February 24, 2013

Early stage companies are often refining their stories or narratives.  It’s important for lots of reasons – inspiring team members, recruiting, creating focus, getting effective press, fundraising, etc.

From a fundraising perspective, one of the challenges of telling one’s story is that as an early stage company, you are by definition very very small, but you are trying to convince an investor that you can be very very big. I’ve talked about the need VC’s to shoot for HUGE outcomes before.

Telling a BIG story isn’t always that easy.  Some market opportunities aren’t obvious at all.  For example, it was hard to do a bottoms-up or top-down analysis of a business like TaskRabbit in the early days because the company was creating a market that didn’t really exist. Yet, Leah Busque was able to convince some investors (and now quite a few others) that what they are trying to do is indeed very big.

Sometimes, companies try to use analogies to cast a big vision.  Other times, they use buzz words or put themselves in the path of mega-trends. For example:

  • We are Pinterest for X
  • We are a Big Data company
  • We are harnessing the power of collaborative consumption to create a platform for native ads :)

Sometimes, an elaborate story can work. But I think most of the time, simplicity wins.  The problem with simplicity is that it’s harder to suspend disbelief.  Everyone “gets” the story, they just don’t necessarily believe it.  But fundraising is about finding true believers, no converting skeptics.

Two stories I always remember that illustrate this point.  Both were about 4 or 5 years ago before I co-founded NextView.

The first was when I was looking at an investment in the series A for a company named Lumos Labs. It’s a company that makes brain training games, mainly targeted at adults.  At the time, the company was quite early, and had less than a hundred thousand users.  Conventional VC wisdom is usually that gaming companies are hard to back because they are hit-driven.  Also, it appeared that this market was perhaps a little small, and the novelty was wearing off in the wake of Brain Age and other similar games popular on the Nintendo DS system.  That said, I liked the founder and was trying to figure out how to position the company internally as “big enough”.  I did a due diligence call with one of the company’s seed investors, who happened to be an old boss and friend from Ebay named  Michael Dearing.

During the call, I asked about market size, and how he saw the company evolving.  Was this going to be a platform for other game developers?  Was the company going to go into other types of software or products around brain training and aging?  Was virtual goods an additional monetization option?

Michael thought about the question for a moment.  Then he responded pretty matter-of-factly: “I just think they are going to find lots and lots of people who want to play their games.”

That wasn’t the answer I was hoping for. But, turns out he was right. The company has had over 25M members and I believe is doing very well.

The second story happened later that same year (or maybe the year after).  This time, I was meeting with John Katzman.  John is the founder of a number of education companies, including Princeton Review and 2U.  At this point, I was talking to join about the series A for 2U (known at the time at 2Tor) when the company was pre-launch.

For those of you who know 2U, it’s an incredibly promising and disruptive company.  They partner with top universities to offer full degree programs online.  The pitch to schools is that they can expand their impact many times over, without sacrificing quality, and grant full degrees even though most or all classes are taken online. Today, the company partners with great schools like UNC, Georgetown, Duke, USC, and Northwestern to name a few.

When he introduced the company to me, he could have told a very big, broad story about the future of education, the pressure facing brick and mortar shools, and the promise of the internet to disrupt the classroom.  But, he didn’t lead with that.  He had a very simple pitch:

“Without exception, online education sucks. We think it can be really great.”

I think there was an expletive in there somewhere :)

Even today, 5 years later, that same idea is on the homepage of their website.

Screen Shot 2013-02-21 at 9.48.30 PM









Wonderfully simple… and big.

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  • Rob Go
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    I really can't stand the smell of the stale air on the Acela. Makes me want to puke every time
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    RT @joshelman: Soldiers are very different than mercenaries. You need people committed to the cause
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    Congrats @hardi_meybaum on your new role with @MatrixPartners They are very lucky to have you. Hope to work together soon!
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    congrats to both @hardi_meybaum and our friends at Matrix for teaming up!