Insights

Aaron Michel - Partner, 1984 Ventures Aaron Michel is a partner at 1984 Ventures, a seed stage venture capital firm in SF. Previously he was the CEO of PathSource, a career and life guidance company that’s created the #1 ranked career app in the US. In the past few years, Aaron and his companies have been featured in USA Today, SV Magazine, TechCrunch, Inc. Magazine and other outlets. A recipient of the Boston Business Journal and Mass High Tech’s Innovation All-Star award, Aaron graduated from Harvard Business School and the Harvard Kennedy School of Government. He was ranked as one of venture capital’s 40 Under 40 by the Venture Capital Journal. Can you tell me a little bit about your background? How you were prepared for the role in venture capital? I came to Silicon Valley about 12 years ago after attending Harvard Business School. When I got out here, I worked briefly in product management, and then started a couple of companies. The most recent of those was a company called PathSource. We enabled people to figure out what career they want to go into and showed them the school and the educational path to get there. I sold into K-12, a little bit of higher ed, adult ed, and eventually expanded into B2C. That got acquired by AcademixDirect back in March 2017. I came on board with 1984 Ventures as a partner shortly after that. To answer the second part of your question, people tend to have beliefs that validate their life decisions. I tend to have the belief that having been an entrepreneur in the past helps me be a better VC. Having gone through the highs and lows, our entrepreneurial experience helps us when it comes to evaluating both companies and founders. It also helps with the “founder therapy” side of our jobs. That is, once we invest, part of our job is to work with our portfolio company founders and help them through the tough spots, both from a strategic standpoint and from an emotional standpoint. Having been there, it gives us a better ability to empathize and do that. Can you tell me a little bit more about 1984 ventures? What is the approximate size of the fund and how much do you normally invest? It’s a $45 million fund. We invest in seed stage companies that are using software to tackle unsexy and antiquated industries. Our investment size tends to be around $500K, and we don’t take board seats. In your investment thesis, it said, ‘’We invest in seed stage companies using software to disrupt unsexy and antiquated industries,’’ and you also avoid high technologies, like Blockchain, AR, VR. What are the reasons behind it? We’re big believers in the idea that you can find and build great companies that don’t require taking enormous technology risks. There are two elements to this. One is that it’s unnecessary to invest in really bleeding edge technology because then you’re adding an additional layer of risk on top of your investment without necessarily getting anything in return. You can build a $10 billion company without going out and splitting the atom. At the same time, the other thing that we try to avoid is hype. A good way to think about how hype works is that you have somebody who is a big name investor who comes out and says, ‘’I’m going to make an investment in this company.’’ It’s a company in a space that no one was looking at, like VR and Magic Leap. And when a Sequoia, a Kleiner Perkins, etc. comes out and says, ‘’I’m going to invest in this space, I picked a company, this is going to be the next big thing,’’ all these other investors start piling in, and they choose the second, the fifth, the 11th, the 20th best companies to invest in. That drives up the valuations for these companies, so you’re getting poor valuations in companies that perhaps aren’t actually all that good. As all that capital is flowing in, other entrepreneurs see that this is becoming a hot space and say, ‘’Oh all this capital is coming into the space, I should start a company here.’’ So more companies start in that space. Now you have high valuations, plus lots and lots of competition. Ultimately, maybe that first company or the top two companies end up with reasonable exits, but the majority of the investors who invest in that space end up faring very poorly. If you invested in the fifth best company at a very high valuation, you’re not going to end up with a good outcome. So for both entrepreneurs and for investors — starting or investing in a hyped up area, like AR, VR, Blockchain, scooters — is not necessarily an optimal idea. How does KYTE compete in the ride sharing or the car sharing space? Wouldn’t you classify that as a pretty hyped space in today’s market? Not exactly. We don’t really think about KYTE that way. We think about KYTE as a company that is really disrupting how people rent cars. Car rental is an exceptionally painful, antiquated industry. The majority of the population has, at some point in time, sat in an endless line at Hertz, Avis, National or Dollar, and just said to themselves, ‘’Wow, this is miserable,’’ and then went over to the kiosks that those companies spent large sums of money on and realized that they don’t work. It’s a horrible process. Plus, the KYTE founders recognized that there was a very important shift happening in the way that people use cars. The level of car ownership, both in the US and internationally, is dropping precipitously. KYTE solves that problem for a lot of people, people who don’t want to own cars, but still, once, twice, three, four times a month, want to rent a car for a long distance. If you’re in the Bay Area, then want to go drive to Tahoe or go camping somewhere outside of San Francisco, you don’t want to take an Uber to do all of that. But if you get a KYTE, it solves that problem. It combines the car ownership trend with another major shift, towards convenience. The millennial generation now has cash and is willing to pay for convenience. The first time you get a KYTE, it’s a magical experience. Any time we’re considering investing in a B2C product, we actually try that consumer product. So both 1984’s managing partner Ramy and I are KYTE users, as well as investors. When we first tried it, having somebody show up at our door, give us the keys and disappear, and all of a sudden, we’ve got this car in front of us, and we never had to wait at a counter or walk anywhere, that was magical. What would you say is the biggest differentiator between 1984 and other venture capital funds? There are a few elements to it. We’ve built a brand as the folks who entrepreneurs go to when they are building a really unsexy company. If you’re building a virtual reality or a space tech company for example, don’t knock on our door, but word has gotten around that if you’re disrupting how residential real estate appraisals are done or if you’re changing the nature of warehousing, we are probably one of the first doors that you knock on. That’s one piece of it. A second piece is that we’ve built a reputation for honesty and transparency. When we pass on companies, we’re transparent about the reason why, which for some reason many VCs aren’t. We try to pass quickly and have honest conversations that add value when we’re engaging with any company. Finally, once we invest we really try to add a lot of value to the company in a couple of ways. One is guidance. We work closely with our portfolio company founders on a range of strategic issues as well as founder therapy. Two is we work hard to help get them not just to a Series A, but to a Series A with some of the best early stage firms in the world. We’re fortunate that we can get our portfolio companies in front of the top Series A firms. And we work closely with our portfolio companies to help them think about positioning, the story, deck iterations, and ultimately make the introductions that are going to be most useful. Having been entrepreneurs ourselves, we’ve always been of the opinion that VCs tend to overvalue their advice and undervalue their introductions. So we really try to optimize around making really valuable introductions to help our founders. Speaking about helping founders, can you give me some insight on how you make decisions in the investing process? How do you decide which company to invest in, and what exactly are you looking for? It’s actually relatively straightforward. At the highest level, we’re deciding if this company is solving a real problem. Then, we look at the team. Are these the very best people to solve this particular problem? Next is the market. Is this a multi-billion dollar market? If this is successful, how big of a success can it be? Then we look at product and product/market fit. Are the relevant KPIs going up and to the right? Then behind that are more secondary considerations such as is this a space that has significant headwinds or tailwinds? There are some industries where you can do everything right, and it’s still an uphill battle. Then there are some industries where no matter what you do, you’ve got a good shot at doing reasonably well. Those are all things that we take into account. Would you be more likely to fund a very experienced team with a mediocre idea? Or would you prefer an amateur team, but they have an amazing idea? The team is much more important than the idea. My