In this episode, I share my thoughts on Startup communities, business plan competitions, pitch contests, and why I’m not so sure that they are valuable ways for entrepreneurs to spend their time.
Clay Collins: Hey, I’m Clay. In 2013 I co-founded a company called Leadpages. Along with an amazing team, I grew that business to 45,000 paying customers while raising 38 million in venture capital. Now, I’m growing a cryptocurrency data company called Nomics, spelled N-O-M-I-C-S. I live with my wife and two daughters in Minneapolis, Minnesota. This podcast is my entrepreneurial and investing audio journal. Hey, welcome to another episode of Maximalist. Today I’m just personally reflecting on the value of startup communities and just how valuable they are. We often take it on faith that startup communities are valuable. That they necessarily are good and are good places to invest your time. I’ve just been reflecting on that recently and I’ve got to say, I’m not so sure. I want to preface all this by saying that venture capitalists are like any other group of people. There’s some good ones and there’s some bad ones. Same with entrepreneurs, or large corporations, or any other category of thing. There are some good ones and there’s some bad ones. A lot of people, back in the day, when I had been part of raising a lot of money… A frequent conversation I had with people was, “Is venture capital good or bad?” The truth is that venture capital is a relationship. That relationship comes with a contract. The purpose of an entrepreneur or any person who’s responsible for a business, is like, “Hey, do good deals, don’t do sh*tty deals.” That’s it. Asking if venture capital is good or bad is kind
Clay Collins: of like saying, “Is marriage good or bad?” Right? 50% of them end in divorce. It really comes down to, who is that marriage with? What kind of relationship do you have with them and does it match your goals and all of that. There’s no good answer to that and I feel very lucky that I’ve been able to deal with some really fantastic venture capitalists. Patrick Meenan from Arthur Ventures is just an outstanding venture capitalist. Seth Levine from the Foundry Group. Absolutely incredible. Those are the folks that did the Series A at Leadpages and I felt really fortunate to have worked with them and learn from them and all of that. Getting back to this core issue of startup communities, it feels, and maybe I’m just speaking to what I’ve seen here locally, but it feels like so much of what happens in startup communities is really just generating deal flow for venture capitalists. It’s just startup communities, for the most part are lead gen for VC deal flow. Many of the events that happen in startup communities are fireside chats with venture capitalists. They are pitches where venture capitalists are there. They’re startup contests. They’re not activities that have at their core a founder-centric mindset. I really think that’s the problem. Let’s first talk about pitch contests. I don’t know where you live. I live here in Minneapolis, Minnesota and frequently, the Minneapolis community will get together, and some group or another will have a pitch fest.
Clay Collins: Either it’s a business plan competition, or some sort of event where a startup founder has to create a deck. They need to present their business plan within a limited period of time. The vast majority of the time the people that they’re pitching to don’t have any money to give. They’re just pitching almost as a sport. In those instances, what I like to encourage entrepreneurs to do, is actually pitch customers. Even if you don’t have a product yet, you can pitch services, you can pitch so many different things. But don’t pitch to people who aren’t actively looking to write a check. Whether they’re looking to write a check as a customer or as a venture capitalist, or an investor. Second thing. Be very careful who you take feedback from on these pitch contests. I was at a pitch contest a couple years ago, and the people, the judges on this pitch contest, were someone from the university, who had never run a successful startup. Someone who was a co-founder, or involved in a co-working space, who had never run a successful startup. An attorney, who had never run a successful startup… And one venture capitalist. That was the judging panel. Maybe there was a journalist on there. I actually think it’s harmful to accept feedback from these people. I truly believe that the people throwing these pitch contests wanted to do it because they wanted to tell themselves a story about how they were helping and fostering the local startup community when in fact they weren’t.
Clay Collins: They were actually being harmful. I also see a lot of hackathons that follow this same pattern. But for all these events and networking that happen in startup communities, it’s worthwhile asking what net contribution do they usually end up making? It’s great to make friends. That’s a worthy thing to do. At the end of the day, if you really want to help a startup, there’s really three things to do and everything else is pretty much extraneous if you’re not doing one of these three things. Those three things are that you are starting a startup, you are working for a startup, you are funding a startup, or the fourth one, you’re a customer of a startup. Those are really the four things you can do. Sorry, I misspoke. It’s four, not three, and that’s really about it. There often can be lots of hangers on, so to speak, in the startup community. They’re kind of watching the space like spectators. Almost like people who would go to a football game and speak to the pros and cons of different teams. They’re sitting in the bench. They’re not on the field. Often, when I go to startup community events, the majority of the people there are people who are in the bleachers and not on the field. Again, I think by being on the field you need to be employing a startup, starting a startup, working for a startup, or funding a startup. If you’re not doing one of those things, you’re on the field. I’ll just hear so much chit-chat
Clay Collins: and so much gossip and I heard so and so raised money, and I don’t know how this company’s doing, but what about this company, and they’re trading little anecdotes. I almost have flashbacks to being in the punk scene when I was in high school or college and just seeing people sort of aggregating around a scene, but maybe not necessarily taking part in it. That can happen. What I’m really getting at is I believe that if you are a founder or if you want to be a founder, there is almost nothing that you can do that will contribute more to your business than building your product and selling your product. Everything else that’s not building your product or selling your product is a waste of time at the beginning, including going to a lot of these startup community events that are really created as lead gen for venture capital deal flow. I see lots of people reaching out and wanting to have meetings that aren’t about building the product or selling the product. I see lot’s of people going to networking events that aren’t building a product, selling a product. I see lot’s of people pitching at these pitch events that are not going to lead to building the right product or selling the product because the people that they are pitching to don’t have checkbooks. I truly believe that the heads down approach is the right way to go if you’re starting a startup, your scarcest resource is time. Question every single hour and how it’s being used and watch the clock. I wish you all the best in the world,
Clay Collins: and nothing but success. Take care. That’s it for this episode. To sign up for our erratically published newsletter, listen to other episodes, or get the show notes from this episode, please visit clay.blog. I also invite you to check out my startup, Nomics, spelled N-O-M-I-C-S at nomics.com. Finally, if you got value from this show, the biggest thing you can do to help us out is to leave a review with some comments and feedback on iTunes, Stitcher, or wherever you listen to podcasts. Thanks for listening.