Johnson Cook

Atlanta tech investor. Entrepreneur.

Johnson Cook - Atlanta tech investor. Entrepreneur.

How to Raise Early Stage Money in Atlanta

 

atlanta_skyline_sunsetFirst time entrepreneurs in Atlanta who are very early stage on their startup, often ask me simply: “How do I raise money?”

It’s a very clean question. I usually tailor an answer somewhat specific to their unique situation, but there are common threads that any entrepreneur can understand about early stage money in Atlanta. I do specifically mean this for Atlanta, because raising risk capital in different parts of the country will vary wildly.   Some tips.

1. Keep your head down and power forward at all times. Raising capital is a consuming activity. It can be all-consuming for many entrepreneurs. However, at early stage when there are often only 2-4 people on the team, losing 25-50% of the team for any period of time can slow the progress down severely. It’s important to keep your eye on the ball that matters.  Until you see that capital is imminently inbound, don’t let its pursuit consume you.

2. Build as if you will never raise money. Always remember that investors want to the guy who doesn’t need their money.   So go ahead and build according to the plan of funding your growth with your own profits. Be an aggressive bootstrapper. Build, sell, learn –> then repeat. Keep doing this and your flywheel will start to turn.

3. Act as though you don’t need money.  This means really believe in your plan and path to accomplish #2.  If you don’t believe in your plan to grow the business with profits, then come up with a plan that you can believe in.  I know this advice is contrary to the Valley mentality of users before revenue, avoid services at all costs, etc… but all I’m saying is that if you have this plan but you understand the alternative approaches, you are more attractive to investors. Once you have actually raised some money, you can change the game. But before you do, you are better served behaving like you don’t need it.

4. BE EXTREMELY AND EXCESSIVELY VISIBLE! The keystone to all this working to help you raise money is that the investment community needs to know about you.  Paint a mental picture: it’s you  sitting in the corner toiling away at something awesome while everybody else is dancing and singing about how great they are in front of the investors. Except, here’s the magic: figure out how to get a spotlight accidentally shining on you while you sit in the corner.

- Network your ass off: but do not directly ask each person you meet if they will invest in your company.  Actually build real relationships.

- Be at lots of events: but only the right events, where the right people are attending.

- Pitch at demo days: but don’t pitch your future $100 billion market potential, pitch your traction.

- Go deep (not just wide) with your network: Don’t just meet at networking functions and trade business cards. Follow-up with lunch dates. Ask each lunch date for two contacts, and continue down that path FOREVER.

- Don’t ever disappear or give up on the networking and relationship building. Host parties.  Plan trips. Be unpredictable. All these things will put your hard work in items 1, 2, and 3 in the limelight and investors will start to see something shiny that they think perhaps other investors aren’t seeing.

5. Commit to Atlanta.  Atlantans love Atlanta. Especially Atlanta investors. The more deals that happen in the local ecosystem, the more everyone benefits.  Don’t be shy about being proud of your city, making public your commitment to helping it move forward and thinking about the ecosystem.

6. Be confident and be bold.  Building a company takes guts. If you’re up for the challenge and you take it on head first, people will notice. Specifically, investors will notice.  Investors are looking for good deals just as much as startups are looking for investors. Have confidence.
It’s a great time to be raising money in Atlanta right now. Access to smart money and the people that come with it who can dedicate energy to your success are abundant. Now go make sure they know about you.

 

For more reading, here’s a post on Quora about expectations of dollar amounts when raising early stage capital.

 

Market Understanding for a Startup Raising Money

 

In every checklist of a good presentation to investors, startup entrepreneurs are taught to present their market data.  To teach the investors about the market is the goal.   I think too often though, entrepreneurs are misinterpreting what is the most valuable market data to show.

Maybe I’m just a simple farm boy, but to me when you show a slide outlining how you are going to attack a 14 quatrillion dollar market and your market share will be 10%, this doesn’t compute with me. It sounds nice to say big numbers, and I would love to see that you had already done that. But I believe the value of putting a number on the entire market size in early-stage startup is next to zero.