assumption is that most of the time the company will make 1–2 pivots before they really nail the model. It’s only at Facebook where somebody comes up with an idea in their college dorm room, and then boom, that ends up being a $10 plus billion idea. The majority of the time, there are twists and turns along the way. So having a team that is able to execute and accommodate those twists and turns is first and foremost. That’s why it’s the number one filter that I mentioned. What’s the #1 red flag you see that makes you pass on a company? I wouldn’t say that there’s a number one red flag. Frankly, the company has to pass all those filters I previously mentioned in order for us to move forward. That’s relatively rare. The nature of the business is that we end up passing on far more companies than we move forward with. Some examples of red flags are teams that don’t come across as though they are prepared for the challenge or don’t know the space well. Or if they’re attacking a small market where even if the business succeeds, you can’t have a billion-dollar valuation. Those are the types of things that we look out for. How do you deal with cold calls and emails? Do you have any advice for entrepreneurs trying to reach out to venture capital? We try to be responsive to the cold emails that we get. An entrepreneur should expect that even if they get a response from a venture capital firm to a cold email or cold outreach, then the bar that they have to pass is much higher than if they came in through an introduction because the majority of the time, entrepreneurs should be able to network their way eventually to whoever they want to meet, within certain limits. For the most part, if somebody wants to reach us, they should be able to find somebody who knows us. So if they’re not able to do that, it’s a little bit of a yellow flag. When I was an entrepreneur, I was of the opinion that VCs should take cold emails, take cold calls, and look at them the same way that they would if the person came in through a warm introduction from somebody that they knew. So, as a VC, early on, I really tried to open the floodgates and take in a lot of cold outreach. What I found surprised me, which was that the people who I was getting connected to through warm introductions or through my own outbound direct outreach, as opposed to direct outreach by the entrepreneur, tended to be a much better fit for what we were looking for than the people who were reaching out cold. My experience has generally been that when somebody comes in without a warm introduction, the likelihood is that they’re less likely to be a good fit for us. Why do you think that is? Is that because of their inability to network or does that suggest that it’s like an auto filter? People you know would are more likely to recommend qualified entrepreneurs? It’s more the latter. The people who send us a lot of deal flow are people who we’ve had conversations with about the nature of our thesis, and the types of companies that we’re looking for. So they’re not likely to send us companies that are well outside of our scope. Whereas, if you’re an entrepreneur, and you’re reaching out to us for the first time, you may not have done the research to know that we’re not looking for the next big scooter company. You may have a great vision for the future of scooters and think that mobility qualifies as an antiquated industry, so we’ll probably like their idea. You might reach out to us directly, whereas somebody who knows us well would tell you, “No, don’t bother reaching out to 1984. That’s not their thing.” What do you find the most difficult part about seed stage investing? I’ll answer that in two ways. It’s hard to find great companies. There are not that many billion-dollar plus companies born every month, so you constantly have to be scouring America to find the companies that really fit what you’re looking for. The other piece is, frankly having been entrepreneurs ourselves, it sucks passing on a company. Saying no to somebody who is really promising, who’s looking for capital, who has the fire in their belly, that is a painful thing to do. The nature of the business is that you’re doing it all the time. So you have to get used to it, but it still sucks. What are the channels that you use to try and find these companies? Where do you think there’s the most potential to find these ideas and these people and these teams? Certainly, Alchemist is a great place to look. We’ve invested in a couple of companies that have come through Alchemist. We’ve invested in some companies out of YC. We have inbound from other venture capital firms who know us well and are familiar with how we add value to companies after we invest. We have friends at universities, accelerators etc., angel investors across the US who we work with, and who would like to have us sitting at the table when a seed stage company is going through the process of growing up and ultimately looking for their Series A. So all of them send us deal flow. We’re also very proactive, both in doing outbound research and outreach, as well as digitally knocking on doors. We’re constantly working to expand the top of our funnel. Is there any one piece of advice that you’d want to share with founders that doesn’t get shared enough in your opinion? Yes, to deeply diligence your market and test the core hypotheses around customer adoption as quickly as you can. Sometimes founders will look at their market with rose colored glasses and say that there aren’t any other serious competitors in their space. Often this is a sign that they don’t understand their competition or don’t take them seriously enough. Or, if other competitors in the space are not doing well, then there might be a reason that applies to your business. Founders are well served by understanding their market dynamics and competition today as well as by understanding what happened in their space in the past. You can learn a lot from reviewing startups in your space that failed. The takeaway here is that there’s frequently an assumption among entrepreneurs that you’re looking at a given industry or problem better than anybody else has, and you’re looking at it in a new way, in a way that no one has ever looked at that problem before. In reality, you really have to be very skeptical of your idea and vision before you decide to spend years of your life working on it. About the Alchemist Accelerator Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley — including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.

Nikolaus Volk - Co-Founder, KYTE Nikolaus graduated from Technische Universität München with a BSc. in Engineering Science. He then went on to pursue a MSc. in Engineering at Stanford University. He worked at Uber as a machine learning engineer, where he built large scale (ML) systems and infrastructure on top of sensor and location data. In 2019, he co-founded KYTE with Francesco Wiedemann and Ludwig Schoenack, where he serves as the Technical Leader. What does KYTE bring to the marketplace that wasn’t already prevalent? We allow customers to rent a car for a day, a couple of days or weeks. We’re completely redefining the experience of how people rent vehicles. For our customers, we make renting a car as easy as ordering an Uber just with the press of a button because the car comes straight to your door. KYTE doesn’t really define itself as a car-sharing or car-rental company, since you don’t own the cars. How does your model work? Yes, that’s correct. We are a technology and logistics platform. We virtualize the supply from car-rental companies, dealerships or directly from auto manufacturers. We work with these fleet professionals because they are really good in what they are doing with respect to buying and selling vehicles. And we are building what we are good at: customer experience, distribution, technology, product etc. For our suppliers we are building what we call cloud-fleet infrastructure to make these vehicles then easily deployable to any demand. Can you tell us about your journey before starting KYTE? What was your motivation for building up KYTE? We have been observing a lot of what’s going on in this space. The three of us realized that ride-hailing has developed over the last couple of years, scooters have transformed micro-mobility, and the car-rental space, in our opinion, was the last missing piece of the entire mobility landscape, where we identified a large gap in terms of a) user and product experience and b) supplier needs. Personally, I used to work for Uber as a machine learning engineer for a couple of years. I was always really fascinated in dealing with the physical and the digital world, how to basically make the physical world smarter, more intelligent and more efficient. At Uber we called that working with “Bits and Atoms”. And my two co-founders were also in the transportation space: Francesco on the product side for BMW, he was developing mobility experiences for the end consumer. And Ludwig developed large automotive strategies as a consultant for McKinsey. How did you meet your other co-founders? Francesco and I met during undergrad study together. We have known each other for more than 10 years now. Ludwig and I met through his (now) wife a couple of years ago in San Francisco and pretty quickly concluded we can (and should) build a company in this space together. The three of us are all German, so that’s another common factor I guess. How did you assign roles to each co-founder? How did you distribute the work amongst yourselves? We are very lucky that we all have very different and complementing skill sets while shill sharing the same traits and principles for running and building a company — I think this is very rare. In general, when building a team and assigning roles, it always comes down to maximizing value for the company and ensuring that everyone can bring in their best side to the table. It is important to have very clear functional titles, not in terms of C-level or hierarchy, but more in terms of ownership or responsibilities. All three of us have very different skills and backgrounds. Francesco has great product intuition and understands the user’s perspective. He is the natural product lead. I am much more a tech person with a focus on software, backend, optimization and analytics. I love running highly efficient technology teams. Ludwig, given his consulting background, his MBA, his ability to understand people and find best possible business outcomes is the perfect fit to run both the operational side of the business and to deal with all of our suppliers, which are essentially the engine of our business. What do you think, out of all your experiences, has prepared you the best for your current role in the company? The high speed at Uber is definitely one of the biggest influencers for me, and also for us. What I mean by that is the capability or drive and push the needle and move incredibly fast and aggressive. Just by having this mindset in terms of how to build things and how to scale, we think we can actually capture market share very quickly. But for obvious reasons we all bring very unique and valuable skill sets and experiences to the table that in sum define how we run the company. What is the most challenging thing you’ve faced at KYTE so far? I think it’s keeping the focus on a few things to work on. It’s so easy to get distracted because there are always 500,000 things that we could work on all the time. We have tons of ideas, and there are all these different directions that we could explore, and that could all make sense, but given limited resources and limited capital, we really need to keep the focus. It’s by far the most challenging thing, but I think in probably any startup and this is not particular to us. What do you think is going to be the biggest challenge for you at KYTE? What is the one bottleneck that you’re trying to fix right now to get to your maximum potential? At scale, in order to ensure scalable and massive vehicle supply will require hard work, really hard Business Development and superior technology and excellent performance. On the other side, for right now, we’re a consumer facing company, which means there’s an entire consumer marketing side to it. Really nailing the product-channel-market fit, i.e. which customers we acquire via which channels with what specific messages and value propositions, and the specific channel mix that is scalable is hard, but probably for any consumer startup. What made you transition from an engineering role or from other roles that you could have gotten straight out of academia to build a startup? I was always somebody who wanted to build and ship things very quickly. Kyte gives me the chance to actually have real impact, ship tangible products and go with a pace which is impossible in a bigger organization. What would be the most valuable thing you learned at Alchemist? How was your experience there generally? The most fruitful experiences always had to do with the people at Alchemist. Looking back, the level of how Ravi, Ash, Danielle and the rest of the crew helped us push through the tough times. They also had a lot of patience with us. We essentially created the company within Alchemist. They were amongst the first believers and amongst the people who motivated us, gave us energy and spread the love for Kyte. Another thing to highlight is the advisors there. I am sure they did a great job with all the companies, but I feel like particularly for us, a bunch of the Alchemist advisors had a very significant impact on the company. We are very grateful for them. For future Alchemist accelerator batches, what would you have done differently in order to maximize what you’ve gained out of Alchemist? We definitely gained a lot. However, if we could do something differently we’d probably be even more thoughtful about how we choose advisors and how we worked with them. We could have tried to better understand how they could have an impact, and then how to best utilize them to get the most value from our time with them. What entrepreneurial lesson took you the longest to learn or you’re still learning? What would you say is the best advice you’ve gotten regarding entrepreneurship that you’ve taken and implemented? It goes back to what I said before, you always have to force yourself to keep the focus and not get distracted. This is across the board. I would say this is something which I still need to remind myself of every day. Another thing that is important is to learn to communicate the confidence in yourself, the team, your company, and your product when you go out there and pitch advisors, investors or candidates. It takes some time to be good in switching quickly from “problem solving” mode (when you need to be critical, challenge your assumptions and reflect) to “selling mode” as we always call it, but it’s very necessary. One more thing to add is the power of story. That probably gets underrated or undervalued a lot. The story is such a powerful thing in general. The story needs to be something that you really believe in and then you need to go out and convince others that you can make this story happen. The best stories are the ones where people first don’t believe it’s possible but then you convince them that you are the one that is gonna make it actually happen. What constitutes success for you in the center of the startup? What would you consider to be a successful outcome and how would you determine that? First of all, the center of the startup are obviously the people, the entire team. I strongly believe in the people first, then products, then profits hierarchy. And for us as a team, success means creating value in some way. A successful outcome is building a massive company (or at least having the continuous ambition to do so and building something that has the potential to be massive). Do you have any insights that you want to share to the next generation of founders? First, focus on the problem and then build a business out of that. Do not put too much focus on fundraising early on. That will come naturally if you put the right attention on the problem, the product and team at the beginning. If you do join Alchemist, make sure to involve the Alchemist crew to a fair degree early on as that definitely helped us tremendously. Also mingle and spend time with the broader Alchemist community, your current batch and other batches. It’s quite a powerful family and network when you know you are going through this together and help each other out. Do you have any insights regarding the mobility landscape? It’s an all-or-nothing kind of market. It’s highly competitive, and has gotten very hyped over the last couple of years. However, the beautiful thing about that market, about transportation in general, is still: if you get it right, it can be really massive. About the Alchemist Accelerator Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley — including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.

Mike Burshteyn - CEO, CryptoMove As CryptoMove’s Founder & CEO, Mike Burshteyn drives all company business strategy and execution. Before starting CryptoMove with his father, Boris, Mike was a cybercrime and data protection attorney. At Perkins Coie he worked with leading technology companies like Google, Uber, Amazon, and Microsoft, as well as startups in hypergrowth, on data privacy, security, intellectual property, and computer crimes. Mike was the #1 ranked college debater in America at UC Berkeley. What does CryptoMove bring to the marketplace? CryptoMove protects data with continuous fragmentation and moving target defense. Current data protection methods leave sensitive data, keys, and secrets as an easy stationary target at rest. CryptoMove’s key vault product is all about protecting authentication tokens, API keys, application secrets, SSH keys for cloud services, and secrets for containers and Kubernetes. Developers who do cloud native development or use cloud services, today, find it difficult to manage keys and secrets at scale. CryptoMove has this revolutionary technology that can help to solve those challenges. If you’re working with cloud services, if you’re working with containers, an effective secrets management tool like CryptoMove can increase your speed of development, make life easier for developers, and also provide additional security. What was your motivation while building up CryptoMove? What was your drive pushing you forward? It