5 Tips & 3 Thoughts For Entrepreneurs

Mark SusterStarting a company is like making sausage, so don’t be fooled by the other guy’s press release.

It’s probably as ugly behind the scenes there, according to Los Angeles-based venture capitalist, Mark Suster.

Speaking at the 2013 Web Summit (@WebSummitHQ), Suster (@msuster) was introduced by conference organizer Paddy Cosgrave (@paddycosgrave) as “one of the most prescient minds in the investment community.”

The VC, who got his start in Ireland, spoke on building and funding a startup. He is now a partner with Upfront Ventures and he blogs at www.bothsidesofthetable.com.

Suster said he is open to funding in Europe as long as “they have ambitions to attack the US market and, in fact, become global.”

He said one of the investments he was most proud of was in DataSift — “best known as one of the two companies that power the Twitter fire hose.”

Speaking generally, Suster said the tech press can make it seem like money raising is easy. Yet most entrepreneurs have to work really hard at it. “It feels like you’re begging people,” he said.

“There’s so much drama and stress involved in startups and yet we read the sanitized versions of it,” he said.

An entrepreneur looking at their own internal operations can lose morale because when they read about competition, “they are all wearing their tuxedos and they look really dapper.”

But Suster said to remember that “we are all naked in front of the mirror.”

Suster’s Tips

50 Coffee Meetings: Often approached by entrepreneurs too soon, Suster advises many to seek angel funding. They often ask him to recommend an angel and, just as often, he says “no.”

“Its not ‘no’ as in I want to be a dick [because] the best source for meeting angels is other entrepreneurs,” he said. The way to do this is for the entrepreneur to seek out fellow startups and build relationships.

If an entrepreneur talks to 50 others, he or she will possibly establish a good rapport with 15. The entrepreneur can ask how to approach angels, what their funding criteria are and so on.

By building on this network, the mentors will likely provide referrals.

Create a sense of urgency: Leadership teams that set objectives get places, Suster said.

Prove you can ship product: Startups more tech these days. They are more achievement oriented. It is less expensive to build product. “It’s the surest way I can judge how you behave and act.”

Related to this is the idea of managing what you can measure, Suster said. People who do not set goals tend not to get there, Suster said.

Don’t hire people like yourself. “This is a big mistake most founders make including myself,” he said. “You need all kinds of people.”

For example, most entrepreneurs are “terrible” salespeople, Suster said. They are “too intellectual and focused on product.” Selling takes a lot more process management and relationship management — traits the entrepreneur may not have.

Start fundraising early: “Most people will tell you the opposite. Most people are wrong,” Suster said.

It’s a question of relations. Meeting people early lowers the bar, he said. If first time a VC sees you is at a pitch, then he is really judging presentation skills.

This is why Suster doesn’t go to demo days. Calling it an “artificial environment,” he said it is “a frenzy for funders who want to rush to fund startup companies they don’t really know and it creates a frenzy for the entrepreneur to accept money from people they don’t really know.”

“There no such thing as investor divorce,” he cautioned. “Make sure you dont get a wolf in sheep’s clothing.”

Suster likes to meet entrepreneurs many times to get a true view of their character. “Most people I’ve funded iIve known for a period of time,” he said.

VC’s also have to fundraise, he noted. Although he next fund worth $200 million will be in 2016, Suster said he cannot wait until 2015 to introduce himself. “ABR: always be raising,” he said.

It is hard to get an anchor investor. But once done, others are likely to follow. Suster suggested offering an incentive to take that risk. “Even rich people tend to be fairly cheap” and the incentive may sway them.

Then again, people become rich because they have good judgment, Suster noted.

Final Thoughts

Suster said he meets 99 “wantrapreneurs” for every one entrepreneur. There is a huge premium from taking the first leap and “most of you wont do that,” he told the crowd. This is a natural tendency because people feel there is safety in numbers, he explained..

Data sources. When Suster started in 1999, there was not enough information. Now the opposite is the case, which can cause “mentor whiplash.”

“Only start with an idea that you are passionate about,” Suster said. “Everything I learned about entrepreneurship I learned from screwing up.” Suster said he was not passionate about his first business’ product but he became passionate about software and sales and leading teams.

Image of Mark Suster courtesy The Summit.