11 reasons we didn’t invest in your company

Like most VCs, we often review dozens of deals each week. We have developed a funnel that enables us to quickly eliminate those that do not fit our general investment criteria (e.g. industry, stage, model).

The deals that survive this initial culling process are subjected to much greater scrutiny and due diligence. This process includes a thorough review of the deck, financial statements and projections; discussions with the founders, customers and other investors; and a review of third-party information relevant to the company, its product and industry. Companies are eliminated from further consideration during various stages of this process and, in the end, we ultimately invest in a small percentage of the deals we review.

When we decide not to invest in a company, we always take the time to explain to the founders the reasons for our decision. The purpose of this article is to provide a review of the 11 most common reasons why we choose not to invest in companies in hopes that some founders will find it helpful in improving their chances of raising capital.

Lack of transparency/candor. If we detect that a founder is not being forthright, we immediately lose interest. Venture investing is based on relationships; being opaque makes for an inauspicious beginning of a relationship.

Nothing proprietary/defensible. If a company doesn’t have something that is proprietary that makes it defensible against potential competitors, then its success will lead to its downfall.

What do I mean by that? Without a moat, the company’s success is easily replicable. The more success it has, the more competitors it will attract. But if it has a secret sauce — which could include technology, processes, knowledge, relationships, etc. — its odds of sustained growth are far greater. And while first-mover advantage is helpful in the early stages, it usually doesn’t mean much in the long run (e.g. Myspace).

No proven, scalable paid marketing channels. We like to invest in companies where our capital can be used to fuel revenue growth. If a company has not yet identified cost-efficient marketing channels that are scalable, they are more likely to burn through our capital experimenting and testing to find them.

We prefer to invest in companies that have already done at least enough of this initial testing so they can use our investment to scale the channels that are working. And we have a strong preference for founders who intimately understand paid customer acquisition and don’t reply to our questions about growth by saying “We’re hiring a growth hacker.”

Don’t know your Key Performance Indicators (KPIs). We find there is a direct correlation between the depth of a founder’s knowledge of the company’s KPIs and the company’s success.

We want to see that founders are 100 percent dedicated to the company.

First, founders must demonstrate they understand which metrics are important to their business. Second, they must demonstrate they are properly measuring and calculating those metrics. Finally, they must know which levers to pull to affect each KPI and which KPIs need to be tweaked for the business to succeed.

Short runway. When we invest in a company, we like to see that it will have at least 12 months of post-close runway. Raising money requires a lot of time and effort and distracts founders from growing the business. We want the company to have adequate resources to enable the team to focus on growth without having to worry about quickly raising another round. Also, the next round becomes much easier to raise if a company has demonstrated 12 months of improving KPIs and growth.

To calculate post-close runway, founders must know the current cash burn and must have formulated detailed projections of how they will spend the funds they are raising and how much cash they will be burning each month post-close. This calculation can be done assuming: (1) zero revenue, (2) current revenue with zero growth or (3) reasonable revenue growth based on historical trends.

TAM is too small. We often see companies that have innovative, sometimes ingenious, solutions to a problem faced by a relatively small group. For a company to achieve exit velocity, it needs to be addressing a large enough market to make its upside revenue potential meaningful to an acquirer. If a company can’t demonstrate to us that the size of the market that its solutions address is reasonable (for us, that is usually north of a $1 billion-per-year market), we usually pass.

Pre-revenue or pre-ship. We find there is a disproportionate decrease in investment risk relative to the increase in valuation when a company makes its first sale. In other words, the risk decreases more than the valuation increases once a company graduates from pre-revenue to building and shipping a product for which someone is willing to pay. Thus, we think it prudent to invest after a company has made this first sale and has shown some early evidence of product-market fit.

No vision. We like to invest in companies whose founders have a clear vision for how to grow the company to 100x its current size. While getting there will certainly require the company to deviate from this vision, not having a vision makes it infinitely more difficult. A North Star keeps founders on track, even in the craziest storms.

Don’t intimately understand your competition. Companies often tell me “we have no competitors.” I generally find this difficult to believe and push back with “How is your target market currently solving the problem you intend to address? That’s your competition.”

