What’s the best way to sell the right amount of equity in your fundraising round?

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

Don’t minimize dilution, maximize impact. If you go out and raise outside funding, resist the temptation to worry too much about valuation (and minimizing dilution). In the grand scheme of things, as long as you’re getting a fair deal, marginal differences in dilution won’t matter. What will matter more is the degree to which you can have an impact (however you measure that). You’re probably going to be happier owning 5% of something great tha… (read more)

What’s the best way to navigate competitive forces?

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

Don’t obsess over competitors. Obsess over customers. I’ll confess. I’m likely more guilty of watching our competitors too closely than anyone at HubSpot. But, the good news is that though I watch them closely, I try not to follow them. Knowing what your competitors are up to is good. Doing what your competitors are up to is bad.

What’s the best way to form your initial team?

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

Don’t defer the hard co-founder questions for later. They only get harder. Have the important conversation(s) with your co-founder early. Topics might include long-term goals, fund-raising, equity allocation, vesting, etc. I’ve written an entire article with some of the questions co-founders should ask each other.

What’s the best way to evaluate a potential hire?

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

Imagine you hired this person. Would you issue a press release to let the world know that you brought this awesome person on board? If so, you’re probably more focused on what they’ve done instead of what they will do for you. Don’t get me wrong, if you can get someone that’s a great fit and they’ve accomplished something in the past, and you think that’ll translate to doing great things at your company, go for it — and may the force be with y… (read more)

What’s the best way to create a good company culture?

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

Once you start writing your culture down, a couple of surprising things will happen: 1) You’ll realize you got parts of it wrong (because people will tell you). 2) You’ll increase the chances of hiring for “culture fit” without falling into the trap of toxic homogeneity where you just hire people like yourself under the guise of “culture fit”.

What’s the best way to build a good company?

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

As a startup, you need to seek that love. We don’t just want people to buy from us. We want people to love us. We want them to love what we love and respect what we do, even if they don’t buy from us. Even if they are unlikely to ever buy from us. Because what we believe is that the more people that love us, and want us to succeed, the more likely we are to do so.

What’s the best way to sell the right amount of equity in your fundraising round?

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

Our rule of thumb is not to sell more than 25% in phase 2, on top of whatever you sold in phase 1, which should be less than 15%.

Sam Altman (President at Y Combinator)
Fundraising Advice for YC Companies – Y Combinator Posthaven

You should aim to sell only about 20% of the company in your seed round (though 25% is ok if you’re raising a ‘large’–say more than $2. 5 million–seed round). You should raise enough money to get to your next significant milestone.

Slava Akhmechet (Founder at RethinkDB)
57 startup lessons

If you have to give away more than 15% of the company at any given fundraising round, your company didn’t germinate correctly. It’s salvageable but not ideal.

Naval Ravikant (Founder, CEO & Co – Maintainer at AngelList)
“The Anatomy of a Fundable Startup”, by Naval Ravikant (Founder, AngelList) on Vimeo

My rule of thumb is 20% for a seed round. Anything more than that and people are going to be worried [about if] you are going to be incented after 2 or three more rounds of financing.

Mark Suster (Managing Partner at Upfront Ventures)
Founder Showcase – Mark Suster Keynote on Vimeo

VCs want meaningful ownership. The fairway for a round of venture capital is 25-33% of your company. If you’re a better negotiator, if you’re hotter, if you have more people interested you can get it down to 18%-22%.

Paul Graham (Co-Founder & Partner at Y Combinator)
The Equity Equation

Greg Mcadoo from Sequoia recently said at a YC dinner that when Sequoia invests alone they like to take about 30% of a company

Babak Nivi (Co-founder of AngelList and Venture Hacks. Previously, he was an entrepreneur-in-residence at Bessemer Venture Partners and Atlas Venture.)
The Option Pool Shuffle – Venture Hacks

If you don’t keep your eyes on the option pool while you’re negotiating valuation, your investors will have you playing (and losing) a game that we like to call: Option Pool Shuffle

Jason Lemkin (Managing Director at Storm Ventures, SaaStr.com)
Jason M. Lemkin’s answer to For a new startup, what would be the ‘acceptable’ equity percentage given to VC (Series A financing)? – Quora

Typically, Seed Stage VCs will want to write smaller checks to achieve at least a 10% target ownership. Sometimes more. If you need more money, they’ll often want to bring in a second Seed Fund to buy a second 10%.
Typically, Larger Funds will want to own as much as 25%. Themselves. And they’ll write a larger check to get it, and sometimes, pay a higher per share price.

