This page contains published about startups and investors. My own vision of how this should work and how they should interact with each other.
Startups and investors. Progress and conservatism.
Many of you, dear readers, probably thought from previous articles that I have a bad attitude towards investors. This is not quite the right statement. I treat investors well, but only to those who will talk to me as equals. It's not my pride, just my sense of self-worth. I respect you, you respect me. Only this way, and not otherwise. For me, a startup is progressive. And investors are conservatives, at least for the most part. And as happens in real life, progress tends to go forward, while conservatives hinder this progress in every possible way. This has always been the case at all times. Such is human nature.
Everything new and progressive is not taken seriously or is viewed with skepticism, or is perceived as a threat to the peaceful existence of most people.
To date, progress, including technical progress, has stalled and stagnated. Mastodons such as Google, Microsoft, Facebook, Twitter, Oracle and a number of other companies are trying their best to prevent progress in their closed world, where they feel quite comfortable. Yes, they feel a threat to their existence, but they do not take it seriously. But this article will not talk about them, because in my opinion, they are not worth my attention. I know that they exist, and for me this knowledge is enough. I want to talk about the interaction between startups and investors. What are the mistakes of this interaction. And how startups can get out of this vicious circle, which has been going on for many years.
A startup asks an investor how much his idea is worth. In response, the investor usually says that his idea is not worth anything. I think this is a deliberate misrepresentation of the startup.
A startup idea has no price-it is priceless.
An idea only has a price when big companies buy an idea from a startup and implement it to take the cream off. Then this idea dies, because everyone got from it, and they don't know how to develop it further. Only the author of the idea knows this, but he sold it and lost access to it. This kind of thing happens all the time, they just try not to advertise it. Because we all remember the well-known saying: Money likes silence. The focus is on material gain, not on what the idea can bring to people and move progress forward. Ideas are not only bought, they are stolen. You don't have to go far to find an example. The famous social network Facebook founder Mark Zuckerberg stole the idea from a fellow student. VKontakte founder Pavel Durov stole the idea from Mark Zuckerberg. VKontakte is the Russian version of Facebook. The Russian proverb: The thief stole the baton from the thief is appropriate here.
"To steal a thought is often more criminal than to steal money." - Voltaire.
By the way, I have tried to steal my idea, too. Oracle tried to hack my WordPress site and steal my idea. Moreover, they hacked into a site that was empty. Apparently they liked the name of the site very much: Intelligent Translator of the Future AI. 27 times within 3 days, this company made attempts to hack the site. Where from can I be sure it was an Oracle company? WordPress showed me the IP address from which the hack was attempted. And, if you're not a complete Internet amateur, you can use the IP to determine the location of the intruder. So, for good ideas, there is a constant hunt. Moreover, as a rule, companies do not need the authors of the idea. From this, I can only conclude that the author's idea is priceless, since it is being hunted on all fronts. A real war between progressivism and conservatism; the authors of the idea and the scammer (thieves).
Tip for startups: You can tell a lot of people about an idea. But it is best to keep your work on the idea in your head, on paper or on your computer. And the computer should not be connected to the Internet. Steal your developments can directly from the computer, despite the high-tech protection. Today, there is no protection that cannot be hacked.
I have my own idea for cyber defense. Below is an excerpt of my future article.
The modern idea of cybersecurity is that hacking the system itself would be pointless. No matter how many operations an intruder makes to get into a system, the system constantly sends him back to his starting point. And he starts trying to break into the system all over again. Even if he gets past the first two degrees of protection, at the third degree of protection, the system will send him back to the starting point. This is called cyclicality.
And yes, the defense system will be based on AI. After returning to the starting point, the protection code will change again. And so it will go on forever and ever.
Before I start writing this chapter, I'd like to ask startups a question: do you need investor money that much to start your startup?
Think carefully, weigh the pros and cons of this interaction. Maybe you will find a source of your own funding, without having to raise money from an investor to get you started. Why am I writing this? Because most investors are conservative and stick to the old rules of financing. You're independent now, but tomorrow you'll be dependent on someone with a lot of money to tell you what to do and how to do it. Therein lies the main danger for you. You will lose the biggest thing you have, your independence. To paraphrase a hackneyed phrase: He who invests the money is in charge.