all started with my co-founder and our CTO, Boris. He invented this technology. For decades during his career he was building distributed systems and he was always thinking about how to do that more efficiently and more effectively. Thinking about the question of “what happens if encryption fails” led Boris to developing CryptoMove. When he needed a business partner, that’s when I ended up quitting my job and joining in. By the way, we are a family business — my co-founder is actually my dad. TL;DR: my dad invented this technology and needed help with the business so I jumped in. What do you think is the most challenging thing you’re facing at CryptoMove? That’s a great question. There are so many challenges with a startup all the time. I think that right now the biggest challenge that we are facing is this idea of how do you scale the organization. We’ve been experiencing a lot of growth: new customers, new users, new team members. Every time that you experience significant growth in the company it seems like everything has to get rebuilt in terms of the processes, whatever everyone is working on and whatever everyone is focused on. Being able to do that rapidly and in a way that maintains a really high standard for execution is a big challenge. Can you tell me a little more about your background before starting CryptoMove? I grew up in the Bay Area and my parents are both software engineers. They used to work at all kinds of startups and tech companies. When the dot-com bubble burst, I remember asking my parents “where did the traffic go?” because all the roads cleared up. So, I kind of grew up around tech. I ended up in college at Cal — most of my time was spent on the debate team, where we were ranked number one in America. We would research all sorts of different topics and actually one of the things that I researched quite heavily was cybersecurity and data protection. After college, I ended up working at a startup. It was a great opportunity to learn a little bit about all the different ups and downs and parts of the startup, and I ended up starting my own ecommerce business focused on debate research for students, which was fun. Soon after college, I ended up going to law school and became an attorney. As a lawyer, I ended up in this practice group at Perkins Coie doing data security, cyber crime, intellectual property, litigation, and privacy. We were working for technology companies, startups, big ones, small ones. I had a lot of exposure to cleaning up messes, such as API keys improperly checked into GitHub. Now, coincidentally, CryptoMove’s product is meant to avoid that. Meanwhile, my dad was working on CryptoMove in stealth, prototyping it. We were helping with the patents and standard legal work. What he really needed, though, was a business partner. So I went to my bosses at the law firm and they encouraged me to take the leap. That was about 3 years ago. Out of all of your experience, what do you think best prepared you for your current role? I don’t necessarily think any one thing prepared me. Frankly, every day and every challenge we encounter is something new and unique. It’s all about being flexible. My approach is generally to try to learn as much as possible from people around me. There seem to be a lot of startups where founders knew they wanted to start a company and they took a very deliberate path towards doing that. In the case of CryptoMove, it kind of just happened and wasn’t necessarily our plan. We’re just trying to do the best we can, taking advantage of opportunities. Going back to the first day of working on your startup, what advice would you give yourself? Apply to the Alchemist Accelerator, which we actually did. Not on the first day, but a couple weeks afterward. I would definitely do that again. I would just try to iterate as rapidly as possible. I think that’s something that I would say could benefit any startup. Create a hypothesis, test it quickly, and iterate and move on. CryptoMove today, our product, our go to market strategy, everything about the company, could not have been predicted 3 years ago. It took a process of rapid iteration. That’s been really important. What was the most valuable thing you learned from Alchemist? Alchemist was huge for CryptoMove and for a lot of companies in our class. We were first time founders and even though we had a lot of startup experience, we had never raised VC funding. Alchemist set us up for our first investor, Tim Draper and Draper Associates. We met at an Alchemist Investor Feedback Summit. Alchemist set us up with our first customer, which was the Department of Homeland Security via a scouting program they had, that led them to look at Alchemist start ups. Just working with Danielle, Ravi, Ash, and everyone helped give us the building blocks of the common pitfalls that you face in a startup. Even now, Danielle is an observer on our board. We have continued to work closely with Alchemist. Across the board it was really valuable to us. If you could do Alchemist again what would you do differently? I think that there are things that we did while we were in Alchemist that in retrospect we shouldn’t have done. For instance, we spent a lot of time going to a bunch of pitch events with corporations. In some cases they were helpful but there is a lot of corporate innovation tourism that is easy to get sucked into. When we were working on our product and asking users for feedback, that was the most valuable thing. In many cases, corporate innovation teams are just cycling through Silicon Valley almost like they are at a zoo. It’s a common pitfall for a startup, especially at that early stage. When you meet with big companies you think you can get a big contract with them, but in reality they’re just enjoying the scenery and taking some notes on startups. Alchemist calls this “corporate tourism.” Just to take note of what really qualifies a lead and whether there is corporate innovation tourism going on can save a lot of wasted cycles. What entrepreneurial lesson took you the longest to learn or are still learning? I think that there are different lessons for different people. For me one of the biggest adjustments I’ve had to make is that in a startup there are ups and downs every single day. Especially as the company gets bigger, you could have massive wins in one area and fires in another area happening simultaneously. You can’t ride that emotional rollercoaster. Also, since I was a lawyer and I was a litigator, I was doing a very specific type of work that required being extremely aggressive, either defending client interests or going after cyber criminals. There’s a shift in style. There definitely was an adjustment period. I can’t write long emails anymore and definitely don’t check all my punctuation. Obviously, you can’t negotiate a business deal the same way you negotiate a settlement in a lawsuit. What constitutes success for you, personally? For me, for my co-founder, and I think, for everyone at work, success at CryptoMove means different things for different people. But, we all are excited about what we’re doing, about building a new product from scratch. Take CryptoMove’s technology, this idea of moving target defense and moving target data protection, which no one has ever heard of before. People think it’s crazy when they first hear about it. We’ve got this really innovative technology, patented globally, that is really changing how organizations such as our government and military protects its data. That is exciting. In some ways success is being able to do it for another day, because it means we’re growing. Startups are always on a fixed timeline. There’s a runway. You’re always trying to get to that next level. As long as we can wake up and keep doing it, we know that we’re succeeding. Do you have any insights that you want to share to the next generation of Alchemist Accelerator founders? It is really great to take advantage of the Alchemist network. There are people with expertise in different areas and you can fast forward a bunch of learning by engaging with the right people. At the same time, you have to really be careful about applying advice to the specific context of your business. I think that there’s so many resources, especially in the Alchemist network that can be leveraged. Do you have any insights for the next generation of entrepreneurs who are specifically manipulating and working with data? When it comes to data, in the security space and for security startups, it’s such a crowded (and overfunded) market that it can difficult to stand out. We’ve done certain things, like making our product SaaS first. We really focus on our users, which are developers, devops people, security engineers, rather than just trying to sell to IT managers. It’s a very different approach than what you’ll see with most security startups. In today and tomorrow’s worlds, data may very well become the most important resource — as impactful and as distributed as oil. Given this, CryptoMove’s data protection innovation via fragmentation and continuous movement and mutation is vital. About the Alchemist Accelerator Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley — including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.