Instead, what I believe it more valuable for an entrepreneur is to have (and demonstrate) a personal, intimate understanding of the pains of the buyer and specifically why they need your product.   When a startup shows a severe pain that they can solve, that the person with the pain has the means to pay for the painkiller, that there are a lot of those people… that, to me, is market understanding.   By the way, major bonus points if you also know intimately from experience how to find those buyers with the pain and the money.

In early startup phase, especially in a B2B startup, this intimate market understanding is much more valuable than your calculation that if 1% of the population of China buys your product, you will have McLaren Money.

 

 

 

House Parties and Investor Pitches Get You in Gear

 

step-functionEver notice how hosting a party makes you clean up your house to new levels?

My confession: I love hosting parties at least once a month, selfishly, for this reason. After a party, aside from the bags of wine bottles to haul to the trash, our house is much cleaner than it was the day before.  Hosting a party makes you act on things that you look at every day and aren’t motivated to act on.  It’s a trigger to elevate your motivation.

There are a lot of these triggers in an entrepreneur’s journey, and these are some I’ve been thinking about lately.

  • Investor Pitches. Events like Venture Atlanta, are great for companies at any stage. Whether you’re profitable and 10 years old or 2 weeks into your startup, the act of preparing to discuss your company with 750 investors is a beneficial and healthy exercise.   I confess that I’ve advised people to apply to present at Venture Atlanta even if they have no plans to raise money.  By preparing a presentation, you get your books together. You get your strategy clean. You review your team.  You take the opportunity to look at your company as an investor will. Perhaps you will find that there is some clutter that you otherwise were satisfied to leave sitting around.
  • Client office visits. I remember when we had our first big client want to visit our office with Impact Media Solutions.   We had a crappy, cheap office space with ants, roaches and an always drunk property manager (literally). Our conference room doubled as our server room, complete with messy cabling, eBay acquired PBX and all. The vision of what we wanted the office to be when we talked about our company was far from the real-life situation. However, a big client want to come meet with us at our office and discuss our proposal to manage digital media for their very large mega-conference.  They would become our largest client by a factor of 2x, if we won.  The pressure was on to reduce the gap between “as is” and “to be” in the office!    It was healthy for the entire company to clean up and plan to impress.   (Probably not because of the office, but we did win the account.)
  • Recruiting a rockstar. Admit it. We’ve all done it. When you’re trying to grab that GT kid or that awesome sales guy from the competition, you want to bring them into the office and show them how great it is to work here.  Perhaps in this instance, you may not be showing office the physical space as much as the cultural vibe. You’re thinking a little bit more about whether your current team is happy or looking for other jobs.  Having to impress a new team member causes you to focus on your current culture as perceived by an outsider. Hopefully you find some things that can be dusted off.
  • If you have kids… Back to school time.    As this summer came to an end, I found that while my awesome wife was buying new shoes, getting haircuts, backpacks, school supplies, and lunch boxes;  I took the opportunity to organize some things in my work life.  I realized that some things in our house needed reorganizing to optimize for morning routines before school and I also took the opportunity to catch up on some back-logged blog posts to finish. Being in the mindset of catching up and organizing can extend throughout many areas of life.

I love these “step function” approaches to moving forward areas in life. Look for reasons to take a giant step forward, embrace them, and then find another one.

 

 

The Book Writing Dilemma

 

snoopy_writingMost entrepreneurs and bloggers I know have written a book or have plans to do so. I’m one of the latter.

However, since I started this blog, I’ve discovered that I enjoy writing most when I’m writing for myself. Not for an audience. I have no market research or polls that drive my content. I also am not trying to push a product, brand, or hidden agenda. It works for me because it’s just works for me.   If you happen to enjoy what I write, that’s totally by accident.  You are spying on me, but thank you for the accountability.

So I thought I’d share publicly that my bucket list item of writing a book poses a challenge. Of course I want it to be “good,” but what is the definition of a good book?  Typically (ok, always)- a book success is measured by readership… right?   Copies sold?   Ratings and reviews?

It’s hard for me to go into a project where the measures of success are already measures I openly don’t care about.

I would really enjoy writing a book. I would enjoy the extended 3- to 9-month  focus on a single outline. I would really get tons of satisfaction out of a finished product that I could hold and call my own. Maybe my kids would even read it one day.  But is that enough reason to write a book?  Just because I want to do it?