Beyond this rudimentary knowledge, founders should thoroughly understand the solutions being offered by their competitors, which market segments they are addressing and how they are selling. A company’s potential customers will be comparing the company’s product against other available solutions, and sharp founders will have properly positioned the product for success.

Not being extremely knowledgeable about these other options and differentiating your product accordingly is a recipe for failure.

Lopsided founding team. Products need to be built and products need to be sold. These tasks require vastly different skill sets that are rarely possessed by the same people. We prefer to see a founding team with experience in a variety of disciplines, from engineering and development to sales and marketing.

Having all disciplines baked in from the founding of a company helps ensure that it creates both great products and products that can be sold. Yes, companies can hire talent in areas in which they are deficient, but then that deficient area is not really part of the company’s DNA. Plus, it’s always preferred if the folks managing the hired hands have experience in the relevant area.

No skin in the game. We want to see that founders are 100 percent dedicated to the company before we jump in. At a bare minimum, they need to be working full time on the business. Ideally, they have invested a relatively significant amount of their own money in the company, as well. Paul Graham wrote that once founders take steps such that it becomes “unthinkably humiliating to fail,” they quickly become “committed to fight to the death.” We agree.

This list is not exhaustive, but hopefully it gives founders a helpful checklist to make sure they are addressing some of the most common reasons why we (and probably other early-stage investors) pass on deals. And, by the way, if you’re doing all of these things right, we’d love to hear from you.

Featured Image: Martin Konopka / EyeEm/Getty Images

via TechCrunch
11 reasons we didn’t invest in your company

Liberty University Takes “Run-Hide-Fight” To The Next Level

“Run-Hide-Fight” is the current active shooter (I hate that term, and will use the more accurate “random mass murderer” from here on) response plan for civilians promoted by the Department of Homeland Security.

As you might expect from a federal government organization, fighting with a real weapon isn’t on DHS’s list of responses.

Unlike most colleges in the United States, Liberty University learned from the security failures of Virginia Tech, and instituted campus carry for faculty, staff, and students after that horrific massacre.

Unlike any other “Run-Hide-Fight” video in existence, this video from the Liberty University Police Department incorporates procedures that explain how the police want concealed carriers on campus to respond to a random mass murderer.

It’s an eye-opening video worth watching all the way through, and it’s encouraging that the LUPD has so thoroughly though the probability that if a random mass murderer does attack their school, that officers may encounter multiple concealed carriers before, during, and after engaging the random mass murderer. They have a plan and procedures to deal with armed people, and they won’t immediately start shooting at an armed person unless that person is acting as a threat.

I wish other law enforcement agencies (campus police or not) were as well trained.

It’s worth noting that as a private university, Liberty is free to make policy as they see fit, and they have clearly gone above and beyond what you can expect from most college and university law enforcement agencies.

The post Liberty University Takes “Run-Hide-Fight” To The Next Level appeared first on Bearing Arms.

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Liberty University Takes “Run-Hide-Fight” To The Next Level

Weekend Project: DIY Steel Target Hangers

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Recently, Joe Grine posted a story featuring the above Rogue Shooting Targets t-post target hangars. While they’re a great idea, I thought the price seemed a bit high. I tend to be a “do it myself” kind of guy, so with a shooting date coming up with Joe and a few other guys, I thought I’d add my steel plates to the range fun.

First off, I measured the end of a common T-post to see what the dimensions were so I could buy the proper sized square tubing. A quick stop at my local steel supplier was then in order. After finding the correct size, (I chose 2″ x 2″ square milled steel, .080 wall thickness). Then I gave a thought to how long it would take me with a hand operated hack saw to cut 10 pieces up.

Not liking that, I asked if the steel supply place would cut it up for me. Yup…at $1.75 per cut. So I gave them the green light. The next morning, I picked up ten three-inch pieces of cut up steel.

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Off to the local hardware store for some bolts and nuts. Four-inch long threaded 3/8″ diameter mild steel should do the trick.

Then to the drill press in my shop. X marks the spot for the holes.

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Put the bolts through the holes, tighten them, and this part is done.

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Next step: bend the bolts. No need for a torch, just a vice and a crescent wrench.

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So I did make one small mistake here. I bent one bolt a bit too far and I could feel it partially break. Next time I’m in town, I’ll just buy another bolt and bend it a little less.

