To me - this is very clear distinction in Bay Area. The guys I know that are most impressive (and build the best startups) shut their doors, code like crazy and don't waste time with what other people other than their customers think of them. The product speaks for itself.
Then you have another set of entrepreneurs leveraging credentials, friendships and their previous successes to 'hack' the fundraising process, it detracts from delivering user experience.
Don't fall into this fundraising mindset - "if you want to raise money, there’s no substitute for working hard on your reputation". There is a substitute - its delivering measurable benefit to customers. Work hard on delivering value to the rest of the world. Its an important distinction because thinking about what investors think of you detracts from a maniacal focus on product.
Its pre-mature reputation optimization. You want to build your rep after you've proven delivering value to customers.. the product should speak for itself.
I consider social capitalism an evil because it creates conflicts of interest, and detracts from goal-oriented thinking. However, like politics and bureaucracy - it is an evil that startups have to confront at some point, or be confronted with. I balance this with a maniacal focus on delivering value while staying at low profile - its tough to create a professional persona in line with your startup before you have accomplished measurable customer value. Without this kind of timing, its very easy to detract from your startup goals because you personally have to conform to a misinformed notion of a professional persona. I'd be curious if others have had challenges along this line..
One last thought, social capitalism gets multiplied by orders of magnitude when you leverage the hub. ie, relationships for finance, advertising are going to be much more valuable in NYC. In optimizing reputation, spend cycles where they have the highest return.
Don't miss that:
a) They've been working on the product since 2004 and it's best in class as a result of an insane amount of product development.
b) Every single lead they've generated has come through their "freemium" model, they've never spent a nickel on marketing.
c) Only recently have they learned that a best-in-class product isn't enough to get investors excited without talking about the market.
Matt wrote an incredible post here about the blood, sweat, and tears that went into building a market leading product:
> c) Only recently have they learned that a best-in-class product isn't enough to get investors excited without talking about the market.
Isn't the whole point of there existing a separate class of tech-oriented investors and investment managers, who get paid pretty well for their work, that they are knowledgeable and well-positioned to evaluate things like market prospects? If who they fund depends so heavily on social proof and slickness of the pitch to investors (as opposed to the actual product and market potential), seems like capital is being allocated pretty inefficiently...
Kudos to Stormpulse for the hard work and the cool product. I just did not like the message of the article because I was considering how it would be interpreted by other startups..
your social capital is not useful only to raise money. it is useful to market your product. marketing your product gets it used which is the best way for it to improve.
that you can use social capital to help raise money is a great side-effect of the real reason it is necessary for startups: marketing.
There's another side to this story. Once you've built the product, have the customers, cash flow, and earnings, you're left with a vacuum in the social sphere. You don't know anybody other than your customers and vendors.
And if you try to raise money at that point( expansion, growth, acquisition, etc ), you can't get so much as a single introduction because you don't know anybody. The reality is that product does not speak for itself.
A couple things:
1. We're getting out of the "gatekeeper" business as quickly as possible. Over 70% of the intros on the site are now driven by code and community -- not us. It took a lot longer than we thought it would. We're working on the remaining 30%.
2. We don't think of it as "applying" to AngelList any more. We think of it as creating a startup profile. Applications made sense when we reviewed and distributed every startup. Now startups create profiles and they live on AngelList well before and after they raise money. For example: http://angel.co/42-floors
It sounds like there is a fantastic opening here for other people in the angel/vc community to take on the task of being a gatekeeper or "talent scout" of sorts for excellent businesses who don't already have the requisite social proof.
But my understanding is that in the past, you guys made something of an implicit guarantee that you would look at all submissions and be the point of introduction for great companies who don't yet already have an introduction. The necessary shift you are now making will eliminate this opening.
You mention that there is a community of gatekeepers and scouts, but I really don't see it this way. One cannot, by policy, contact anyone on the site without already having a "follower" relationship with them.
It would be nice to see a handful of angels/vcs take upon this mantle of being the go-to talent scout for great but unconnected businesses. There's no reason these people couldn't use AngelList as the platform on which to do it, of course.
1. Matt is an amazing speaker, in person he is captivating when he discusses StormPulse.
2. He has been iterating on the idea for 3-4 years now? He actually launched it on HN IIRC.
3. His customer development skills are NO f*%kin' JOKE - he has been becoming intimate with his customers needs for a good while now.
4. He is very approachable, there are many people that you get a weird vibe from & may feel like you don't have their full attention - Matt is not one of them.
So basically - this is less of a hack & more of a culmination of years of hard work!
So my question is: it obviously took you awhile to get to this point, but don't you feel like, if you can put together a pitch like this, there's not a whole lot of additional "hacking" required?
I'm definitely getting more comfortable with pitching, but don't consider myself a master by any stretch. I think the next frontiers are frame control and getting a better grasp on market sizing and pricing.
But yes, hopefully not much more hacking required to close this round of funding. :)
I can second what auston (and others) have echoed about Matt. I had the pleasure of having Matt do a presentation on Price Hacking for Hack and Tell in South Florida (where he's very active in the community) and it was easily one of the best presentations we've hosted.
I did reach out to a few people I met at conferences but that got me nowhere. I thought being a TechStars finalist might help too.
Meh. I decided it's really not worth the time/effort now. Maybe I'm doing something wrong (yes, I've read all the relevant posts on "hacking angellist") but for now, I'll focus on the product and growth. Perhaps I'll try again later.
For a guy that's spent 7 YEARS building his product he does a remarkably good job talking about the market, great write-up and post Matt!
Excite them about the Market so they are intrigued about the product.