easily find pitches from Airbnb and likes on Google that can serve as a guideline. Also, be sure that a US American goes through the pitch and looks at language. You want to talk the same language as the investors. Words we learn in university might not be the best ones to use in a pitch deck. Direct translations from German are also very dangerous.
- Make bold statements. Be confident.
Europeans are very humble compared to Americans. Get rid of this habit as soon as you can. Investors and advisors react to bold and strong statements made by confident and strong people. You want to stand out, you want to convince them of your ability to deliver and execute. You should start behaving like that. I know that this seems very awkward at the beginning. In Europe we don’t want to be known for bragging. Here in the States everybody exaggerates and you should not be the only humble person in the room who downplays all their achievements.
Use this advice with your instinct. When you feel that humility is expected, trust your instinct and forget what I said. In your pitch you want to be bold and confident, trust me!
- Start with a number.
Big numbers always attract attention. You should be able to show that there is a market for your product. The market should be growing and not stagnating. You want to tap into an existing but somewhat inefficient market and improve it. As compelling as it sounds, don’t say that you are opening up a new market. New markets sound risky and there is no proof that the market is really there. A better way to say this is to take an existing market with huge potential and transform it in some sort of way!
- Show the potential to the investor.
Your pitch should start with a number that reflects the potential of the market. That guarantees attention from everybody you are talking to. Not everybody will like your idea or be interested in your concept. But everybody will be interested in the market potential. After showing the potential your idea becomes secondary. It doesn’t really matter what idea you have come up with to tap into the market potential. I’m sure there are tons of different possibilities of how to tap into the market! But as long as your idea seems to be a suitable solution for the existing market it will be a good idea.
Laura Behrens Wu has studied at the University of St. Gallen and Harvard College. She is just about to finish her graduate degree and spent her summer in San Francisco to learn from LendUp, a YCombinator company, and to fundraise for her own startup, Popout. Popout is a curated e-commerce store that sells products with a story and it just launched its referral system.
picture: emmanutella / photocase.com