By: Kyle Westaway
August 24, 2017
Two companies really caught my eye at Y Combinator Day this year. They are both blending profit and purpose, and if successful they will create significant impact in the sectors of health and employment. (more…)
April 13, 2017
A good deck is central to fundraising. It frames the conversation in a familiar format for investors and serves as an important visual aid while pitching. There are hundreds of well discussed approaches to building a deck but many founders still struggle. Here are 10 slides that work well at the seed stage.
Slide 1. The Problem — Grab investor attention by immediately presenting a specific problem, which they’ll agree should be solved urgently. Don’t begin with a personal story detailing the source of your passion. Support your assertions with data and focus on the customer pain. For example, don’t say: “Travel industry software is bad”, instead say: “A TripAdvisor survey found travel agents waste 40% of their day on bad software workflows”. (more…)
March 24, 2017
Deciding the best legal structure for a social enterprise can seem like a daunting, high-stakes task.
This post is designed to help social entrepreneurs and their attorney progress through a clear process for understanding how to structure their organization to maximize their social / environmental impact. I’ve developed and refined this method by working with hundreds of social entrepreneurs, getting input from fellow attorneys in the field, research and teaching the topic since 2008. Though this decision is never simple, the goal of this process is to reduce complexity, confusion and give the social entrepreneur a few clear options.
Progressing through the process will help narrow down the potential legal structures from 7 to 2 or 3. (more…)
March 23, 2017
In 2016, the number of seeds has fallen by a 27.6% reduction in the number of seed rounds. But as the chart above shows, the median amount invested in seed rounds continues to increase at about 40% annually. This trend started in 2014 and has continued through the first quarter of 2017. These two forces in opposition netted a 10% increase in total dollars in 2016.
The average number of investors per seed round has plateaued at about two. A few years ago, party rounds seem to prevail in the press. But data doesn’t support a broad change. In fact, the distribution of seed investor count hasn’t changed materially over the last seven years. It’s quite nearly always 2.
The big trend is the increasing prevalence of second seed rounds. Second seeds are seed rounds raised after an initial seed round. Though quite rare in 2010, startups have raised more than 750 second seed rounds in each of the last three years.
Second seeds now represent approximately one in three seed rounds. This is a big contributor to the increase in median seed round size.
Several founders have asked me recently how investors perceive second seed rounds. This data shows that they are broadly accepted as a common way to finance an early stage startup. There is no stigma with these rounds.
The chart above shows the median amount of a first seed round and a second seed round. The first seed round has persisted below $400,000 throughout the dataset. The anomaly in 2017 is due to an outlier. Only one company has raised two seed rounds so far in 2017, qualifying it into this dataset.
In contrast, median second seed size has more than doubled. Since 2013, median second seed size has increased by 18% annually. It now exceeds the overall median. Startups that raise one seed round typically raise $1.0M in that round, compared to startups that raise two seeds, who raise about $1.6M across those two rounds.
The very earliest investors’ appetite and deal structure seems not to be changing. However, the increases in second-seeded rounds suggest investors are competing more for these opportunities. Consequently, round size and valuation increase.
Overall, it is difficult to paint the seed market is anything other than healthy. The total amount of capital available to seed startups is constant. The amount they can raise is increasing. Second-seed have become ubiquitous. All of these different factors contribute to strong financing market to support the very earliest companies.
Originally published on 3/20/2017 by Tomasz Tunguz
February 11, 2017
“If you want to build a ship, don’t drum up people together to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.” – Antione de Saint-Exupery
Newton’s ﬁrst law of motion dictates that an object stays at rest until acted upon by force. Even if that object is the best-designed product, it will never be successfully launched without exerting the right amount of force to get it in motion. That is what the building phase is all about—igniting the momentum necessary to launch a great product and a great company.
The most important factor in this phase is hustle. So many pieces need to fall in place, from press to design to distribution, and at the prelaunch stage getting support and funding can take a good deal of persuasion. This is a messy process for many founders, of ﬁts and starts, with daily challenges and many setbacks. Just think of how many of those the Embrace team had to overcome. Often the only way to succeed is with a great amount of audacity, energy, passion, and sheer hustle to rally all of the resources, people, and ﬁnancing required. (more…)
Many founders feel a great sense of urgency to get up and running, and they are too hurried in launching and then give up too soon if the service or product doesn’t take off right away. Another key problem in this phase is that once they’ve created a business plan, they follow the plan too rigidly, mistaking what should be only a rough guide for a fully worked-out business model. A third common mistake is believing that they have to have all the answers and should be able to design their product or service on their own or with only minimal input from others.
The stories of successful social innovators, however, clearly demonstrate the value of taking a more user-focused and iterative approach to designing your product or service. Every one of the enterprises proﬁled encountered unexpected setbacks and had to scramble to make improvements to their concepts or products, often making a substantial pivot away from the original plan. It’s not important whether you follow the Lean Startup methodology or improvise your own particular development process, but what’s vital is that you approach the process with a good dose of humility, not believing you’ve got answers, but rather that you’re testing hypotheses, and that you move forward according to these three steps:
November 16, 2016
On Halloween 2007, a room full of employees waited for a secret announcement. Two men emerged at the front of the room dressed in bee costumes and revealed news that would alter the course of two companies.
The men in the bee costumes were a senior vice president from Clorox and the general manager of Burt’s Bees. They were announcing Clorox’s acquisition of Burt’s Bees for the cool price of $925 million. The beloved all-natural products brand was joining the ranks of a company known for its chemicals.
Was Burt’s selling out?
September 1, 2016
This week charity: water celebrated its 10-year anniversary. In that time they have raised hundreds of millions of dollars, which has funded 21,118 water projects providing clean water to 6,400,000 people in 25 countries. Did you ever wonder how an organization that has such a big impact got started?
This is the surprising story of how social entrepreneur Scott Harrison went from a club promoter to running a global social enterprise.
Every social enterprise has a founding story. If you’re interested, click here to download Discover Through Curiosity, a chapter from my book Profit & Purpose that details the founding story of Warby Parker, Method, Embrace and Burt’s Bees as well as gives clear actions to apply to your own social enterprise.
August 2, 2016
If you have an existing company, you can elect to become a benefit corporation by amending your governing documents. In most states, amendment requires a 66% super-majority vote of all shareholders. This high threshold of approval is an important element of the B Corp structure.
Converting from a traditional corporation or LLC to a B Corp changes the goals of the company and thereby alters the relationship between the shareholders and the social entrepreneur. Under a B Corp, the mandate of the company shifts from a narrow focus on pure profit maximization to a broader focus of creating a positive impact on people and planet while still making a profit.
At times the pursuit of a social / environmental impact can have a negative impact on profitability, which can create tension between the shareholder and social entrepreneur. Under a traditional corporation, the investor has the right to sue the entrepreneur if her decisions to create a social / environmental impact has a negative financial impact. (more…)
August 2, 2016
The B Corp is a new type of corporation for a new type of entrepreneur, the social entrepreneur, who creates business models that benefit society, the environment, employees, customers and investors. These social entrepreneurs increasingly demand that business serve both shareholders and society, considering the impact of their decisions on multiple stakeholders rather than maintaining a singular focus on short-term maximization of financial profits.
B Corps are designed for companies that are intentionally seeking to create a material positive impact on society and the environment, in the operation of their business. If that purpose does not effect the manner in which you operate your company, then the B Corp may not be a good fit for you. (more…)