So what to do? Drop the idea and just keep writing here? Or do it, spend the money to get it out there, and call it a learning experience to mark it off the bucket list?

 

Observations of Trying on a New Hat – Entrepreneur to Investor

 

Bad Ass Bumblebee TransformerWith the launch of our Atlanta Ventures Accelerator along with some opportunistic angel investments through Atlanta Ventures, I’ve had the opportunity that is one of the most fun for any entrepreneur: to wear the hat of the investor.

No telling where exactly I will land in the bell curve of how well entrepreneurs transition into successful investors, but so far I feel like it’s a natural fit: given my love for connecting people, helping those I can help, and focusing on the right people for the right roles with the right values.  It’s also exhilarating and educational given that I’ve always bootstrapped and never had the opportunity to raise equity money in my previous companies. We always used personal credit cards, family, and bank debt to get from point A to B.   (I’m not sure I would do it that way if I had it to do over again, but that’s for another post.)

Some observations that any entrepreneur who transitions to investor will experience:

Optimism’s Complicated Role.

This is by far the biggest contrast between the two roles. Typically, the most successful entrepreneurs I know are the most optimistic ones. It’s not that they don’t acknowledge the dangers and challenges out there, it’s that they choose to focus on their resources at hand, and the vision of what they’re trying to accomplish. They are constantly and relentlessly optimistic. I’ve been told a few times that this describes me.      Now that I’m wearing the investor hat, however, it is impossible, and as such, ill-advised to invest in every opportunity that comes along. :)  (That’s putting it lightly. )     I meet tons of amazing people. I hear about countless brilliant ideas. Yet, optimism as to be put aside and realistic measures of probability of success have to be counted on when making decisions about a very limited supply of capital and unlimited demand.

At SxSW last year, Peter Theil describe a quadrant of macro economic sentiment.   It crossed Informed vs. Uninformed with Optimistic vs. Pessimistic.    His point of the talk was to say that we are currently in the  quadrant of Uninformed-Optimism.  He generalized that we are happy about the world right now, and we are saving up tons of cash, but we don’t really have a large purpose of overall societal goal.

That’s a long way to say that the frame work of Uninformed Optimism vs. Informed Optimism is how I have to think about investments we make despite my naturally optimistic tendencies. Where an entrepreneur can typically do well with Uninformed Optimism as the M.O., an investor must be informed about the Optimism. There must be overarching goals with intentional strategies and directional control from Day 1.  At a minimum, there must be some basis for the decision to invest other than “it just feels right.”

Patience.

As an entrepreneur, I can’t tell you how many times I would think of a new idea or direction as I was falling asleep and jump out of bed to spend several hours in the middle of the night creating, launching, building, or plotting. As an investor, everything is driven by conversations with people. I cannot decide that tomorrow I want to meet 10 investable startups. It just won’t happen.   I can control only one thing– the top of the funnel. I can meet more people. I can help my team meet more people. If we fill the top of the funnel, we will find some percentage of investable deals.   This is a fun transition for me.    I’m not sure I would have had the patience for this just 5 years ago.  It’s a new understanding of slowing down to go faster.

Freedom and Joy of Accountability.

It’s not secret, just like most VC’s out there, I too am using mostly OPM in these investments.  As a bootstrapped entrepreneur, I reported to nobody but my customers (and I can fire them).   If I felt like a half-ass year was ok with my bank account, there was nobody to discuss it with except my wife.      Investors with Partners who fund the activities however, have a fiduciary obligation to deploy capital and answer for the decisions made.   I have to be honest, I absolutely love this structure. It gives me a needle to move and for some reason I do much better when challenged externally.   If left to my own money and total freedom I find it hard to achieve the same focussed staying power.

Helping Seems Easier.

Because I meet so many people every week (for details on this, read The Grind post by Fred Wilson. This is spot on.), I find it much easier to make connections that change trajectories for people.   For talented folks looking to be placed, I have no problem finding them a role in some startup I’ve met… same goes for startups looking for team members, customers, or even additional investors.    I felt connected as an entrepreneur, but nothing like now.

