The Future of Company Building, Tips on Raising Venture Capital in 2024, A Methodology for Understanding Cause and Effect- Tactician #0031

09/01/2024

THE FUTURE OF COMPANY BUILDING

Justin Mares, Co-Founder at TrueMed shares his personal insights and experiences on health, wellness, and company building in “The Next, Episode #50”

• A New Era for Startups:

  • "Historically, software startups raise a lot of money to hire employees, scale a team, and invest in go-to-market... I think we are entering a new era for many startup founders. One where the model does not involve raising hundreds of millions of dollars in round after round of funding, but looks a lot more like: Raise a small amount of money in a pre-seed round... Use that money to hire a team and ship a product... Use early traction to raise a $3-5M seed round... Get to profitability, never raise again."

• Technology’s Role in Redefining Business Models:

  • "AI (specifically, Github’s CoPilot and Google Gemini) will have a huge impact... Historically, you had to hire tens-to-hundreds of engineers to build and maintain a given software application... Today, both of those things are increasingly untrue. When you’re hiring remotely, it suddenly matters less if your person is based in SF or South America, but there’s certainly a cost difference! This combination of AI-building software + outsourcing in my opinion structurally changes the cost structure of your average software company."

TIPS ON RAISING VENTURE CAPITAL IN 2024

Paul Hsu, Founder & CEO of Decasonic, guides founders on effectively partnering with venture investors in “How to partner with a venture investor who values technology innovators”

• Search for Lead Investors:

  • "In most fundraising, identifying and closing a lead investor can catalyze the entire round... When you pitch an investor, especially in 2024, one of the first questions is whether they have the capacity and capability to lead your financing round."

• Utilizing Professional Networks:

  • "This includes entrepreneurs, investors, ex-colleagues, attorneys, CPAs, contract finance professionals, marketers, PR firms, and other consultants for warm intros to venture partners... The more resistance barriers you can lower, the better."

• Balancing Cold and Warm Outreach:

  • "Venture partners are generally less discriminating when it comes to taking intro calls and meetings from entrepreneurs who can demonstrate durable use cases and revenue... LinkedIn outreach may suffice and has the potential to yield conversions."

• Clear and Prompt Communication:

  • "Completing things promptly and accurately at the beginning of your relationship with a new investor is critical to building credibility and trust... When you get back to a VC in less than a day with well-thought-out responses, you show your commitment."

• Leverage Associates:

  • "The associates who originate deals are evaluated on their ability to find and close high-quality deals and are predisposed to saying yes... They are your champion, not your gatekeeper."

A METHODOLOGY FOR UNDERSTANDING CAUSE AND EFFECT

Admired Leadership, 40k subscriber newsletter about leadership, emphasises the importance of understanding cause and effect for leaders in “Leaders Are Great Students of Cause and Effect”

• Importance of Understanding Cause and Effect:

  • "For leaders, it’s not enough to see patterns and to recognize what is happening. Leaders are expected to know why. By being great students of cause and effect, leaders are better prepared to shape the future through their decisions, choices, actions, and messages."

• Identifying Root Causes Over Symptoms:

  • "The root cause of any problem, issue, or challenge is often elusive. It is much easier to identify a symptom and not the source of why things happen. Generating theories as to why events occurred or problems materialized and then testing them with others is what good leaders do."

• Using the Fish Diagram Method:

  • "In the so-called Fish Diagram method, a leader writes the problem or effect on the far-right side of a piece of paper, flip chart, or whiteboard. They then draw a straight line to the left with angled lines to create the outline of a fish skeleton... The bones of the fish skeleton are represented by anything connected or related to the problem... Before concluding that one of these possible causes is the culprit, the best strategy is to identify a potential reason for each of these causes, as well. Add the underlying reasons behind each to expand the fishbone diagram."

• Discussing Possibilities with Trusted Colleagues:

  • "Now, take a step back and discuss the many possibilities with one or more trusted colleagues. The likelihood is that somewhere within the fishbone diagram lies the root cause that serves as the catalyst for the effect. Talk it out with others using as much empirical and anecdotal evidence as you have. Usually, a strong conclusion will surface."

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