VC Minute – quick advice to help startup founders fundraise better
Click below to listen. 3m 25s duration.
Subscribe to your podcast platform of choice.
Rich Maloy:
This is Rich Maloy with SpringTime Ventures, bringing you the VC Minute. Quick advice to help startup founders fundraise better. I’ve really been enjoying my partner. Allyson’s writing over on our sub-stack. If you haven’t checked it out, head over to VCminute.substack.com. She’s leading off this week with her three most recent articles. But first, I can confidently say that our sponsor is a financial game-changer. They’ve been a trusted financial ally, providing invaluable insights to several of our portfolio companies. I’ve known them through the startup community for over a decade, and they have a stellar reputation. So who is our game-changer, helping growth companies with their success? AVL Growth Partners. Head to AVLgrowth.com and explore how they can be pivotal to your growth. AVL Growth Partners. Your success. Their expertise.
Allyson Plosko:
If you spend enough time in the startup ecosystem, it’s inevitable you’ll come across companies solving the same types of chronic problems, such as care coordination or food waste. These are pervasive, near-universal problems in dire need of a solution. Yet, they remain largely unsolved. In the storytelling around successful startups, one of the critical elements that often gets underemphasized is the role timing can play in making or breaking a company. A company might have an amazing founding team with a well-thought-out solution, but the likely outcome will be much smaller if they’re too early or too late to market.
For example, AlchemyAPI, which was building a deep learning platform, started in 2005 and was acquired by IBM in 2015. From what I’ve been told, the outcome was modest compared to AI evaluations today. This is pure speculation, but had they started a decade later, I suspect the outcome could have been very different. When investors talk about market analysis, one of the key points they’re trying to understand is the ‘why now’. This is an even more critical question if the investor has seen other companies fail to solve the problem.
An investor’s pattern recognition can be positive and negative assets, but if there’s a graveyard of companies that have come before and have not found success, an investor is likely to be biased by past failures and will want to understand what’s different now that makes a solution feasible. In a previous newsletter, we discussed the importance of founders describing the hair-on-fire problem a startup’s customers have, but it shouldn’t stop there. If this is such a massive problem, founders need to explain why it hasn’t been solved before and what makes this moment unique for doing so.
It could be technological shifts, cultural changes, regulation, or something else entirely, but the burden of proof is on the founder to demonstrate that there are enough tailwinds to break customers free from the status quo. This is exactly what Liz Georgi, CEO and co-founder of Soona, discusses in episode 198. Market context, that is, the timing and bigger picture of why your business should exist, is one of the three pitches founders should hone. The analogy she uses is that of a world-class surfer. It doesn’t matter how good the surfer is if there are no waves to ride.
Ultimately, successfully answering the ‘why now’ question comes down to being able to articulate differentiation. For founders to stand out to investors, they have to effectively communicate why the timing, team, and insights are different enough to succeed now. Otherwise, investors will infer from past experiences and pass.
About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast – get to know AVL Growth Partners at avlgrowth.com. (Sponsored)
Visit the VC Minute homepage for more episodes and more ways to subscribe.
