Joe Stump on How to Manage Venture Capital Investor Feedback

In Chapter 10 of 17 in his 2011 Capture Your Flag interview, Internet entrepreneur and SimpleGeo CTO Joe Stump learns to work with venture capitalists (VCs) after taking a Series A financing round. He shares the VCs provide a strong checks and balances feedback system that helps a business accelerate growth and refine product. He notes that while criticism around products is usually valid, acting on the feedback should be a startup team responsibility and not a VC responsibility. Stump is the co-founder and CTO at SimpleGeo (www.simplegeo.com), a San Francisco-based mobile location infrastructure services company. Previously Stump was Lead Architect at Digg. He programs in PHP, Python, Django and enjoys scaling websites. He earned a BBA in Computer Information Systems from Eastern Michigan University.

Transcript:

Erik Michielsen:  How has taking venture financing affected what you do and how you do it?

Joe Stump: I would say as far as day-to-day operations, it hasn’t changed what I do that much.  The venture-funding thing has been interesting to say the least.  I think what it changes is it - that influx of cash puts everything into overdrive and also creates a balance – a checks and balances kind of system between what the company is doing with the people that put in the money, which I think is good.  

I think most entrepreneurs would be like, ‘Oh, our VCs stink and all they try to do is screw up the product.”  And there are definitely VCs out there that will do that, but I think that’s an exception to the rule and not the norm.  Most of the time when they are telling you you’re doing something wrong, you probably are doing something wrong. The thing with the investors and the VCs in particular, when they say you’re doing something wrong, they’re almost always right that you are doing something wrong.  Where they tend to I think overstep and overexert is how the problem should be fixed.  I don’t think that VCs and investors are in a good position to force a specific fix.  I think that needs to be done from within the company.  And I think that’s where things to tend to go off the rails pretty frequently.  Like when a VC is like, “There’s a problem.”  

And at first the people and the company will be like, “Well, there’s no problem.”  And they’ll have a little fight over whether or not there is a problem.  Usually there is a problem.  And then they’ll come up with two totally separate solutions on how it should be fixed.  I think it’s fine for there to be problems, I think it’s great that VCs point out those problems, where it’s bad is when the VCs attempt to force their specific fix.  I think it’s pretty rare that the company, once that they recognize that there is a problem, that the company will come up with an inferior fix compared to the VC’s.  I think it will usually be a superior fix.

Joe Stump on How Startup Evaluates Potential Seed and Series A Investors

In Chapter 11 of 17 in his 2011 Capture Your Flag interview, Internet entrepreneur and SimpleGeo CTO Joe Stump shares his approach to evaluating both Seed and Series A investors. In the early days, Stump looked for investors who had names and who understood the value proposition. He compares this to dating. Now, after two years, Stump looks for ex-entrepreneurs who invest their own money. He sets an investor cap at roughly $250,000, which at $50,000 per investor means about five angels. Stump is the co-founder and CTO at SimpleGeo (www.simplegeo.com), a San Francisco-based mobile location infrastructure services company. Previously Stump was Lead Architect at Digg. He programs in PHP, Python, Django and enjoys scaling websites. He earned a BBA in Computer Information Systems from Eastern Michigan University.

Transcript:

Erik Michielsen:  What criteria did you use to evaluate potential investors?

Joe Stump: That’s a great question and I think it’s something that I’ve been doing a lot of thinking about recently. In the beginning, to be totally frank, in the beginning of the seed round I was totally new to the game.  I didn’t know any of the terminology.  I didn’t know how any of this shit worked, and I literally said, “If you have money and I don’t totally hate you, let’s get this on!” It’s kind of like when you’re a fifteen/sixteen year old guy and you’re getting ready to finally enter man hood, you’re like, “Anything will work at this point!”  And as you get older you’re like, “Well, I have very specific needs and very specific things that I look for.”  And I think that my attitude has changed a lot recently.  