You lose control of your startup or your company. Don't forget that the investor wants profit, and as much as possible. Here, your priorities with the investor are diametrically opposed. You want to create a product or service, and the investor wants to get a crazy profit from the money he has invested in your business. And your attempts to explain to him that he is wrong, most likely will break against the wall of incomprehension. So it turns out that the conservative beats the progressive, even without making much effort to do so.
I have read many articles on how you should and must write letters to investors. I can tell you that in two years of reviewing such articles, the content of these articles has not changed. I am sure that for several years nothing has changed. All articles on this subject are made as if from a template. The result is a vicious circle from which there seems to be no way out. In fact, there is a way out, only you don't notice it, because you prioritize the wrong goals. You set the goal to like it the investor, that is, you initially put yourself in a dependent position. And you need to talk to the investor as an equal, as a partner.
You don't need to write any warm and cold letters. If you start writing them, it means you accept the rules of their game. And in the end you become a conservative. It is your inevitable flight from the progressive camp to the conservative camp. This has been going on for years. Already a new generation has grown up who dreamed of changing things or doing something that would make progress move forward. And where are they? They have safely finished their startup without creating anything worthwhile and have moved on to the conservative camp, where it is warm and cozy. Where you don't have to fight, because you don't know how your fight can end. The result of your confrontation is unknown to you. Move progress is the lot of strong and independent people who are not afraid to take responsibility and not afraid of loneliness.
Remember how you usually get to know people through correspondence. And start writing to investors in the same way. Your letter can be short.
The shorter it is, the more likely it will be noticed. Ask the investor a question that is not important to them, but important to you. This is typically the way to get to know the right person. You can choose the style of your first letter. Break the pattern, start playing by your own rules. In most cases, there will be no response to your letter. Because your potential interlocutor does not respect you and your time. Do not waste your time on this person, he is not worth it. There is no need to write him a second time, you will not get an answer, and if they do, they will get he offered with general phrases that do not mean anything to you.
Most investors tell you that they are very busy, so they can't answer you. But they do make it a condition that you have to respond within 48 hours. I find such demands from investors to be sanctimonious.
A prude (hypocrite) is one who applies standards to others that he refuses to apply to himself.
Of the 50 people I wrote to, three responded to me. I corresponded with only one person. His name is Nick Van Breda, a Dutch entrepreneur and investor. I was free to ask him a question that concerned me at the moment. Nick Van Breda answered me within 24 hours. Yes, we didn't get to cooperate, but I'm glad I got to talk to an intelligent person who cares about me. It's worth a lot, for your motivation, moving forward and believing in yourself, and that you will succeed.
This investor is a typical representative of the progressive camp. They are few, but they exist. They do not advertise themselves and try to keep a low profile.
Oliver Jones of Angel Investment Network is a typical member of the conservative investor class and a hypocrite.
In his article: 10 Practices of Attracting an Investor, he discusses what a startup should do to attract an investor. The text of the article is well formatted and beautifully written. In this article, this young investor raises the topic of a disease called CHSV (feeling of self-importance) and directly advises startups to pay special attention to this point. That is to give to investor to understand that he is important. The disease of the CHSV has another name, more understandable to a wider audience - vanity.
Vanity - the desire to look good in the eyes of others, the need to confirm their superiority, sometimes accompanied by a desire to hear other people flattery. Related concepts are pride, hubris, star-spangled illness, and conceit.
I had the same disease. It was very difficult to get rid of it. I am still doing it now as I write these lines. It is a constant war with myself. It's good to have a friend around who can point out my shortcomings and help correct them.
Startups, when you choose your investor read the information about him, do not believe what he says. For you, he is a "dark horse", as well as you for him. Many investors have their own blog. According to their published articles, you may well get an idea about this person. You can write a nice and informative article, but during a conversation with the person, you may have a diametrically opposite idea about him. As the Russian proverb says: Measure seven, cut once. This is exactly the approach you should have to an investor. It is easy to take the money, making a beautiful presentation, and convincing the investor that your idea is great and scales well. But that money has to be paid back, and it has to come with interest. And that's the question most startups leave for later. The startup convinces itself that it will succeed, and that it will conquer the world. Naive. The world is a tough place. And you have to fight for a place in the sun. And if you take the money and don't do anything worthwhile, you owe the investor. That what you dreamed?
By starting a company, you are creating a problem for yourself out of nothing. The company will take up the lion's share of your valuable time.
But you had a different goal. Before you take that fateful step, think about what is your goal? Your goal is to create a product or service. Your goal is to move progress forward. Your goal is to do something to help your customers solve their problems.