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

Don’t minimize dilution, maximize impact. If you go out and raise outside funding, resist the temptation to worry too much about valuation (and minimizing dilution). In the grand scheme of things, as long as you’re getting a fair deal, marginal differences in dilution won’t matter. What will matter more is the degree to which you can have an impact (however you measure that). You’re probably going to be happier owning 5% of something great tha… (read more)

What’s the best way to navigate competitive forces?

Eric Ries (Author, The Lean Startup)
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

Sooner or later, a successful startup will face competition from fast followers. If a competitor can out execute a startup once the idea is known, the startup is doomed anyway. The reason to build a new team to pursue an idea is that you believe you can accelerate through the Build-Measure-Learn feedback loop faster than anyone else can. A head start is rarely large enough to matter, and time spent in stealth mode—away from customers—is unlikely… (read more)

Sam Altman (President at Y Combinator)
Startup Playbook

99% of the time, you should ignore competitors. Do not worry about a competitor until they are beating you with a real, shipped product. In the words of Henry Ford: “The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time. “

Michael Porter (Professor, Harvard Business School)
The Five Competitive Forces That Shape Strategy

Deliberately choose a different set of activities to deliver a unique set of value or choose to perform activities differently than your rivals.

Michael Porter (Professor, Harvard Business School)
The Five Competitive Forces That Shape Strategy

To limit the threat of substitutes, offer better value through wider product accessibility. Soft-drink producers did this by introducing vending machines and convenience store channels, which dramatically improved the availability of soft drinks relative to other beverages.

Michael Porter (Professor, Harvard Business School)
The Five Competitive Forces That Shape Strategy

To neutralize supplier power, standardize specifications for parts so your company can switch more easily among vendors.

Michael Porter (Professor, Harvard Business School)
The Five Competitive Forces That Shape Strategy

To counter customer power, expand your services so it’s harder for customers to leave you for a rival.

Michael Porter (Professor, Harvard Business School)
The Five Competitive Forces That Shape Strategy

To temper price wars initiated by established rivals, invest more heavily in products that differ significantly from competitors’ offerings.

Michael Porter (Professor, Harvard Business School)
The Five Competitive Forces That Shape Strategy

To scare off new entrants, elevate the fixed costs of competing; for instance, by escalating your R&D expenditures.

Peter Thiel (Co-Founder & Partner at Founders Fund)
Peter Thiel’s CS183: Startup – Class 3 Notes Essay

In perfect competition, no firms in an industry make economic profit. If there are profits to be made, firms enter the market and the profits go away. If firms are suffering economic losses, some fold and exit. So you don’t make any money. And it’s not just you; no one makes any money. In perfect competition, the scale on which you’re operating is negligible compared to the scale of the market as a whole.

Mark Zuckerberg (Founder & Chairman & CEO at Facebook)
How To Get Ahead: Entrepreneurial Lessons From Mark Zuckerberg

We had this concept that we actually still have in the company today, called lockdown. Which is — whenever any other company got ahead of us on something that we thought was strategic to us, we literally did not leave the house until we had addressed the problem. Now it’s a little looser of an interpretation. We don’t literally lock everyone inside the office, but about as close to that as we can legally get.

Naval Ravikant (Founder, CEO & Co – Maintainer at AngelList)
“The Anatomy of a Fundable Startup”, by Naval Ravikant (Founder, AngelList) on Vimeo

[It’s] very rarely a case for a startup where a [competitor’s] patent becomes an issue unless you’re already successful.

Seth Godin (Founder at Yoyodyne Entertainment)
Seth’s Blog: What are you competing on?

What are you competing on? It’s pretty easy to figure out what you’re competing for—attention, a new gig, a promotion, a sale… But what is your edge? In a hypercompetitive world, whatever you’re competing on is going to become your focus.In any competitive market, be prepared to invest your heart and soul and focus on the thing you compete on. Might as well choose something you can live with, a practice that allows you to thrive.

Paul Graham (Co-Founder & Partner at Y Combinator)
Startup Investing Trends

We currently advise startups mostly to ignore competitors. We tell them startups are competitive like running, not like soccer; you don’t have to go and steal the ball away from the other team. But if idea clashes became common enough, maybe you’d start to have to. That would be unfortunate.