Derek Chau - Partner, Acorn Pacific Ventures Over his career, Derek has been involved in over $3.5B of private and public company acquisitions. Prior to Acorn Pacific, he was the co-founder of a machine learning company in the news aggregation space and also served as the COO of a leading-edge government software company. He is a CFA charterholder and also actively mentors companies in the Dartmouth and Harvard alumni networks. Can you tell me about your background? I was an executive at a couple of software companies ranging from a 300–400 person enterprise software company, down to a startup level software company. Prior to that I was mostly in corporate finance. Out of all your experience, what do you think best prepared you for your role in Venture Capital? I served a lot of senior level operations, seeing — for a lack of better words — a lot of blocking and tackling. Dealing with a lot of headaches on the operational level really prepares you to understand what it takes to scale a company. I also had some experience operating a very small startup, working with my own team, bringing everything together, and raising capital. Can you tell me more about Acorn? What is the approximate size of your fund? How much do you normally invest? Acorn is a network of funds. Acorn Pacific Ventures is the fund with myself and three other partners. Acorn was founded about 18–19 years ago as one of the first Chinese Americans funds here in the Valley, funded by a number of very successful Chinese American entrepreneurs in industry. They banded together with the vision to give back to the community, investing in founders and supporting that ecosystem. Over time that morphed into a series of funds. Acorn Pacific is the forefront here in the valley. There are a couple funds in Taiwan and one in Shanghai, and a partner fund in Singapore. Between that ecosystem, we invest in founders and in their vision. We also look for companies that over time have an international component and can leverage our cross border experience. Things like optimizing supply chains and technology transfer. How does your fund differ from other funds? There are two main factors. Whereas a lot of funds have good operational people, at Acorn we bring together all of our operational teams. From the very first founders, it is a requirement that we bring in people who have seen it from a variety of standpoints. Everything from robotics to supply chain optimization to software. We look for people who’ve been through it and have got battle scars. People who understand how it works and are very sympathetic to founders, understanding what it’s like to raise capital and scale a company. Understand what it’s like to go through the good times and the bad times. Can you tell me about how you make decisions in investments? We try not to be overly formal. We don’t run traditional investment communities. Rather, we want people to meet people. So, the operating partners and GPs at Acorn want to work with folks. We want you to meet the folks who are going to be helpful and who are going to be working day to day with you. As those conversations go over time and people become more comfortable, we run through our diligence. That is our process. We of course make unanimous decisions about the partnership. Once we are invested we get behind the company, working through the good times and bad. How do you deal with cold calls and e-mails? Do you have any advice for entrepreneurs trying to reach out to the VCs? It’s very very hard. We don’t put a lot of weight on them. We’re not trying to exclude cold emails and cold calls, but it’s very difficult to get our attention. It’s not a deal that’s introduced by someone in our broad network, which can be very broad. We’re not going to give it a lot of weight unfortunately. By chance you may get our attention and may get a response but it’s pretty rare. What’s the number one red flag you see that makes you pass on investment? There’s a lot of flags that we look for. A team dynamic is really important to us. First and foremost we invest in people. If we see that the team of founders or co-founders are not gelling or there’s some dynamic that’s missing there or if the team is not cohesive, that’s big flag for us. If we feel the technology is something we don’t feel that there’s much defensibility in, that’s another piece that could also raise a lot of questions. I don’t think there’s ever just one flag so to speak. Can you tell me more about your investment in MetaData with Gil? We met Gil probably a couple of years ago, and at that point the company was still very young. First and foremost I liked Gil. He had very good passion when he spoke. The market he is in is a very crowded space. It’s one that I traditionally did not spend a lot of time in, but there was something that was interesting about Gil. After the first meeting, we continued to keep in touch. He did what he said he would do in terms of delivering, in terms of top line, in terms of product, and customer traction. Transparency was really important to us and and Gil was super transparent. When we talked, we could tell he had a lot of candor and things clicked. We could also tell he cared very much about making the best out of his company and also being successful for his investors. The fit was there in terms of the people. How do you identify passion in entrepreneurs? It’s hard to boil it down to a few characteristics. The advice I give to all founders is to be true to yourself. If you’re not true to yourself, we can see through that. If it’s not something you are passionate about it’s, for a lack of a better word, fake. Obviously. In Gil’s case, he was in an industry he spent a lot of time in. That’s a good sign for us. He came from a frustration with this space and he saw an opportunity to make things better. Gil’s case is just one. We can tell even though he’s been at a few different companies, he was very passionate about making sure he would succeed. He was hungry. What do you find difficult about seed stage investing? Startups are hard. Anyone who has done it knows that. It’s easy to, after the fact, describe how everything went right, but we all know it’s so non-linear. There’s so many things that can go wrong. Everything from product market fit to technology to the team. It’s just pure luck. For us there’s never just one thing. There’s so many reasons that a company can fail, even if a company has all the right people and execution. There’s no perfect investment. For us it’s very much an art and it’s really going with your gut. Would you be more likely to fund a very experienced team with a mediocre idea or a novice team with an amazing idea? Every situation we come across is different. It’s really hard to boil it down to such simple terms. If I had to give an answer, I would say that The Valley is full of ideas. There’s not a lack of ideas, but it’s more about the ability to execute. Operational experience counts for a lot. Is there any one piece of advice you want to give to founders that doesn’t get shared enough? Be true to yourself and be humble. I think humility is a really important skill that we really value at Acorn. Rejection is hard and it requires endurance and perseverance. It’s not an easy thing to do. We’ve done it and understand it. It’s hard to look around you see all these other startups that are getting so much money and valuations, but they’re the exceptions. If you’re having trouble raising money, just keep at it, believe in yourself, believe in your team. About the Alchemist Accelerator Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley — including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.

Sean Ellis If you’re looking for experts that can advise you on when and how to scale your startup, Sean Ellis should be one of your first calls. Sean coined the term “growth hacker” in 2010, after helping companies like Dropbox, Eventbrite, LogMeIn, and Lookout achieve breakout success and billion-dollar plus valuations. Today, he’s the Chief Evangelist at GrowthHackers, a company he founded in 2016 to “help teams work together to drive breakout growth results for ‘must have’ products and services.” During the summer of 2012, Sean spoke at Alchemist and distilled some of his most valuable insights around product-market fit and developing strategies for growth. His advice provides a significant and preliminary roadmap for early-stage founders, as they look to take the next steps with their startups. Sean shared insights across several different, critical areas. Product-market fit is important…but what exactly does it mean? For every startup, finding “product-market fit” is a critical early inflection point. Sean notes that Marc Andreessen, founder of a16z, and one of the first people to coin the term, emphasized that founders should be obsessive in pursuing this state. Andreessen sees it as so make-or-break that every business can be categorized in a binary manner, as either “pre” or “post” product-market fit. Despite its importance, Sean observes that a metric-based, universal definition of product-market fit has proven elusive. Through his operating experience, Sean has developed a potential solution to this “mystery.” Put simply, companies need 40% of their users, within a large segment of their market, to be in a place where they’d be “very unhappy” without the product. That seems like a clean, elegant solution. But, what is a large segment of your market? Sean has a few answers. First, you should look for some type of 40% cluster within your user base. Next, try to figure out whether that group is meaningful, or merely an edge case. For example, if 80% of men are really unhappy without your product, that’s meaningful. However, if 80% of men between the ages of 37–40 in Oakland are really unhappy without your product, that’s an edge case. While definitions are a helpful starting point, there is limited utility in theory. Sean’s unique value comes from his experiences in helping companies achieve breakaway success. To reach product-market fit, he has a few key suggestions. Have a concrete plan for growth. Pain Point First: Find that there’s real frustration around the problem you’re solving, before you even write a single line of code. Early Feedback: Release an MVP to get feedback on your product as early as possible. Find Your “Must-Have” User: When you find this user, or group of users, who really need your product, learn as much as you can about them. Explore some of the following questions: Why do they need your product? How are they using it? What’s the primary benefit they’re getting from using your product the way that they do? Sean realizes that it’s tempting to find people who don’t like your product, so that you can try to improve and iterate. It makes sense, but he emphasizes that it won’t lead you to create consistent value. Instead, he advises that you discover everything you possibly can about your “must-have” users, and find out what makes their experience “must-have.” From there, you can start to identify must-have groups and execute on their needs, as they continue to engage with your product. Sean stresses that your product roadmap should be tailored to replicate the experience that’s been resonating so strongly with these must-have users. Funnel optimization is critical, and it always pays off. There are a few key skills that can help founders on their journey to product-market fit. According to Sean, funnel optimization might be the most important. He emphasizes that it’s necessary to analyze every point of the conversion funnel. This process can be frustrating, because users are typically unresponsive and unwilling to give meaningful feedback. However, even if you’re frustrated, Sean says you can’t give up or give in. Even a 1% response rate, with months of funnel analysis, can provide significant value. Sean explains that in one case, a company he worked with tripled their conversion rate with minor tweaks to messaging on their platform. Through survey results, they were able to see that users were unsure whether they were actually downloading a free version of their product. A minor tweak that more clearly distinguished between free and paid versions led to the 3X increase in conversion. Know when to grow. For most companies, there’s a lot of uncertainty around when and how to scale. Sean suggests that it’s optimal to spend and scale aggressively when you’ve reached the key 40% very unhappy stage, and when you have a positive ROI. He also notes that, for freemium products, the free version is an excellent customer development channel for premium offerings. This testing ground lets them observe actual user behavior and see where there’s real value. He implores the audience to think about products in their lives that hooked them on their free versions, before getting paid subscriptions. For Sean, Skype was one of these products that quickly came to mind. The network effects complication. Toward the end of his talk, Sean makes a key distinction: there’s a big difference between traditional growth companies, and companies that rely on network effects. He asserts that, with network effects, it’s not possible to simulate the value of the company at critical mass, because it continually gets more valuable over time. These companies don’t have the luxury of finding product-market fit, followed by optimization and growth — they must do all these things at once, which makes the process much more challenging. Key takeaways in 50 words or less. Find people who really need your product and engage deeply with them. Optimize your sales process to increase conversion at every point of the funnel. Recognize that purely viral growth is not sustainable. There has to be a “must-have” experience underlying growth, or you won’t be able to retain users. About the Alchemist Accelerator Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley — including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.