Instead, you create a company. A company that the investor wants, not you.
Investors are the most comfortable investing in a company that is already established. They really don't want to invest in a specific person.
A company is a legal entity. And, it is easier to collect money (debts) from a legal entity than from an individual. The company can be sold, and the proceeds from the sale of the company, at least somehow, will be able to compensate expenses to the investor.
A startup that has created a company is required to pay employees' salaries, keep the books, hold founders' meetings, write minutes and resolutions for those meetings, and much more. You will get bogged down in paperwork, but you will not move forward to create your product or service. Yes, you can use outsourcing, for example for accounting. But, you will have to rent an office, buy and constantly replenish office supplies, buy office equipment, pay utility bills, pay taxes, etc. You will start spending investor's money not to create your product(service), but the company.
Oh, the investor will be very happy and wonderful, and you will spend his money on all sorts of nonsense.
So I don't share the joy with those startups that are happy to report that they have raised money for a launch. I look at them as small children who have been given a toy to play with, and then that toy is taken away. Stand up as adults and responsible people. Every decision you make should be a balanced one. Never make a decision under emotion or pressure or manipulation. Conservative investors are good manipulators and the actors. You are neither the first nor the last in their list of defeats and victories. Mostly victories than defeats. Remember, they will always take theirs and you, if you don't think with your head, will be left with nothing. The money is spent, the product fails in the market, or the product is bought, but not in the way you planned. Your opinion, if you take money from an investor, is the last thing that counts.
So it turns out that in the last few years there are no bright personalities in either business or politics who can break this vicious circle and do something bright and memorable. Progress is still stagnant. But I believe that this will not last long.
Thank you for reading my article.
I just listened to Google. How startups are invited to assemble a team. Rather, according to what criteria and assessments it should be collected. I immediately felt rejection. Even in the most inflamed brain, this is impossible to come up with, but Google did. It turns out that in order to assemble a team, you need to take into account not the talent of a particular person, but the race and social status of the candidate. Social status means that people in a team need to be collected from different strata of society. That is, it turns out that if a person is wealthy and has the best education, then he needs to be rejected because he is rich. And you need to take from the poor, who do not have a very good education and he does not understand very well the essence of what needs to be created. This is called insanity. Or people deliberately use psychotropic substances to make such a claim. A normal person would not have thought of that. First of all, he looks at what value this or that candidate is or what he can bring to the team: his knowledge and experience, his skills.
For me, it does not matter who he is white or black pink or brown, in what social group he is. If a person has the skills that I need, then I will take him to the team. Everything else does not matter to me. Each person can do it himself. Each person can find an opportunity to get out of the slavery of their needs and passions, or the vicious circle that prevents him from changing and becoming better.
Reply to an invitation
Today I received an email from a startup acceleration company. They invite me to join them.
They run cybersecurity startups. I had to explain to them my position, namely that without creating a full-fledged AI, all attempts to break through, both in medicine and in cybersecurity, are pointless. Companies will continue to try to create something worthwhile, but their success will be variable. Somewhere they will win, and somewhere they will lose.
I will emphasize once again that the creation of a full-fledged AI is not the work of a specific person or company, but an international project. This project needs to involve many specialists from different fields and different countries. Apparently, you need to step on a rake several times, before some will eventually reach this simple truth.
And yes, apparently it's time to tell about yourself. I do not sit on social networks, since social networks today have turned into political platforms, where for one opinion of a person who does not agree with the opinion of the crowd, he can be ostracized. And I have rather harsh statements on some issues. So why spoil your mood and engage in meaningless polemics with people who do not want to listen and hear you.
Recently read an article about Elizabeth Holmes. The posh woman has won over a large number of investors. Having received at the same time as an investment $ 700 million for his project.
Her idea was, as I understood, that a large number of tests can be done on one drop of blood. The idea is great, the implementation is mediocre. The presentation of material for obtaining investment is gorgeous. She became one of the youngest startups to raise an impressive amount.
Investors believed that she would be able to implement this project. They bought a candy wrapper, and Holmes herself ate the candy. And moreover, she ate well, she lived for her pleasure. Using investment money for other purposes.
I asked myself a question: could she fully implement her idea? No. At that time, with such a development of technology, this idea is unrealizable. Could she implement this idea now? Yes. The technologies that are now, could help her with the implementation of this idea. But only when making adjustments to the original plan.