I’m pleased with the end result…10 steel plate target hangars.

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You can see the broken bolt, fifth one up.

While Joe paid $37.50 per pair for his hangars, I’m into mine for considerably less. Total cost for ten hangers:

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Grand total: $31.73. Your mileage may vary depending on the cost of steel in your area.

It took me about an hour to make them. I suppose I could paint them and de-bur the edges to make them prettier. Also, this project would have only been $14.23 had I chosen to work up a sweat cutting these things by hand. So for those of you with a little more DIY attitude, that gets it down to $1.43 per hanger.

Now I’m all set for the range trip to Mt. Hood. This will be great preseason practice for long range shooting. I’m headed for the Hells Canyon wilderness area for first season elk. Stay tuned.

via The Truth About Guns
Weekend Project: DIY Steel Target Hangers

Hauntingly Beautiful Drone Footage of a Boat Graveyard


GIF

Where do boats go when they’re no longer fit for the high seas? As it happens, they go to Staten Island.

For instance: the Arthur Kill ship graveyard, located just across from New Jersey’s Tuft’s Point.

The ship graveyard has a storied history reaching back to World War 2, when the nearby scrapyard bought obsolete boats to scrap for parts. The influx of vessels outpaced the shipbreaker’s ability to take anything useful off of them, especially since—as Wired pointed out—people started dumping busted out dinghies there. A few decades ago, ships rotting in Arthur Kill numbered in the hundreds.

On land the graveyard isn’t much to look at. So videographer George Ivanoff decided to shoot the scene from the skies using a Phantom 3. The combination of rusting metal and toxic chemicals leaching into the water is, well, a lot more beautiful than it ought to be.

[PopSci]

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Hauntingly Beautiful Drone Footage of a Boat Graveyard

Read the FBI’s Clinton Investigation documents for yourself

The FBI released documents today about its investigation into presidential candidate Hillary Clinton’s use of a home email server during her time as Secretary of State. After the investigation, the Department of Justice decided not to file charges. Clinton was found to have not deleted sensitive emails, but the State Department called her actions "extremely careless."

The investigation focused on whether classified information was stored or transmitted to the unclassified server. It also looked at whether any top secret information was compromised by unauthorized individuals.

The investigation noted that 81 email chains containing information that ranged from "classified" to "top secret/special access program" level were found on the unauthorized email servers between 2009 and 2013. Of those correspondences, 68 still remain classified. During that time there were two systems used. Initially Clinton used an Apple server, but eventually migrated to BlackBerry. No big surprise there, Apple got out of the server game years ago.

Yet unlike the DNC, it looks like the private servers were not compromised by hackers according to the FBI. But the FBI noted that because it didn’t have an SSL certification from January 2009 until March 2009, it was vulnerable to attacks. It’s worth noting that the Clinton’s asked that the servers be encrypted but that the company managing the system, Platte River Networks never followed through because it said it would interfere with system administrators that were troubleshooting accounts.

During her time as Secretary of State, Clinton used a personal BlackBerry for her personal and official email because she didn’t want to carry two devices. She did tell the FBI she asked for a secure BlackBerry but doesn’t recall why she never received one. Also, while an email system admin says he remembers her using two phones during her time as Secretary of State, Clinton and others stated she only used a flip phone while in the senate.

When the FBI presented the classified correspondences found on her personal server to her, Clinton said she did not believe the emails contained classified information.

The documents also include information about failed spearphishing attempts and information about an interview with hacker, Guccifer who admitted he lied to FOX news about hacking into Clinton’s email account and the FBI’s interview with Clinton.