Gut feelings still help, but must be checked.

Believe it or not, a gut feeling comes in handy as an entrepreneur turned investor, but there’s a caveat. First, it requires the self-awareness to know that my FIRST gut feeling almost every time will be an optimistic one.  After I’ve gotten over that and still like an opportunity, I’ve already benefited from acting on a gut feeling either positive or negative. When a fut feeling turns out to be right, it’s awesome.

I enjoy this new hat very much and look forward to sharing more thoughts here on the journey.

 

 

An Antifragile Team – When Each Person Stands on Their Own Two Feet

 

I adore the team we’ve assembled at the helm of the Atlanta Tech Village  They are amazing individuals who impress and inspire me every day. They believe in what we’re doing, they take ownership of everything, they get along, they are nice, they don’t hesitate to dream big, and they sure as heck know how to work hard and play hard!

One observation that I think makes this team especially unique and should be the goal for every startup: each team member can stand on his or her own two feet.    What do I mean?   Here are some examples and observations.

  • Self Confidence.  This is the biggest. Each team member has confidence in his or her abilities. This leads to much cleaner communication, more efficient and healthy disagreements, and a “presence” that just makes it enjoyable to spend time with them.  I’m not sure how to describe someone’s presence, but I think you know what I mean.  You just have this feeling that they have their shit together.
  • Passion. Not just passion for what we’re doing, but passion for life all around. Passion fuels ability. It gives it legs.  Passion is the salt that makes anything worthwhile.
  • Side projects. I love that we have personal blogs, side contracts, weekend gigs, non-profits, even book projects underway. It gives us all the balance to keep our sanity and to not over-focus or burn out on the Village. After all: (job != life).
  • Meaningful activities.  I also find it super impressive that many of the non-Village activities our team engages in are related to non-profits or other causes that they find important. This is just the same value that entrepreneurs get from being involved in a religious or spiritual group. It gives you a greater sense of perspective on where you stand in the universe. Keeping this perspective is key.
  • Relationships.  Having a team that each has their own strong networks can be a powerful accelerant for any organization. People make the difference. People who know more people can make a bigger difference than others.   (Granted, we aren’t a tech company therefore we don’t have any introverts… so that does skew this crowd a little.  Heck, even our accountant likes to party!)
  • They Choose to be Here.  I think all of the above items lead to this one.  Each team member has the resources, confidence, and abilities needed to go get any other job they want. They aren’t here because it’s the only option. They’re here because they choose to be.

This is an antifragile team.    We could pull the Tony Hsieh and offer them $2,000 to quit and they wouldn’t even consider it.    Every startup should make this the goal. The best team is the team that doesn’t need you. They choose you.   The amazing things they will accomplish will change your organization’s trajectory!

So here’s the quick shout out (in no order) to the awesome: Lindsay, Karen, Erin, Ben, TPaz, Durrty M (yes, two R’s), DLight, Kaitlyn, and JPach.  Thanks guys.

 

ADHD Writing Habits

 

Batches of content. That’s how I approach this blog.  Thank goodness for WordPress “schedule post” feature.  I haven’t found that the discipline that others have to sit down at the same time each day and be able to produce works for me.   It just doesn’t. What does work though, is to have the tools in place when a surge of ideas come to me. I work in Evernote. I have different notes for different thoughts, posts, and projects.

When I’m in “work mode” (not writing mode) … that is, responding to e-mails creating/reading official documents, or spreadsheets, I embrace the need to focus. I try to close e-mail (unless that’s the project) and never leave the window on screen that requires my attention to complete the project.   It’s hard to do, but it leads to GSD.

On the other hand, when I’m writing, I find that one idea will lead into another thought that deserves a separate thread. I guess this is embracing the ADHD. I’ve now learned the habit of grabbing it, jumping over to a new note and starting there.  It has worked well. I usually am able to jump back to the original note/thought once I’ve completed the tangent and sometimes I realize it’s not worth posting and should be trashed, but other times I have clear thinking and finish it easily.

I’m just now realizing how ADHD this is, but it really works for me, and it’s part of the reason I’ve started to enjoy writing so much. I’m just going with the flow and not trying to force it.