So, in the early days I looked for obviously people that were top tier investors that had wins that I could point to and say, “Clearly these guys have helped entrepreneurs win in the game.”  That was probably the first thing that I looked for.  And I also looked for people that I could get along with.  There are investors that you’ll sit down with and it’s clear, just like when you go out with dinner with a girl for the first time.  Within ten minutes you know whether or not you’re going out on a second date, right?  It’s the exact same thing with investors, you walk in and you’re like, “Here’s my idea.”  And they’re like, ”Eh.”  And you’re like, “Well, no second date!”

So, I think really finding – those are the two things that I looked for.  I looked for investors that got the idea, got the value of the proposition, were passionate about it and I looked for people that had funded companies that won and funded really good companies that I respected.  That’s changed totally since – now, uh, I don’t like the whole super angel, seed kind of thing.  I think what I look for in investors now are people that use to be entrepreneurs, and invest with their own money and normally don’t invest more than 200K. And that’s the first round – after that – Because I really think you can build almost any product on the face of the planet for 250K or less, and I think 250K is at the very high end these days.  

So, in that reality, at most you need is five angels, right?  So I think the big thing that has changed for me is in my future companies I don’t think I would pitch a seed round, I would pitch a couple of investors that were investing their own money. I think there’s a very big difference in the dynamics between people that invest their own money and people who don’t invest their own money.  And I think there is a very big difference in the insight and advice that you’re going to get in somebody who has worked in startups verses people who have started startups.  

Erik Michielsen:  And how has that – what you’ve learned from looking at investors at in the early stages applied to how you’re making decisions reflecting on your Series A and looking forward to your Series B?

Joe Stump:  Well, it’s really different, right?  Because each stage of the company and each stage of funding requires a different set of skills. So, now that we’re a twenty-something person company and we’re turning around revenue and we’re starting to negotiating big deals with big clients, we fundamentally need different insight and different money.

I don’t need that at this stage in SimpleGeo, I don’t need the guy that was the first angel investor in Instagram or the guy that founded something like that.  I need the guy that was a late stage investor in TeleAtlas.  That knows how to grow a big business and turn it into a billion dollar company.  So, I think as you progress through those stages of funding you need different investors with much different experience funding much different companies.

Erik Michielsen:  So, you’re dating different types of chicks?

Joe Stump: Indeed.

Joe Stump on How CTO Improves Public Speaking and Presentation Skills

In Chapter 13 of 17 in his 2011 Capture Your Flag interview, Internet entrepreneur and SimpleGeo Chief Technology Officer (CTO) Joe Stump shares how his public speaking and presentation skills are improving over time. As his college Interfraternity Council (IFC) president, Stump learns to overcome nervousness and butterflies. As Stump progressively becomes a thought leader, he finds value simplifying his presentation and slides. As his talks become less technical and more about future and innovation topics, including mobile location services, Stump uses more statistics to support his points. Stump is the co-founder and CTO at SimpleGeo (www.simplegeo.com), a San Francisco-based mobile location infrastructure services company. Previously Stump was Lead Architect at Digg. He programs in PHP, Python, Django and enjoys scaling websites. He earned a BBA in Computer Information Systems from Eastern Michigan University.

Transcript:

Erik Michielsen:  How has you approach to public speaking changing as you learn and grow as a though leader?

Joe Stump: I don’t get nervous anymore, obviously I’ve been speaking in front of a lot of people a lot, so that’s gotten a lot better.

Erik Michielsen: When did that stop?

Joe Stump:  Um… That actually stopped a while ago.  I did a lot of – I mean you were in B school and you know that everything is a group project and everything ends with a presentation.  And every class that I had I had group presentations or single presentations, I had to take speech in college because of business school as well and ended up on IFC as the IFC president, so I had to give like a speech in front of the whole Greek organizations on campus.  So, I think I got over a lot of that in college.  

The big thing that has changed as I’ve grown as a leader- well as I’ve attempted to grow as a leader in the tech space, is when I first started giving talks I felt that it was really important to put as much shit on a slide as humanly possible, right?  And it was literally like twelve-point font, all code, monotone, you know it looked terrible. Everybody is like “Ehhh” Everybody in the back is like, “I don’t even know what he’s talking about.”  And now if you look at my slides, they’re literally just like a funny picture background and one or two words, and that’s it.  