Jean Kovacs -Partner, Hillsven Capital Jean has more than 30 years’ experience directing technology companies, and delivering exceptional results with growing enterprises. She is currently president of the Northern California Chapter of the HBS Alumni Angels, a forum for Harvard alumni to connect with, learn about, and invest in quality early-stage companies. Her resumé includes serving as CEO and Co-Founder of Comergent Technologies, and Co-Founder and EVP of Qualix Group. She was named to the Silicon Valley/San Francisco Business Journal’s list of Most Influential Women in Business and has been profiled in Fortune, The Financial Times, Computerworld, Internet World, and InfoWorld. She holds an MBA from Harvard and a BS from Northeastern University. Can you tell me a little more about your background before venture capital? I worked for technology companies in marketing, product marketing, customer support, sales, applications engineering, and then went to get an MBA, thinking that I was going to go to Wall Street. I ended up deciding to come out to the west coast. I worked at Sun Microsystems, which went public, and then Frame Technology, which also went public. Following that, started a company (Qualix), which we took public, then started another company, which we sold to AT&T. I was always on the operations side until I got involved in angel investing. About two years ago I joined Hillsven as a Partner. What do you look at when you’re looking at a startup? We typically focus on enterprise companies. We don’t do a lot of marketing of our fund. We typically look for “curated deals”, deals that comes out of an accelerator that we trust or is referred to us by someone that we trust. We’ll do two to three deals per year. We typically go in at Seed and lead the round. We put in anywhere from $500K-2M. What about MetaData stood out from the rest of the investments you were thinking about making? I should say that I was not with Hillsven when they invested in MetaData, so this is a little bit of hindsight on my part. One of the things we liked was that Gil started as an engineer then got his MBA and went on to be a CMO, so he actually lived the customers’ lives before he started the company. He had that domain expertise and could talk the CMO language. As he was being a CMO he was thinking, “Why hasn’t anyone developed a product like this?” We felt he had that unique combination of business experience, domain experience, and technical experience. That experience and vision, combined with energy and tenaciousness, were the right ingredients that lead him to start MetaData. What are your thoughts on Alchemist? I like the Alchemist team. They seem to have a higher bar for companies going in, which also results in a higher bar for companies who are exiting. When I talk to entrepreneurs who have gone through the program, they all universally say that it was really worthwhile. There are a lot of incubators and accelerators. That makes for a lot of noise, but I would say Alchemist is certainly in the top percentile, based upon their results. Is there anything you’re excited about in the future? I just think there’s a huge opportunity for what we do. We’re seeing SaaS is leading to the democratization of the enterprise. No longer are business people in enterprises beholden to huge IT departments or huge ERP vendors so that everything has to go through. It’s much more accepted now if you have an application that fits a need in an organization, to go ahead and get that and deploy it within your organization. It’s an opportunity we’re seeing for startups that we haven’t seen for a very long time. What do you think is the number one red flag that would make you pass on an investment? We invest very early on. Our number one priority are the founder(s). If we don’t feel good about the founder and the founding team we won’t invest no matter how hot the space is. What makes a good founder? First, it’s someone who can articulate a problem and has domain expertise with that problem. Second, it’s someone who can attract and build a great team. Third, the founders and especially the CEO has to be tenacious. Probably less than 10 percent of the companies that get started have an easy route creating a product, bringing it to market and growing sales. There are always ups and downs, so we need to know that that entrepreneur is so passionate that they’re going to forge ahead even when the going gets tough. Would you be more likely to fund a very experienced team with a mediocre idea or a team of novices with an amazing idea? It’s about the quality of domain expertise and focus. If they’re novice they have to be coachable, have energy, and be tenacious. We’d rather have someone come in and say, “I know this problem. Here’s how you solve it and here’s who I’ve talked to and here’s who I’ve sold to.” Having early traction in a company is really critical. Which of your investments are you most proud of and why? We’re proud of all of our investments! Can you tell me about how you deal with cold emails and calls? That’s a tough one. We’re so busy getting curated deals that it’s hard to answer cold emails/calls. We try to get to them, but they typically don’t get the attention that we give to curated deals. Earlier you spoke about finding deals through references you trust. What makes a reliable reference? In addition to a few accelerators we trust, we get deals from several sources: 1. Other investors who understand our model and know how we invest in and support our companies 2. Our CEO’s/Founders — They understand our model and we trust their insights. 3. Customers. We keep in touch with enterprises and are always talking to them about the problems they have. If they find a company who is young and helping them solve a problem, we want to talk to that company! What separates Hillsven from other funds in the area? We take a very active role. Typically, we lead the round, and always take a board seat. There are three partners here and we all have different skill sets. We’ve all been founders ourselves and our careers have been focused building companies, not just investing. We really spend time getting to know the company, and helping with what they need, whether they want to brainstorm on technical concepts or market fit. When they’re getting ready to raise their Series A, we also spend time helping them and making introductions. Bottom line: We view ourselves as partners with our investments, not solely as investors. What do you feel like your role in the company is? We’re there to support the CEO and the team. If the CEO comes in saying I’m really wrestling with this or that, we’ll pull in the right partner who can help. If we don’t have a partner with experience in that specific area, we all have networks that we can reach out and find someone who knows a lot more about a specific area. What you think is the biggest indicator of failure for a startup? If I were to sum it up, I would say believing your own bullshit. Someone who pulls together a great pitch and says, “if we build this they will come” and not really having that tie into the market and customer prospects. When you look at Gil, he was a CMO and he knows the pain that they have. We have a company called Retail Zipline, another Alchemist company. The CEO of that came out of the retail space. She knows the pain. It really is having that passion where you say, “this is an issue that my team and I can fix, and it’s a big opportunity.” Is there any one piece of advice you would give founders that you think doesn’t get shared enough? Do your homework. Look at the VC’s web page, talk to their portfolio companies to figure out what they focus on, get your information all lined up. Then, have the tenacity to, in a nice way, keep on top of the process. Can you tell me about your experience as a woman in Venture Capital and any advice you’d give to young entrepreneurs and investors? I would say right now, it’s a fantastic time to be a female in the venture and startup worlds. There’s been so much awareness in the market, that I think people are really realizing the talent pool and are going above and beyond to access it. Do you have any advice for mothers who are trying to grapple with motherhood and their career? It’s never going to be easy. One or the other is going to suffer and I think you just have to make peace with that. Sometimes you’re going to be more career-focused and sometimes you’re going to be more family-focused. I think as a mother you’ve got to just come to grips that you can’t be all things to all people, all the time. About the Alchemist Accelerator Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley — including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.

