Beshore on the Lower Middle Market

Brent Beshore with some comments on smaller PE deals.

“My advice to someone interested in buying a company for the first time is to have at least three years of runway available. The first year will be spent generating opportunity costs. The second year will be spent negotiating, re-negotiating, diligencing, and likely failing to close a deal. The third year is when something from the first year comes back around and can get done.”

Tren Griffin on Modelling Subscription Businesses

“Spending money on a growth hypothesis before a value hypothesis is a classic way to suffer horrific churn.”

And how to model lifetime value of a subscriber:

And further on the same topic as regards MoviePass:

h/t Patrick O’Shaughnessy


NPS Scores

I love Leo Polovets, aka coding vc. He just sent out an email with some helpful reference NPS scores –

  1. It’s hard to earn a high NPS score. I sent every participant a short, anonymous follow-up survey. 39 people filled it out, and my NPS score was 56. This is pretty good, but could be better. (A few reference NPS scores: HSBC Bank = -13, American Express = 41, Google = 53, Amazon = 69, Costco = 78.) I now have even more respect for startups that report NPS scores of 70 or 80.

There are also some helpful lessons learned about office hours for founders, which I’d like to archive for myself here –

Office Hours with an Engineer Turned VC

By Leo Polovets

Last year, I experimented with VC office hours for the first time. People were invited for 25-minute sessions where they could ask me whatever they wanted for 20 minutes, and then they would teach me something for 5 minutes.

The experiment was a success and a lot of fun, so I’m going to repeat it this year. The first part of this post covers details for 2017 office hours, and the second part of the post covers some of the lessons that I learned while conducting this experiment last year.

2017 Office Hours


40-minute time slots for office hours with me. I was a software engineer for 10 years (very early at LinkedIn and Factual, not-so-early at Google). I transitioned to venture capital about 5 years ago, and I’m a cofounder/partner at Susa Ventures, a $50m seed stage venture fund.

When and Where?

  • Dec 21 (Redwood City)
  • Dec 29 (SF)
  • Jan 2 (SF)
  • Jan 5 (SF)

The time slots will be between 10am and 6pm.

There won’t be any online/remote sessions — I tried that last year and it didn’t work as well as in-person.

Who is this for?

Current and aspiring founders in the SF Bay Area.

How to Apply?

1) Please read the FAQ below.
2) Please fill out this 2-minute questionnaire.

(Anticipated) FAQ

What can we cover during office hours?

Some things I can offer during a session: feedback on your business/idea/pitch, general business advice, my impressions of where your company’s biggest risks are, opinions on what the market valuation for your next round might be, etc. I’ll honestly answer any question that you have, or I’ll tell you that I don’t know the answer.

What’s your background?

I studied computer science at Caltech, then spent ten years working as a software engineer. During that period, I was one of the first engineers at LinkedIn and Factual, and one of the first 10,000 engineers at Google. For the last five years, I’ve been a cofounder/partner at a seed-stage venture fund called Susa Ventures. We’ve invested in about 65 companies so far, including AndelaFlexportLendUp, and Robinhood. While my fund invests in both B2B and B2C companies, most of my personal investing experience is on the B2B side.

My LinkedIn profile.

Why should I care about your opinion?

You probably shouldn’t. But hey, it’s free!

How will you pick who gets a time slot during office hours?

If there are fewer people that want time slots than there are time slots, then everyone gets a slot.

If there are more people than time slots, there will be a preference for discussion topics where I think I can be more helpful, and for people who come from groups that are underrepresented in the founder community (if you apply for a slot, you can optionally let me know if you are part of such a group).

Can you refer me to other investors after we talk?

Sorry, no. Most VCs only want intros that are warm/vouched for, and I can’t offer intros like that if we’ve spent half an hour together.

Will you reply to every email?

I’ll try! I have no idea how much interest there will be. In the likely scenario that I get 25 or 75 emails, I’ll reply to all of them. In the very unlikely scenario that I get 500 or 1,000 emails, I might not be able to reply to each person, but I’ll do my best.

Can I use my office hours slot to pitch you for an investment?

No. If you want to practice your pitch and get feedback then I’m happy to help. If you want to do a formal pitch because you think my fund may be a good fit† for your seed round then office hours are not the right venue. Just email me about doing a formal pitch instead.

