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And so today a few things Investors *do* care about (pre-Series B) and a few they *don't* (but founders think they do)
Thread/
Thread/
1. Salaries: If you've raised >$1Mn, Investors *do not* care if you take a salary of $60-80k as long as you've budgeted it into the burn and can last 18mo.
In fact Investors *do not* care if you take a decent market salary with the 4 other team members as long as you budgeted it
In fact Investors *do not* care if you take a decent market salary with the 4 other team members as long as you budgeted it
2. Investors do *NOT* care if you spend $5k on a macbook.
3. Investors *do* care if you start going off to events, and speaking engagements in exotic locations on the company dime - especially in Seed / Series A stage.
3. Investors *do* care if you start going off to events, and speaking engagements in exotic locations on the company dime - especially in Seed / Series A stage.
4. Investors *do* care if you just raised your seed round and went off to Vegas with the team to get bottle service at a nightclub.
5. Investors *do* care if you put your apartment lease on the company dime.
5. Investors *do* care if you put your apartment lease on the company dime.
6. Investors do *NOT* go thru Bank statements monthly and nitpick individual expenses unless they're really egregious and have dented the bank balance.
7. Investors *do* care if you don't update them with your cash balance, cash burn and activity every month.
7. Investors *do* care if you don't update them with your cash balance, cash burn and activity every month.
8. Investors do *NOT* care if you hire your family.
9. Investors *do* care if you ONLY hire family and have no reason to do so.
10. Investors do *NOT* care if your credit is shit. Or if you have no personal savings.
9. Investors *do* care if you ONLY hire family and have no reason to do so.
10. Investors do *NOT* care if your credit is shit. Or if you have no personal savings.
11. Investors do *NOT* care whether you paid yourself a salary or didn't pay yourself a salary in the time before they invested. The good ones tell you to take a salary. You don't get extra equity for foregoing a salary.
12. Accumulating salary on the balance sheet is usually OK
12. Accumulating salary on the balance sheet is usually OK
13. Do NOT think you get to bump your equity later. Its harder than a secondary. Give yourself as many shares as you can, upfront. It will matter when you convert your notes.
Investors *do* care about giving the founder CEO shares. You'll have to ask for it.
Investors *do* care about giving the founder CEO shares. You'll have to ask for it.
14. After a Seed Round - you're now a professional CEO. Pay yourself accordingly and take the rest in equity. A Series Seed CEO gets $200k. Plus 3.5% stock. If you're taking less, issue yourself the rest in stock *after* you discuss with lead Investors
15. After Series A, a hired CEO gets $250-300k + 2-4% equity. If you get paid less (take less) vest the rest as options in equivalent options.
Nobody will give you equity when they fire you at Series B. They'll want equity for the new CEO
Nobody will give you equity when they fire you at Series B. They'll want equity for the new CEO
16. Investors *do* care about vesting. Founder best practice to avoid tax treatment issues?
Issue and BUY all your founder stock upfront. Then reverse vest to the company. Despite what @jasonlk says, do a 4 year vest and add equity grants every year till it stretches to Year 7
Issue and BUY all your founder stock upfront. Then reverse vest to the company. Despite what @jasonlk says, do a 4 year vest and add equity grants every year till it stretches to Year 7
17. Do NOT give your senior Hires VP or C level titles till Series A. Use "Head of Marketing" "Engg Lead" to denote seniority till you bake in your levels. Its OK to be the only C level person.
18. Investors *hate* being responsible for company issues. Investors have a VERY limited set of options inside a fund to deploy money. Once its inside the startup ironically they have greater flexibility. So if you need a $50k loan, take it from the startup w/ their blessing.
19. Investors typically do *NOT* care about using your product, esp B2B. Highly counter intuitive, but only ask associates to try your product. Investors care about the team and the market.. and the numbers.
20. Investors do NOT care about your past unless its relevant to the startup story. They *do* care about whether you've been to jail or similar. They don't care if your friend sued you in a prior company.
21. Investors are highly tolerant of personality quirks as long as it doesnt matter to the startup growth. They are NBA scouts drafting you to the big leagues of startups. If you smoke pot or do acid they wont care till it affects them and the startup. Then they *have* to care.
22. Nobody knows anything (h/t @retail_risk) Investors do NOT always know more than you. They do NOT care where you found the hire. They will love what you love and hate what you hate as long as it grows the startup.
23. If you piss off an Investor too much, they *do* care about looking good and being top of the game. Do not embarrass them. Its the worst thing you could do to erode your goodwill and you'll see it hurt you when you need it the most.
24. Investors *do* care about their reputation. They actually do like long term partners who deliver results and get along. It reduces friction and brainwork to make their life easy. BE THAT FOUNDER.
/fin
/fin
