Funding isn’t Everything: Ten Insights for Founders Starting Up  

12.04.2018Tanya Loh

When people ask what sets M12 apart from other VCs, it’s easy for us to answer. We provide funding on founder-friendly terms along with the extensive backing and resources of Microsoft and M12. The latter is core to our values in redefining venture capital: that we ensure the companies and people we invest in gain access to valuable, often non-monetary assets like product expertise, integration support, strategic introductions, customer engagement events and co-sell collaboration as well as key promotional opportunities. This access is part of the deep commitment we’re proud to make to the most innovative startups out there: that together we will go to market and make mutual success our reality.

That’s why when we first put together the Female Founders Competition, we chose partners who shared the same beliefs – that venture capital is about more than just money. In addition to providing critical funding for our winners to grow, we wanted to make sure intangible benefits were baked into the process from beginning to end.

We started with our finalists competition at the Microsoft Reactor, where, over a one-day startup bootcamp hosted alongside partners EQT Ventures and Silicon Valley Bank, a dream team of leading founders, operators, and advisors took the stage and shared advice to help our finalists on their entrepreneurial journeys.

Key insights include:

  • Insight #1: Build products customers love: “Delight is in the eye of the customer…have a cadence for customer research and identify your design principles. For Workspan, our main principles are user productivity, ease of use, and consistency.”– Nithya Lakshmanan, VP of Product Management at Workspan
  • Insight #2: Be strategic with marketing: “We are in a new era of marketing. Most people have learned how to optimize messaging for search engine optimization (SEO) and in the process, overpromise and underdeliver. At Synack we focus on being real and authentic. Knowing who you are, what value you bring and who your customer really is, is so important. Like good Product Development, Marketing is a delicate combination of art and science, and should be respected as such.”– Aisling MacRunnels, CMO of Synack
  • Insight #3: Drive effective sales: “Sales is hard. Know how to sell. Get comfortable with evangelism. Figure out what nuggets and narratives get people excited. We iterate on our sales deck every week.”Linda Crawford, CEO of Helpshift
  • Insight #4: Motivate your team: “Dedicate a lot more time to talent management. Managing and retaining talent is a constant, ongoing operation. It only becomes more complex as teams grow. Rapid growth can result in your company feeling materially different every six months or so, requiring constant step changes in employee performance. This can be particularly painful for early team members who need to find their place in the ever-changing company matrix.” – Zoe Jervier, Talent Partner at EQT Ventures
  • Insight #5: Legal best practices: “Legally, keep it simple. Know your IP and who has rights to it. Get equity negotiated and documented as soon as possible. Understand your pro forma cap table. Make sure you understand dilution. Talk everything through with your counsel. On investors — ask yourself whether you can spend 10 years with them.”Amanda Galton, Partner and Co-Practice Group Leader – Technology Companies Group, Orrick
  • Insight #6: Choose lenders wisely: “Ask whether they will scale with you and remain your partner, especially during difficult times. There’s a lot of fast money that comes at a high cost. Fundraising is the start of a relationship, so treat it with as much deliberation and thoughtfulness as you would a marriage.”Jamie Ramenofsky, Managing Director, SVB Financial Group
  • Insight #7: Establish your board: “You’re going to be in deep, long-term relationships with your board. Statistically, your first director will be with your company longer than the average length of a marriage in the US (8 years). Pick carefully.”Greg Heibel, Partner – Technology Companies Group, Orrick
  • Insight #8: Think about financing: “What I’ve seen is that it takes longer and more money than you ever imagine. Competitors will enter once they see your success, and big companies will launch competing products. Don’t overreach or else you may get a down-round, yet ask for enough to enable you to reach the next stage.”Jeff Grabow, US Venture Capital Leader at EY
  • Insight #9: Critical success factors: “From working with women founders for the past decade plus, we’ve found 5 winning lessons that help fuel growth: thinking big and being bold, working on the business rather than in it, establishing key advisors and leveraging their networks, building a public profile and telling your story, and evaluating financing for expansion.”Sue Borgman, Principal at EY and champion of the EY Entrepreneurial Winning Women™ program
  • Insight #10: Persevere and find your market: “We created a new solution category, but when we first started our solution was a hard concept for VCs to appreciate because most had no enterprise context to understand the problem. We pursued our vision even when the need wasn’t tangible to everyone else — the biggest opportunities may be those that are least obvious!  When you’re solving a hard problem many organizations have, persistence is everything: We recently met with Satya Nadella, and he felt the problem and understood the solution in an instant.” – Deidre Paknad, CEO and Co-founder of WorkBoard

To our partners: thank you for your collaboration and help showing there’s value in going beyond the usual pipeline and networks to surface great companies and exceptional founders. We know we only scratched the surface with our boot camp that day but your commitment to our ten finalists – Acerta, Bitdam, Contilio, CrowdAI, Features Analytics, Jargon, Mental Canvas, TrialJectory, Verge.Capital, Wenspire – and other pioneers around the world speaks volumes.

To our speakers: thank you for demonstrating that the best to-dos and what-not-to-dos come from actual veterans of the battlefield. Starting up is hard, and it’s seasoned practitioners like you who make innovation seem possible. On behalf of M12, it has been a pleasure to work with all of you in accelerating access to not just financial but intellectual and human capital with the gift of your time and insights.

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*Special thanks to M12 portfolio companies Helpshift, Synack, WorkBoard, and Workspan for letting us borrow key folks from your leadership teams, to EY and Orrick for keeping us well-fed and hydrated, and to Teresa Nemassanyi for providing pitch coaching to our finalists. Thanks as well to Christine Alford, Elaine Dai, Catherine Mulcahy, the Mixed Reality Capture Studio team, Microsoft for Startups, and the Microsoft Reactor event production staff for your support and many contributions.