Source: FBI

via Engadget
Read the FBI’s Clinton Investigation documents for yourself

FBI Releases Hillary Clinton Email Report

The FBI released 58-pages documents on Friday detailing its investigation into Hillary Clinton’s use of a private email server while she was secretary of state, and a summary of her interview with agents, providing the most thorough look yet at the probe that has dogged the campaign of the Democratic presidential nominee. CNN reports: Clinton repeatedly told the FBI she lacked recollection of key events. She said she "could not recall any briefing or training by State related to the retention of federal records or handling classified information," according to the FBI’s notes of their July 2 interview with Clinton. Fallout from Clinton’s use of a private email server continues to dog the Democratic presidential nominee’s campaign, as her lead over her Republican counterpart Donald Trump has been cut in half since her post convention bounce last month, according to CNN’s Poll of Polls released Thursday. Trump and other Republicans have stepped up their attacks connecting the emails to questions over whether Clinton gave preferential treatment to donors to her family’s foundation. The bureau is making the information public in response to numerous Freedom of Information Act requests, including from CNN. "Today the FBI is releasing a summary of former Secretary of State Hillary Clinton’s July 2, 2016 interview with the FBI concerning allegations that classified information was improperly stored or transmitted on a personal e-mail server she used during her tenure," the agency said in a statement. "We also are releasing a factual summary of the FBI’s investigation into this matter."



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FBI Releases Hillary Clinton Email Report

Small Shop Entrepreneur Molds Gun Show Holsters

If you thought the spirit of small shop entrepreneurs was drying up across America, you are way wrong. At a recent gun show I watched as a two person team hustled their wares from three tables along a busy aisle of gun and knife buyers. They were making holsters right on site.

The team of Erin Herrington and John Allen work for their outfit they call Tac My Girl, LLC in Mississippi. With one table full of Kydex holster blanks and the other tables set up as a molding station, these guys can produce holsters for just about any pistol on the market. And this is done while the customer stands and waits for the finished product.

On display are over a hundred holster blanks offering a variety of color graphics from the American flag, camouflage patterns, the Punisher face, political remarks, symbols of many descriptions, trademark logos, snake scales, and much more. Also available are holster blanks in universal black and many solid colors for multiple applications including concealed carry, law enforcement, hunting, security or just personal preferences.

On the table also are mold guns of nearly every model available today. All the consumer has to do is identify their own personal gun, pick out a color or graphic holster blank and the team molds the holster right on the spot. The mold gun model is inserted into the blank, which is put into the heated molding “oven” press. The Kydex plastic blank then forms around the exact shape of the pistol mold.

The holster technician then uses a hot blow gun to customize the pistol mold to the holster for a proper fit. This allows enough friction to hold the gun in the holster firmly, but also permits a quick release with appropriate withdrawal pressure.

Once the molding is complete, the technician then attaches the holster carry accessory of choice which includes a traditional belt slide, an IWB clip, or a spring steel clip to simply slip the holster over the pants belt. Special belt slide leather “wings” can be added to the sides of the holster if the customer wants a wider belt slide set up, popular for bigger pistols.

Prices on site range from $35 to $50 depending on the blank. Plain black is on the least expensive end to a full color graphic on the higher side. The cool part is that the buyer gets their custom molded holster right at the show, ready to carry and go. You can contact these guys at tacmygirl@gmail.com.

The post Small Shop Entrepreneur Molds Gun Show Holsters appeared first on AllOutdoor.com.

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Small Shop Entrepreneur Molds Gun Show Holsters

Types in PHP and MySQL

Since PHP 7.0 has been released there’s more attention on scalar types. Keeping types for data from within your application is relatively simple. But when talking to external systems, like a database things aren’t always as one eventually might initially expect.

For MySQL the type we see — in the first approximation — is defined by the network protocol. The MySQL network protocol by default converts all data into strings. So if we fetch an integer from the database and use PHP 7’s typing feature we get an error:

<?php
declare(strict_types=1);

function getInteger() : int {
  $mysqli = new mysqli(...);
  return $mysqli->query("SELECT 1")->fetch_row()[0];
}

var_dump(getInteger());
?>

Fatal error: Uncaught TypeError: Return value of getInteger() must be of the type integer, string returned in t.php:6

Of course the solution is easy: Either we cast ourselves or we disable the strict mode and PHP will cast for us.

Now let’s take a look at another case. Assume we have an application where we fetch an integer ID from the database. We know MySQL will send us a string and we treat the ID as opaque data anyways so we have the type check for a string. Now we refactor the code slightly and make use of prepared statements. What will the result be?