I believe that enjoying the act of writing is the only way you get any value from it. If you don’t enjoy it, your output sucks and nobody cares.   At least if you enjoy it, even if your output sucks, you’ve already gained the value you were seeking from the act of doing it.

 

 

The Atlanta Ventures Accelerator – Background Ideas and Thoughts

 

Johnson-Cook-David-Cummings-Jamie-Hamilton

Johnson, David, and Jamie. Photo by my main man, Byron Small

Last week was exciting for the Village and for Atlanta. On Friday we announced the Atlanta Ventures Accelerator in this article in the Atlanta Business Chronicle and David’s blog post here. I’m super excited to be bringing this to life in partnership with Jamie Hamilton and Buckhead Investment Partners

It has been a 7-month process of reviewing our options for an accelerator and I wanted to share some of the thoughts, ideas, observations, and common questions that went into our thinking.

Does the world need another accelerator?

This was the question we kept asking ourselves as we considered whether or not to do this.   The answer: The “world” definitely has too many accelerators. However, I’m not concerned with the world… I’m concerned with Atlanta.  Atlanta does not have too many accelerators.  Atlanta has far too few accelerators, incubators, investors, and startup support organizations.  There are too few faces and names. It only takes a few weeks to get to know most people. That shouldn’t be the case. Atlanta needs more of everything in the ecosystem. More full time entrepreneurs, more angel investors, more angel funding organizations, more VCs focused on early stage tech, and of course more exits and big success stories.   The Atlanta Tech Village is a great platform, but it’s not the answer to all our needs. The Village is *a* leader (not “the” leader)  in a regional thirst to bring more programs and platforms like it to this already high-energy ecosystem.

Why are we non-cohort based?

The biggest reason is that we don’t want to be pressured by a scheduled start date to accept a specified number of companies.  We plan to be extremely selective in the companies accepted and by not placing any pressure to get X startups in the same cohort, we can take our time and be sure there is a total fit of the teams we accept.

Additionally, many of the benefits of a cohort driven program are the peer interactions. Because we are building this program into a Village where there are already over 100 startups and 300 people working on startups, we have no shortage of peer collaboration. We can leverage the existing community to bring that critical peer sharing and accountability aspect to the program. Most other accelerators don’t have this existing community on which to build. We are fortunate.

Structured curriculum?

Every startup needs different things. After speaking with several hundred startup entrepreneurs, we find a broad spectrum of domain expertise, customer understanding, product value proposition, and business model understanding. We weren’t able to identify a program that would be a one-size-fits all value proposition for startups. Instead, we decided that the investment terms of TechStars ($20k for 6% of the equity at a financing of $500k or more, plus a $100k convertible note) is the main common element that we felt appropriate to embrace.  More of a hand crafted approach than a factory production line (for now).

A Lean Accelerator

We aren’t seasoned accelerator directors, if there is such a thing. Admittedly, we are new at this approach compared to the YC’s and TechStars leadership. If we’re going to learn how to run an accelerator, we want to do it the same way we would start a company. One customer at a time. Lots of conversations. Lots of build -> measure -> learn.    We’ll figure out the best structure as we go. Of course we’re paying attention and learning from those that have gone before us, but we also want to learn our own lessons. Scrappy.

A single and simple KPI  

Everybody gets on base. It’s a money ball approach to accelerator.  The seed round is the goal for each of these companies.  How they get there will be different for each company. Some will have a product and need customers, some will need to spend many weeks on customer discovery. Others may have product, customers and revenue, but just need the contacts to raise the money.    Our goal is to do whatever it takes to get each and every company to that next step. Again, this is why we’ll be really selective on the front end.

What are you looking for in companies?

It’s nothing new. The right team. The scrappiest hustlers who know their space have focused energy, the gumption to put things together and make them work, and the polish to present themselves as adults (when called for)… but who don’t take themselves too seriously.   Nice people, who are dreamers, who pay it forward and know how to work hard and play hard.

It’s an exciting time for Atlanta and we hope the Atlanta Ventures Accelerator will be more fuel to the flame. To learn more and apply: atlantaventures.com/accelerator