The phrase, “I’m sorry, we just need someone with more experience” is a common refrain when job hunting and when looking for capital.
Today, when fundraising, the majority of investors privilege serial entrepreneurs over first-time founders.
Bijan Sabet, a general partner at Spark Capital, has decided to buck that trend. “First-time founders are so exciting to me,” Sabet says. But Sabet’s view isn’t widely held in the industry at large, so he has a few tips for entrepreneurs making their first trips to venture firms with their hats in their hands.
The importance of a great team cannot be emphasized enough, Sabet says. “First-time founders have to surround themselves with great people,” he said.
The trick is to figure out who will be responsible for each major work stream. “Specialization and clear division of labor is crucial as a startup scales into hyper-growth mode,” he said.
Sabet illustrates this with the Tumblr journey. “David Karp went from a good CEO to a great CEO when he hired Derek Gottfrid as Head of Engineering,” according to Sabet.
To make sure early hires are incentivized, Sabet recommends have a conversation at the beginning about equity and responsibilities. Establish founder vesting schedules. Come to a quick conclusion, and proceed to build the company.
Fundraise with a spear
Account-based marketing is a strategic marketing approach to attain large enterprise accounts in SaaS. As Jon Miller, Founder at Engagio, described it to me, “it is fishing with a spear instead of a net.” However, a similar approach should be applied to the fundraising process.
Dustin Dolginow highlighted that “capital is a crappy differentiator.” Therefore, use the funding process to build a team of operational experts in your domain. Investors will be there “to help you be the most successful you can be,” according to Sabet.
Rookie founders going out to fundraise have very little supporting evidence to back up their claims that investors should part with their money. They have no past success to draw on, no definable traction and have never raised funding before. As a result, product must be core to their thinking.
Sabet described being “hooked as an early user” of Twitter and the virtuous loops inherent within the product. This ability to quickly and sustainably entice investors with the product is crucial.
Ultimately, the checklist for first-time founders going out to raise is endless. However, the common thread throughout is the importance of being strategic.
Be strategic about hiring and assigning responsibilities. Be strategic about choosing investors — this relationship will likely last longer than most marriages. Finally, remember when all is tough and seems lost, 23 percent of billion-dollar-backed VC companies were founded by 20-24-year- olds.