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

Don’t obsess over competitors. Obsess over customers. I’ll confess. I’m likely more guilty of watching our competitors too closely than anyone at HubSpot. But, the good news is that though I watch them closely, I try not to follow them. Knowing what your competitors are up to is good. Doing what your competitors are up to is bad.

Clayton Christensen (Author, The Innovator’s Dilemma)
a16z Podcast: Disruption in Business… and Life by a16z | Free Listening on SoundCloud

We look at how many products are being sold [and by competitors]. What’s really interesting is the amount of non-consumption that’s going on. Because it hasn’t become more affordable or accessible for them yet. It’s too narrow to focus on consumption as opposed to non-consumption.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Some Lessons From Vine – AVC

Once again, it appears that the category creating innovator isn’t hurt too badly when the bigger and more popular social platform copies their signature feature in their product. We have seen this before with Twitter and Facebook and Foursquare and Facebook and many other similar situations.

Clayton Christensen (Author, The Innovator’s Dilemma)
a16z Podcast: Disruption in Business… and Life by a16z | Free Listening on SoundCloud

Management goes on to believe that their product is about features. When you start up, you have an insight about a job that needs to get done. You respond to that passive data to develop a product. But then as a company goes on to be successful the nature of the data is very active. Management loses their insight about the job [that they help a customer accomplish] and now they believe their business is about products and features. Put out all of… (read more)

What’s the best way to make tough decisions?

Sam Gerstenzang (Director of Product at Imgur)
Sam Gerstenzang – Seven things I learned in venture

The best way to become quickly knowledgeable is to find the right people and talk to them. There is no template for success, and no one knows what works. Big things growing really fast get really big, really fast. There is a huge advantage to being right early on.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Sunk Costs – AVC

Sunk Costs are time and money (and other resources) you have already spent on a project, investment, or some other effort. They have been sunk into the effort and most likely you cannot get them back.
The important thing about sunk costs is when it comes time to make a decision about the project or investment, you should NOT factor in the sunk costs in that decision. You should treat them as gone already and make the decision based on what is in… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Satisficing – AVC

Satisficing is a decision-making strategy or cognitive heuristic that entails searching through the available alternatives until an acceptability threshold is met.This is contrasted with optimal decision making, an approach that specifically attempts to find the best alternative available. I love the concept of satificing instead of optimizing. It is something I have been trying to adopt (changing behavior is hard) for close to twenty years now w… (read more)

Mike Maples Jr (Managing Partner @ FLOODGATE)
Ron Conway, Mike Maples Jr. – Angel Investing Revealed by Stanford eCorner | Free Listening on SoundCloud

The way I look at it, most decisions are either 50-50 or obvious and if its 49-51 it almost doesn’t almost doesn’t matter what you pick. Just pick one and execute it with brutal precision and you’ll be ok. When I flip a coin and it comes up heads and I wish it came up tails, I just turn it over and what tails says. If it comes up heads and I say ‘Oh I knew it all along I wanted it to be heads”, then I do what heads says. It’s surprising how you a… (read more)

Ben Erez (Product at Breeze)
22 Mistakes I Made as a First Time Founder — Viabilify

[Follow your gut. ] At one point during the first few weeks of starting our company, I had a very strong gut feeling to change the way we were going to tackle the problem we saw (aka in tech lingo a “pivot”). But the three of us weren’t on the same page and after a couple hours of arguing back and forth, we came together as a team and decided that we would not go in the direction in which I was pushing. In hindsight, I wish I stood my ground mor… (read more)

Dharmesh Shah (Co-founder and CTO of HubSpot)
Happy Birthday HubSpot! 9 Lessons From Our First 9 Years

An imperfect decision today is better than a perfect decision some day.

Amir Elaguizy (CEO Cratejoy, YC Alumni)
58 things I learned at YC – Giftshop Scientist

There is no shortcut around learning, you just have to learn it. Everything is harder than it looks

David Frankel (Managing Partner at Founder Collective)
7 Deadly Distractions That Can Kill Your Business | Inc.com

Whenever a company strays from its core market, message or mission, the results can be devastating, particularly for small companies and startups. common causes… Waning confidence in current market position or pricing, overreaction to existing competitors or new, “hot” entrants in the market, sudden stagnation or rapid decline in growth, strategic partnerships with no clear metrics for success, pressure from investors or board members to change… (read more)