Everything that I talk about when I talk is off the cuff.  I don’t actually plan what I’m going to say other than I have my slides as an outline.  And the reason why I do that - a really good buddy of mine in New York, Eric Kassner, I use to when I was doing really heavy technical talks I would have him review my slides.  He’s a friendly nerd of mine.  And he was like, “Why are you putting all of this crap on slides?”  And I was like, “Well, I like to have something for them to read and I want to give them as much information as humanly possible and…”  

And he was like, “Dude.  You can bullshit about this stuff ad nauseum. You don’t need to worry about putting a bunch of crap on slides.” He’s like, “Get up there, be yourself and just talk as if you and I are having a conversation.”  That’s probably the best speaking advice that I’ve ever gotten.  And that’s – the biggest fundamental shift is I get up, I talk ad hoc, just from the cuff about what I know and what I’m passionate about and it either resonates with people or they think I’m an idiot, which is fine too.

Erik Michielsen: Now, how has that changed as you’ve talked less about tech and more about ideas and innovation?

Joe Stump:  I actually just recently learned a lesson on this one. Now that I’ve gotten away from more technical talks and getting into more of the “what does it all mean and where are we all going” kind of talks is that I use a lot more statistics and a lot more kind of metrics to get my message across.  Like one of the current things – there are a couple of things that I think are really interesting about mobile location kind of stuff.  

One is that there’s about 1.5, 1.8 billion people on Internet.  There are 5.8 billion mobile subscribers.  We have a four billion person gap that’s going to be closed – those four billion people will be on the Internet probably in the next year or two.  So, if we thought the Internet is growing quickly before, we haven’t seen anything because those mobile subscribers are just waiting for the Internet to come on to the network.  So, I use a lot of numbers to talk about that and to back that up.  

And recently a lesson that I learned from that was that I have sources for all that stuff but I don’t generally put them on slides, and I recently quoted a report from Africa that said that students in Uganda and Kenya spend fifty percent of their disposable income on mobile communications.  And this woman who was from Kenya got up and was like, “That is absolutely false!” Like she went off to me with the microphone in front of the whole thing and I’m like, “Clearly I need to cite my sources.”

How Starting a Company Teaches Humility - Dan Street

In Chapter 1 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder Dan Street shares how he has embraced the challenges starting a business. He notes the lifestyle changes associated with becoming an entrepreneur - constant focus on the business, less sleep, and less social time. He finds meaning in learning the ropes - hiring, raising capital, and learning all aspects of the business - as he works on his vision. Street is the founder and CEO of Loku, previously known as Borrowed Sugar which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

How to Manage Lifestyle Change Becoming an Entrepreneur - Dan Street

In Chapter 2 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares what getting easier and harder as he builds his company Loku. He focuses on some of the lifestyle challenges that accompany starting a company. This includes finding time for social activity, eating healthy, getting exercise, and perhaps most importantly setting expectations with friends and family. Street is the founder and CEO of Loku, previously known as Borrowed Sugar, which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

Why Entrepreneurs Need Great Cheerleaders - Dan Street

In Chapter 3 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares why entrepreneurs need great cheerleaders. He notes entrepreneurship is a perception game. To gain confidence and build that positive perception, Street finds value in both internal company support networks as well as outsider support networks. By being transparent and showing his flaws, the insider and outsider "cheerleaders" find more ways to support him. Street is the founder and CEO of Loku, previously named Borrowed Sugar, which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

Why Patience is Important to Startup Success - Dan Street

In Chapter 4 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares why patience is important when measuring success. Street discounts myths that startups become billion dollar companies overnight. He believes patience is about sticking to your vision, developing ideas over time, and finding support to help execute that vision. Street is the founder and CEO of Austin, Texas based Loku, previously named Borrowed Sugar, which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

How to Recruit Talent Based on Vision - Dan Street

In Chapter 5 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares how hiring is the most uncomfortable part of starting a company. Street struggles to recruit others based on his vision instead of what he can pay today. He shares how he balances an iterative process shaping his vision with conveying that vision to others in both recruiting and team leadership. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