Gil Allouche, Tech Entrepreneur Gil Allouche is a tech entrepreneur whose passion for artificial intelligence (AI), big data, and growth marketing led him to start Metadata in May 2015. As the Founder and CEO of Metadata, Gil prides himself on building a customer-first company. He is part of an ambitious team that is committed to solving a major problem that B2B marketing and sales professionals face — generating qualified, opt-in leads. Prior to Metadata, he ran marketing for Karmasphere (now FICO), Qubole and Silver Spotfire (now TIBCO). Could you explain a little bit more about what Metadata brings to the marketplace? Metadata is a technology software company in San Francisco. We are disrupting the B2B marketing space. We automate the marketing operations role with automation and AI. There are many tools in the B2B marketing space for tag management and email marketing automation and advertising and data vendors, etc. What Metadata does is connect all of those tools together, learn what worked and what didn’t work, and then orchestrate operations from within those technologies using an API, so that people don’t have to log in every morning and manually operate those tools. That’s the big vision. Today we connect about 40 different tools in paid media and do anything from sourcing audiences to getting all of their PIIs and cookies, etc. Then, we execute campaigns on social media, retarget, and optimize all of those campaigns automatically using KPIs from Salesforce and market automation from the customers. We have about 60 customers. Some of them are enterprise and some of them are mid-market and startups. Can you tell me a little more about your background before you started your startup? I’m a software engineer. I’ve written code since I was a kid. I moved to the U.S. about 12 years ago to do my MBA at Babson College, an entrepreneurship school in western Massachusetts. After that, I spent eighteen months running product for B2B companies. Then I moved into the marketing realm. I was a very technical marketing manager, so I relied on 3rd party contractors to do my copy and communications. But, I had complete responsibility for on demand generation, making sure that my counterparts have a pipeline to go and sell. I did that in three companies. Two of them got acquired. At the third one, I was the first business hire. I was in a small team in a tiny room, and today Qubole is a few hundred people. After doing that for about 7–8 years I had to choose whether I wanted to continue my career as a CMO (Chief Marketing Officer) and just work for bigger companies, or switch into the entrepreneurship realm, which is what I’m interested in, and build a product that will serve those non-technical CMOs and enable them to do what I did, but much easier. I started a consultancy with Qubole becoming my first customer. Three years later, this is where we are. What previous experience do you feel best equipped you for your role right now? Having the experience from both sides, as the software builder as well as the marketing software user. Building systems with AI, building Web products in the first part of my career and then switching up to doing an MBA led me to understand the business side of things and which software can solve for critical business KPIs. Then choosing the marketing space I wanted to innovate in, and then working as a CMO in a B2B company, gave me both points of view. All that prepared me for building the right software and serving the customers. I started software companies before, and I’m always passionate and excelled in that type of culture, without everything set up, An unstable environment and high risk, that’s where I thrive and every year we exist makes me better entrepreneur for the future. Do you believe that having a technical background first and then understanding the business side of things is the best background to have? Or do you believe learning the business side of things first is more important? It’s hard for me to say because I’m already subjected to the way my career went and so it’s hard for me to roll back and say maybe there’s a better way. I think I’m well equipped to run Metadata because I have a technical background and then I had the customer experience. Would it be better the other way around? Maybe. I don’t know many people who have done the other way around. The vast majority of people that I know in my position have a technical background and they know what’s possible to build to begin with. They build it in an amateur way using scripts, which is exactly what I did for eight years while I was running marketing. Then, after seeing it working, I built some of the tools myself, used them in my role and then built a generic solution for the rest of the market. It would not have been possible to do that the other way around because I wouldn’t even know it’s possible to fix using software. If you could go back to the first day of your startup, when you were still building Metadata up, what advice would you give yourself? Probably spend more time building the software. Maybe give delivery more time, building something small, focused, and that was more of an MVP (Minimal Viable Product). In my mind my MVP was more of a VP and not so minimal. It was more of a bunch of different tools put together. I think I would’ve focused on building something more holistic, but more minimized. It took us about a year to bridge that gap to what we have today. I probably would have invested a little more in engineering and product earlier on. Today that’s our main focus I’d also recommend reaching out to all of your colleagues, former managers — those will be your first customers, advisors, investors and will give you friendly needed feedback. Finally — I think it’s critical you learn how to manage your own psychology. Starting a company can be a tough journey and you need to learn to forgive yourself, adapt quickly and include others in your journey. What do you think is the most valuable thing you learned from being a part of Alchemist? I learned a lot from Alchemist. I learned about how seed investors perceive companies. I think I’m good at it, thanks to Alchemist. I also learned how to pitch my company, self development and reaching my first paying customers using CAB. That was very helpful and Alchemist definitely helped me do those. And finally the network, connections and practical 1:1 programming. Big shout out to Danielle and Ravi who are always there. If you had to give some advice to someone in Alchemist right now, what kind of advice would you give them to make the most of the experience? I think you have to come to Alchemist with something to offer already, meaning some technology or customers, and then take that raw material and build upon it. If you don’t have much, I would recommend to wait a quarter or two until you do, because otherwise you’re going to waste your time in the program. Another piece of advice I have is to start the program before the program starts. Danielle and Ravi will attest that I was in touch with them maybe two or three months prior to the program starting, doing email campaigns to get investors, asking advice about evolution and about the rest of the things that I had challenges with before the program started. So, moving at your own pace with the leaders of Alchemist I think was the key success factor for me. Finally, pick your battles in terms of what you want to participate in Alchemist and what you don’t. Running a business that already had some traction, I did not want to stop everything and attend every talk that Alchemist had. Rather, I wanted to keep running the business and use Alchemist whenever I saw fit, maybe 40 percent of the capacity or maybe 50 percent of the capacity. I don’t know if Alchemist will be happy with me sharing this, but that’s how I set it up, and it was very successful for us because it allowed us to keep the business running, and then use Alchemist for the things that we actually needed help with. Versus, go line by line with a program that was not always fitted to us because some companies were in a very different stage. We already had 30K MRR. and were kind of already started. Given your background, do you have any advice for other foreign founders? Being in the U.S. I would say visiting the U.S. and going after local companies with what is called the customer advisory board (CAB), a tactic that Alchemist educates about, is a great idea. Coming here, doing the activities, being at the office, I think is very important. I would also say, bring your team members with you to Alchemist. You need them involved, and not just your founders. You want to bring your co-founder and whatever the team is and bring them into the program and get them involved. I would say especially for foreign partners to begin the process of reaching out to Angels and Seed Investors prior to joining Alchemist and work hard on getting some funding prior to the demo day. We got some money at the Investor Feedback Summit and we got some money prior to the program even starting. That was very helpful for us to give us a good sign that the strategy of Alchemist works, prior to the program even starting. It was very helpful, especially for a foreigner who was not very knowledgeable about those things. That’s a piece of advice I would give someone who’s coming from a different country to Alchemist. Was there anyone in your life that helped you as a mentor and influenced you a great amount? If so, what about them helped you? I’m very lucky to have many mentors. I think I wouldn’t be able to get where I am without them. Some of them belong to Alchemist, some of them belong to Alchemist network, some of them don’t. First one that I had goes all the way back to my high school teacher who gave me confidence and belief that I didn’t have in myself back then. That’s the first one, back when I had some issues in high school. Then, if I take it all the way to Metadata time, my first advisor, outside of Alchemist, was Mickey Alon, a serial entrepreneur from Israel. He helped me get started with my very first pitch decks, etc. And then