Tien Tzuo Profile picture
Oct 26, 2018 15 tweets 7 min read
1/ I recently spoke to @AccelepriseSF’s 9th cohort. Topic turned to how to approach #angelinvestors for #seedrounds. I shared some of these thoughts with @TomTaulli on @Forbes, forbes.com/sites/tomtaull…
but let me expand...
2/ According to @ACAAngelCapital, every year +200k angels invest +25 billion in +71k startup deals! This has changed 3 big things: 1. how formal VC firms operate 2. Silicon Valley’s stranglehold on talent 3. How founders raise funds. Let me explain.
3/ Let’s start with VCs. Initially wary of angels as competitors, they realized that letting angels take the initial bets actually helps reduce risk, letting them focus their own bets. Win.
4/ Startup Hubs. The pattern of successful #founders reinvesting in the next gen is invigorating startup hubs outside of #SiliconValley, which is awesome to see. According to @ACAAngelCapital 63% of angels live outside of SF, Boston, NYC. Also Win.
5/ Founders. This is the biggest change. The rise of angels has changed how #startups get going, making it easier. Also a win! But raising money from an angel is very different than from a VC. The conventional wisdom of #fundraising doesn’t apply.
6/ I witnessed this in 2013 with @joshuareeves who started @GustoHQ with a monster angel-only $6.1M round. He actually TURNED DOWN top tier #VCs to accommodate angels. Wow. So what’s so different about raising from angels?
7/ #VentureFirms are ultimately … firms. All have some kind of disciplined approach. GPs have to justify bets to each other. Cost of choosing wrong is high (loss of reputation, inability to raise next fund). So they really need to know TAM, business model, metrics, etc.
8/ But angels have different motivations: pleasure of giving back, excitement of the tech sector, founders reliving those fun early days, badge of honor of finding the next @uber or @wealthfront.
9/ Angels know their chances of winning are slim. They aren’t about reducing risk, heck they often see it as playing with house money. They are about the pursuit of glory. So if talking to angels, here are some lose/win pitches:
10/ Lose: “We are a mobile content optimization solution.” Win: “We are the Akamai for phones.”
11: Lose: “We are a learning program aimed at legal documents.” Win: “We give every startup in the world their own blue chip law firm.”
12/ Lose: “We are an e-commerce SMS platform.” Win: “We are bringing the Wechat shopping experience to America.”
13/ Lose: “We’re a SaaS platform that accelerates hardware development.” Win: “We’re part of the revolution and revitalization of manufacturing in an age where every product is a smart product”
14/ Your job as the founder: get angels excited about a big idea they can relate to, help them visualize the fun of helping this idea (and you!) succeed. Sell the idea, sell the team. The company will come later.
15/ OK everyone -- please share the best angel pitches you’ve heard! Thanks for reading, and may you and your angels enjoy #theclimbtoabillion! ow.ly/29J630mmdAr

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More from @tientzuo

Oct 17, 2018
1/ Had a CFO of a 100 person SaaS company reach out today for some advice on pricing. Today they sell primarily fixed annual subscriptions. Wanted to know if moving to transactional pricing models made sense or not. Said I was a big fan, here's why.
2/ First, this is where the world is going. Amazon Web Services is getting everyone used to consumption based pricing models.
3/ Second, our research shows usage pricing works. Looking across 900+ companies, we found that companies that use consumption (aka transaction) based pricing see faster growth. ow.ly/r0aA30meLTs
Read 6 tweets
Sep 21, 2018
Thread: Founder/CEO reached out this week for advice. 18 people, one other co-founder, just closed the Series A. Specifically wanted to know how do you learn "trust others" and "distribute power" without "jeopardizing what has been built thus far".
First, huge congrats, Series A a HUGE milestone! And big props for approaching subject with honesty and open mind. Second, suggested she look at this through the lens of managing shift from a 2-tier org (mgr->individuals) to a 3-tier org (m>m>i).
Assuming mgrs have 7 directs on avg, shift happens between 8-57 ppl. Usually around 20-25 ppl. A 2-tier org is flat, everyone reports to CEO (or other co-founder) & knows what all others doing, roles are fungible, decision making is obvious, CEO can direct all decisions
Read 7 tweets
Sep 14, 2018
Thread: Had a 90 min walk with a founder asking for advice. The good: i) Strong growth. Triple digit annual growth as a sub 10M ARR company - check ii) Runway. 6-8 qtrs of cash - check iii) Valuation. Should easily clear last round post at conservative 10x ARR - no down round!
The challenges: i) Scaling sales. Tenured reps rocking it, new reps not so much. Suggested it's time to crystallize the play book, especially around how to ID a real deal. Could take a few quarters to work out.
ii) Management. At 100+ employees the VPs need to be manager of managers. Not all are ready. CEO needs to learn to groom managers of managers, start to be more hands off, still be in details but focus on alignment and accountability.
Read 6 tweets

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