Why to Bootstrap Finance a Startup - Dan Street

In Chapter 6 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street tells host Erik Michielsen why bootstrap financing his company helped position it for growth. Bootstrapping gives his company Borrowed Sugar direction, employees and market fit. Bootstrapping forces the company to attract employees motivated by vision, culture and problem solving rather than money. Additionally the bootstrap approach helps the company focus its product development. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

When to Be a Less Controlling Manager - Dan Street

In Chapter 8 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares how he has adapted his management style to be less controlling. A self proclaimed "control freak", Street learns the amount of control varies between working on later stage and early stage companies. Working in private equity, Street works with later stage firms where control is welcome. As a startup entrepreneur with Borrowed Sugar, Street learns to be less controlling and call on team members to help him through the transition. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

When to Stop Bootstrapping and Raise Convertible Debt - Dan Street

In Chapter 9 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares his excitement about raising a $600K convertible debt financing round for his business after funding the business by bootstrapping. Seeing a need to grow and compensate staff, he decides to raise outside capital after building a team up to eight people. Street reflects that bootstrapping was appropriate given his situation, and that it was a fundamental enabler in developing his vision for Loku. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

When is Convertible Debt Preferable to Equity Financing a Startup - Dan Street

In Chapter 10 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares why he chose to raise convertible debt financing over equity. He shares the pros and cons of each. Convertible debt benefits include structure flexibility and faster time to close. Convertible debt does not provide investor assurance they will own a piece of the company. Street notes the next time he approaches fundraising he would be more open going the equity route. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

How to Evaluate Potential Internet and Software Investors - Dan Street

In Chapter 11 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares how he evaluated potential investors. First, Street wanted investors passionate about his company mission. Second, he prioritized investors with consumer Internet and software businesses. Third, Street notes the investors had to come via trusted network connections. He shares how different type of investors asked different questions. From beginning of raise until end of raise, the process took six months, with two weeks to close on term sheet details. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

How Full Time Commitment to Startup Evolves Ambition - Dan Street

In Chapter 12 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares how stopping bootstrapping and committing full-time to his company changed his ambition. The shift allows him to focus less on checklists and more on holistic company aspirations. He broadens the business model to encompass local school relationships that complement efforts at the community and neighborhood level. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

What Makes Failures Great Learning Experiences - Dan Street

In Chapter 13 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares why failures are more meaningful learning experiences than successes. He notes that when you get something wrong and you set up an experiment the right way, you can identify the root cause why it went wrong. He shares how failure has taught him to identify root causes that, when corrected or modified, improve his startup direct mail marketing. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

How to Improve Local Communities and Neighborhoods - Dan Street

In Chapter 14 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street shares ways communities and neighborhoods can improve. He cites the need for local activists, local news reporting and knowledge sharing, and local prioritization. He notes cultural challenges that often direct support to large issues abroad, such as Japan's Tsunami, reporting infrastructure challenges, and limitations of having outsiders report on insider stories. Street is the founder and CEO Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

How Private Equity and Management Consulting Prepare Startup CEO - Dan Street

In Chapter 16 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder Dan Street shares how private equity finance and management consulting experiences prepare him to start an Internet software company. Through M&A private equity deals and consulting for Internet software companies, Street learns about the emotional connections that come with founding a company as well as how to run an Internet business. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.

How to Recruit a Technical Co-Founder - Dan Street

In Chapter 17 of 20 of his 2011 Capture Your Flag interview, software entrepreneur and Loku founder and CEO Dan Street highlights how he selected his technical co-founder, Shea Sullivan. He found Shea a great complement skill-wise. Street offers three criteria to selecting a good technical co-founder. First, Street believes a technical co-founder should provide both complementary skills and the way you think. Second, believes trust is fundamental to choosing a technical co-founder. Third, he believes mutual commitment is fundamental. Through the startup process, Street learns that he and Sullivan should have considered adding a third person who had venture capital fundraising experience. Street is the founder and CEO of Loku (previously named Borrowed Sugar) which develops Internet software to strengthen local communities. Previously, Street worked in private equity at Kohlberg, Kravis, and Roberts (KKR) and management consulting at Bain & Co. He earned a BA in music and business from Rice University.