† We generally invest $500k-$1m when companies are raising $1.5m-$3m seed rounds. Most of our investments are in SF/NY/LA, but we’ve invested in other parts of the US, too. Our investments are about 70% B2B and 30% B2C. The core thing we look for in companies is the potential for strong long-term defensibility, typically via network effects, economies of scale, or proprietary data.

Lessons from 2016 Office Hours

I held office hours last year over the course of four days, and approximately 50 people participated. Here are some observations and takeaways from that experience:

  1. 1.5% Response Rate. Last year’s office hours blog post was seen by about 3,500 people within 48 hours, and about 50 people applied for a time slot. The replies were great: well-written, very positive, and filled with interesting discussion topics. I was very happy with the turnout.
  3. It’s impossible to make everyone happy. Example #1: I did 30-minute sessions for a while, and most of the survey responses said 45 minutes would be better. So I switched to 45 minutes, and most of the survey responses said that 30 minutes would be better. Example #2: I did all of the sessions at cafes. Some people mentioned liking the informality of a cafe, others thought an office setting would’ve been better.
  4. Low diversity ☹. My post stated that I especially wanted to chat with people from underrepresented groups. Unfortunately, <10% of the people I talked to were from groups like that. (If you have advice on how I can increase that number, please let me know.)
  5. Most discussions fell into one of several buckets:
    1. Pitch feedback.
    2. Seed fundraising advice and valuation estimates.
    3. Feedback on a product or startup idea or business sector.
    4. Analysis of a company’s risks from an investor’s perspective.
    5. Tips for college seniors and new grads who are trying to plan their near-term careers.
    6. “I have an idea/unlaunched product/launched product. What do you think I should do next?”
    7. My personal transition from engineering to venture capital.
    8. Business models and pricing.
  6. Take breaks. I did 6-hour blocks of back-to-back sessions. My rationale was that I could last 6-hours after a meal without getting hungry. That was a mistake. Hunger wasn’t an issue, but I was mentally exhausted by the end of the day. This year I’m going to do sessions in shorter chunks and with breaks in-between.
  7. SF > Menlo Park. There was twice as much demand for SF office hours as for office hours in the Menlo Park area.
  8. In person > online. I did a day of online office hours because there was some demand for that. I liked in-person a lot more. Online sessions were harder to coordinate given time zone differences, tended to start late due to Skype/Google Hangout issues, and felt more formal and impersonal than talking face-to-face at a cafe. Given my limited bandwidth, I’m only going to do in-person office hours going forward.
  9. The ROI was good for participants. Out of 39 survey responses, 36 people rated office hours Very Useful or Useful, 2 people rated them Neutral, and 1 person rated them Somewhat Useless.
  10. The ROI was good for me. Each participant was asked to teach me something for 5 minutes and I learned a lot. Examples of topics that people explained to me: types of 3d printers, Twitter marketing tips, indoor rowing tips, breaking into television shows, and an overview of deep learning applications in speech. I also met several people that I’ve continued to keep in touch with on a regular basis.
  11. Preparation makes a difference. One piece of early feedback I received was that it’s hard to have a productive session if there’s no shared context. After the first few sessions, I started asking people to email me anything they wanted me to review before our meeting. Some people sent pitch decks or one-pagers, others sent a few paragraphs of text. A few people asked me to download and try out their apps. Spending 5-10 minutes preparing for each meeting made the meetings a lot more effective.

Nice Summary about AngelList Syndicates

In order of typical minimum ticket size:

  1. Friends, co-workers & family ($5K+)
  2. Angels ($50K+)
  3. AngelList Syndicate ($100K+)
  4. Family offices ($250K+)
  5. Corporate VCs ($250K+)
  6. Institutional / seed funds ($250K+)

In September 2016, the average syndicate check size was $390K , with larger Syndicates reaching seven figures. For seed rounds in the $1–$3M range, a Syndicate can therefore contribute anywhere between 10–40% to the round.

That’s a significant chunk, and a key reason why a Syndicate should not be considered as a way to “fill your round”, but rather as a key financing vehicle that deserves top priority when planning your fundraise.

How Successful Founders Will Raise Money in 2018