The bottom line of this story is logical: investors have lost their money, and now they are distrustful of technology startups, coming up with more and more conditions for startups. Thus, making it difficult for them to live and receive investments. Holmes was charged with fraud. And she faces prison and multimillion-dollar fines. You have to pay for everything.
And based on what I wrote above, we can conclude that the investor approach to startups is hopelessly outdated. Also, the way startups approach investors is outdated.
These are people who come up with ideas. Simplified, but enough. Startups are trying to put their idea into practice.
After reading useless literature, they begin to act. Why useless? Because this literature talks about clients, the market, the business model, and the company's development strategy. But nothing is said about the idea. And young startups, headlong, rush to look for their potential clients, research the market in order to occupy their niche, develop a business plan that no one needs, choose their own business model, prepare a colorful presentation of what does not exist. And much more. That is, they perform a lot of useless actions.
They compete among themselves, who will present their idea more colorfully to a potential investor. Out of 3-10 companies, 1-2 is selected, which ultimately receive investment money. And startups start to develop their own product, i.e. implement their idea. Only a few reach the end, that is, before entering the market. And those who have reached it do not always cope with the realities of life and die slowly or quickly.
Bottom line: the money has been spent, there is no result.
Takeaway: Startups don't go deep into their idea. Having come up with an idea, they don't work with it. They write it superficially. The details and stages of the development of the idea are not well thought out. Everything superfluous, which at the moment cannot be realized, has not been discarded. This is just a wishlist. The principle is: I want and I will succeed.
Because each stage requires specific resources. Each stage needs not only to be thought over in your head, but you need to write it down on paper and think, think. Weigh the pros and cons.
Asking yourself questions: How am I going to implement this? how much money do I need for a specific stage? What kind of specialists do I need to involve at this stage? what is my salary? what is the salary of the involved specialists? how will I interact with them? how will I check their work? do I need a prototype right away? what research do I need to do at this stage?
And only after answering these and other questions, proceed to the next steps. Namely, share your idea. with as many people as possible. This is a slow stage, not a fast one. And write, write, as much as possible about your idea. When you write, you taste what you wrote. When you return to your articles later, you see, maybe not immediately, your shortcomings and mistakes. And you can fix them. Honing my idea, almost perfect. When you can talk about it with confidence. When you can firmly defend your point of view. You can safely discuss with opponents and prove that your idea can be realized.
Based on your worked-out idea, you can write a concept. But this will not be a superficial and crude concept, but a deep analysis of what you want to create.
As I already wrote, the more people you tell about your idea, the more likely it is that you will have your followers who can turn, over time, into your potential customers.
As I wrote above, investors have become distrustful of technology startups. They shifted their guilt and responsibility to startups.
Investors today take a passive position. They wait for potential startups and go through their presentations on their desk. Deciding who to give investment money and who to refuse investment. They like pretty candy wrappers (presentations). They are like crows who throw themselves at everything shiny. Most of them do not understand what exactly the startup is doing. They see only what they want to see. Namely, their profit, which they can get from the implementation of the idea.
What prevented investors from asking Holmes were the following questions before funding her project.
What will a blood analyzer look like? How much blood will be drawn from the patient? Will a drop of blood be enough to get one or another test? How will the analysis information be displayed? What are the consequences for the patient with this method of blood sampling? What part of the body should the analyzer be placed on? What are the priority analyzes? How many of them will there be? Is it possible to determine by a drop of blood: blood group, rhesus, blood sugar, a person's predisposition to the formation of thrombosis, blood biochemical composition, allergy to certain drugs or substances, what diseases a person has suffered, etc. Can this analyzer be used when a person, for example, got into a car accident in order to quickly identify his group and inform the doctors at the hospital? Can this analyzer be used to inject a small amount of a drug into the human body to remove the latter from a state of shock?
Asking Holmes: How are you going to implement your idea? what stages have you prepared? how many funds and resources do you need for each stage? When can we see at least roughly a working prototype? What kind of specialists do you want to attract to implement each stage? how much do you want to pay them? how much will you earn? what research have you done to validate your idea or concept? Etc. every investor can prepare their own questions. These questions should not concern customers, the market, or marketing. These questions should be about the idea and concept, as well as the product that a particular startup wants to create.
A good option for an investor and a startup is when the investor brings their value to what the startup does. And this is not money. This is your knowledge and experience. If an investor is directly involved in creating a product, then, in my opinion, such an investor has no price.
Thank you for your attention and for reading my article.