<?php
declare(strict_types=1);

function getId() : string {
  $mysqli = new mysqli(...);
  $stmt = $mysqli->prepare("SELECT 1");
  $stmt->execute();
  return $stmt->get_result()->fetch_row()[0];
}

var_dump(getId());
?>

Fatal error: Uncaught TypeError: Return value of getId() must be of the type string, integer returned in t.php:8

Wait! – What’s up there!? — Didn’t I just say that the MySQL protocol will always send a string, thus we retrieve a string in PHP!? – Yes I did and that’s true for "direct queries." It’s not true for results from prepared statements. With prepared statements the MySQL protocol uses a binary encoding of the data and therefore mysqlnd and mysqli will try to find the matching PHP type. This isn’t always possible, especially if we’re going into the range of big values. So let’s query for PHP_INT_MAX and PHP_INT_MAX+1 and look at the types:

<?php
$mysqli = new mysqli(...);
$stmt = $mysqli->prepare("SELECT 9223372036854775807, 9223372036854775808");
$stmt->execute();
var_dump($stmt->get_result()->fetch_row());
?>

array(2) {
  [0]=>
  int(9223372036854775807)
  [1]=>
  string(19) "9223372036854775808"
}

Here 9223372036854775807 is the largest value a PHP integer can represent and thus is an integer. 9223372036854775808 however is to large and can’t fit in a signed 64bit integer thus it is converted in a string, as this keeps all information and can be handled at least to some degree.

Similar things happens to other types which can’t be properly represented in PHP:

<?php
$mysqli = new mysqli(...);
$stmt = $mysqli->prepare("SELECT 1.23");
$stmt->execute();
var_dump($stmt->get_result()->fetch_row());
?>

array(2) {
  [0]=>
  string(4) "1.23"
}

Yay – yet another wtf! So what is going on this time? — Well, a literal in SQL is treated as DECIMAL. A DECIMAL field is supposed to be precise. If this were to be converted into a PHP float aka. double we probably would loose the precision, thus treating it as string again makes sure we’re not loosing information. If we had a FLOAT or DOUBLE field this could safely be represented as float in PHP:

<?php
$mysqli = new mysqli(...);
$stmt = $mysqli->prepare("SELECT RAND()");
$stmt->execute();
var_dump($stmt->get_result()->fetch_row());
?>

array(2) {
  [0]=>
  float(0.16519711461402206)
}

So to summarize:

  • For a direct query the MySQL server sends strings, PHP returns all data as string
  • For prepared statements MySQL sends data in binary form and PHP will use a corresponding type
  • If the value could only be represented with a potential data loss in PHP it is converted to a string by PHP, even with prepared statements

Now we might expect the same when using PDO. Let’s check:

<?php
$pdo = new PDO("mysql:host=localhost", "...", "...");
$stmt = $pdo->prepare("SELECT 9223372036854775808, RAND()");
$stmt->execute();
var_dump($stmt->fetch(PDO::FETCH_NUM));
?>

array(2) {
  [0]=>
  string(1) "1"
  [1]=>
  string(18) "0.3217373297752229"
}

This example uses prepared statements, but returns strings!? The reason is that PDO by default doesn’t use prepared statements on the network layer but an emulation within PHP. This means PHP will replace potential placeholders and then runs a direct query. As mentioned above with a direct query the MySQL server will send strings, thus PHP will represent all data as string. However we can easily ask PDO to disable the emulation:

<?php
$pdo = new PDO("mysql:host=localhost", "...", "...");
$pdo->setAttribute(PDO::ATTR_EMULATE_PREPARES, false);
$stmt = $pdo->prepare("SELECT 1, RAND()");
$stmt->execute();
var_dump($stmt->fetch(PDO::FETCH_NUM));
?>

array(2) {
  [0]=>
  int(1)
  [1]=>
  float(0.24252333421495)
}

This leaves the question whether you should disable the emulation in order to get the correct types. Doing this has some impact on performance characteristics: With native prepared statements there will be a client-server round-trip during the prepare and another round-trip for the execute. With emulation only during the execute. The native prepared statements also require some server resources to store the handle. However if a single statement is executed multiple times there might be some savings. Also the type representation means that different type conversions happen and a different amount of data is transfered. For most cases this shouldn’t have notable impact, but in the end only a benchmark will tell.

Hope this helps to give a better understanding, or more confusion :-)

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Types in PHP and MySQL