one of the other very prominent advisors I had to date, I would say my strongest advisor, was Bill Portelli. He is from the Alchemist network. I met him at an Alchemist event and he’s been tremendously helpful with all things Metadata from sales to personnel issues, etc. Other wonderful advisors who constantly tell me things how they are include Boris, Derek, Jean, Bobby, Jonathan, Gary, Eli and the list goes on. Maybe that’s another important advice — get your advisory board early on and keep them engaged. They can do magic. And I would say that Danielle has been very helpful. You know Danielle is kind of the de facto manager for Alchemist. She makes a lot of things happen and she’s also very good at advice and very resourceful. I think she provided great advice and mentorship at times when I needed it. What are you excited about for Metadata in the coming future? Growth. We are onboarding more and more customers than ever before. The last four months have been stronger than the previous twenty-four months before them. We’re seeing a good amount of growth. We’re also seeing a lot of confirmation from the market that what we’re doing is the future of marketing. So now it’s a question of how quickly can we leverage that growth with the value, raise more capital, and then grow the company. I’m excited about the next stage of the company moving from 60 customers to 200. Having a fifteen person team to having a thirty person team. I’m excited about those challenges. What constitutes success for you personally? Success is to see a product that you really needed in the market being used by enterprise companies like Amdocs, Hitachi, and SugarCRM. Having companies like these use the product, successfully renew, excel, and giving us testimonials and case studies. For me that is success. That means that the initial idea that we had and the solution to that problem that we thought exists, these are confirmation for a product market fit. That’s the first piece of success for a company at our stage. The next success would be a big institutional venture capitalist standing behind us with a large sum of capital to grow, and of course reaching profitability. For me a personal milestone that I’d like to achieve. Those three things I think are the major successes in relation to Metadata. Are there any other insights you’ve learned that you want to share with the next generation of entrepreneurs? I think the biggest thing to do for an entrepreneur is to get started. To unblock your own limiting thoughts of “what needs to happen before I’m ready to start a company.” Nothing has to happen. You just have to start it and then break down the path to entrepreneurship through small wins. To put the first landing page together, talk to the first 20 prospects, talk to the first angel, put it on Facebook. Share it. Don’t be secretive about your startup. The moment that you think you’re ready to, if you have a problem that you’re very passionate about and you have the domain expertise, you shouldn’t wait a second, you should just start it and then let it grow and let the market reject your idea or execution. You may have to switch, to change your idea, change your execution strategy, change your partners, what have you. Or if you see that it’s gaining traction then just continue to roll with whatever is coming at you. I would say that the biggest hurdle is for people to change their mind and say I’m an employee now and today I’m an entrepreneur. Nothing’s doing it for you. You have to do it on your own. The best way to get it is to just start taking action. You don’t have to resign from work right away, just devote 3 days or a week to it for a few months and you should be able to see some progress before you make the switch completely. That’s that’s the biggest hurdle I would say for entrepreneurs. About the Alchemist Accelerator Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley — including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures/year. Learn more about applying today.

Tim Chou, Lecturer at Stanford University Most people never think of technology from an economic point of view. Instead, we focus our efforts thinking about the nuts and bolts of the technology. Tim Chou, a current lecturer at Stanford University, spent his career focusing on Enterprise Technology. He believes that it is important to know a variety of business models to better understand how we can sell to customers. In a talk given at Alchemist, he outlined seven important models of how software companies drive revenue, and offered further insights into the sales process. Model One: The most typical, yet still extremely effective model: license the software to the user and then charge for support and maintenance. Tim gives the example of Oracle, which previously was a $15 billion corporation with $12 billion coming from support and maintenance. Model Two: Make your software open source, but monetize the support and maintenance. Tim emphasizes that Red Hat is the only real example of success for this model. Model Three: Outsource. “I’ll take over your mess and I’ll do it for less.” He explains that the amount of money to manage software is 4x the price so in most cases 75%-100% of the budget is fully allocated for the next year. Therefore, by outsourcing, you reduce the cost structure to purely human labor in China, India, Eastern Europe, etc. However, Tim goes on to outline two major flaws with this model. One, you are unable to maintain a low cost of labor for outsourced labor as workers will eventually want wages that match the workers in Silicon Valley. Two, the primary reason of system failure is human error. Model Four: Tim explains, “The customer pays for the software and maintenance, while I’ll manage security, performance, etc. for a set price per user per year.” In this case specialization is key. If you can standardize the hardware and software then you can replace human labor with machine labor, crushing cost structures and increasing reliability. Model Five: You alter the payment terms of Model Four. This can mean paying monthly or by other terms. Model Six: Every business application company since 1999 has delivered in this model. It involves removing the at-home and at-customer aspect of the model, in order to standardize and reduce cost structures even more. In justification, Tim explains that while operating in model four or five, cost structures can be taken down to about $50 to $70 a user. On the other hand, students of model six can get down to $5 per user. Model Seven: In reality, Facebook, Amazon, and Twitter are all software companies. What’s different is the way they charge for their service, whether it is ad-based models or embedding it in the transaction. An example is buying a book on Amazon, which is essentially paying for the software. In order to justify that there is an extra step in standardization, Tim argues that Google would otherwise charge around 70 cents per user per year in order to break even for searches. He explains all of their software is extremely standardized so their cost structure is entirely reduced to power (electricity). Understanding your Customer is Key to Choosing a Business Model These seven models offer a wide variety of choices to founders — however, in order to know which business model is right for your customers, you’ll need to talk to them! Tim believes in this day and age, we can now target our customers by first knowing who they are instead of just throwing your product out there. We can apply Geoffrey Moore’s idea of Crossing the Chasm to people who will buy into your vision and help you cross the chasm. Tim explains, a lot of the time you can tell if a potential customer is only interested in following the mainstream if they ask, “What is your ROI?” They are not your early investors. They are only interested to see if others have bought. Customers before the chasm are not large corporations, rather, they are individuals. How do you Sell? Once you know your customers, the challenge becomes how to sell to them. When broken down, there are two methods of selling. Both methods of selling involve “preciseness:” low and precise selling (e.g. Amazon selling $10 books, movies, etc.), and high but imprecise selling like business software, where you need fewer sales due to high value. The challenge is sitting in the middle where selling price is still high and is still imprecise. Tim makes the analogy of big screen TVs. Just like enterprise sales, there is an education cycle before you buy where you ask friends, read reviews, and do your research. Ultimately, you find that “selling is education and education is selling”. The challenge is that your sponsor (the guy who thinks what you’re doing is cool) is unable to answer questions to others about your software. Tim explains that the key is the art of storytelling. It really matters who is saying what. Without the right character telling the story, there is no credibility. Stories are a key part of learning as it activates a different part of the brain and your information is more believable. There are three types of stories: Man versus man, man versus nature, and man versus self. When telling a story about your product, communicate it in 3–5 points, identify the problem, and identify the value of your solution. By comparing the situation before your product to the situation after your product, you create value. What does this mean? It is no surprise that in order to sell to customers, you must understand your customers. It is important to understand that while your customers’ ability to use your product relies entirely on how you structure your business model. Their role as a customer lives entirely inside the model you choose to adopt. Therefore, when analyzing your product’s reputation, you can not overlook how your model is structured. By being aware of which business models work and which ones don’t, you can begin to better understand your customers as a whole. About the Alchemist Accelerator Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley — including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.