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Lee Blaylock speaks at Dallas Startup Week.
Lee Blaylock speaks at Dallas Startup Week.

DALLAS — They say knowledge is power, and that couldn’t be more true for entrepreneurs looking to raise their first significant financing round.

Lee Blaylock, a former Oracle exec and current serial entrepreneur and investor, offered up a multitude of advice for founders on Tuesday at Dallas Startup Week.

First, the Who@ founder started with his definition of entrepreneurship.

dallasstartupweek“It’s the undertaking of a business enterprise with a complete, total, utter lack of respect of the resources you currently control,” Blaylock said.

Blaylock, a seventh-generation Texan who now splits time between the Bay Area and Dallas, listed a bevy of investing lingo that every entrepreneur should understand when trying to raise that first $1 million to $5 million. Among them:

  • Fiduciary
  • Traction
  • Term Sheet
  • Debt
  • Equity
  • Warrants
  • Option Pool / Vesting / Cliff
  • Capitalization Table
  • Accredited Investor
  • Due Diligence
  • LTV / CaC
  • Burn Rate
  • Fume Date

Making money and good investments conceptHe then offered a “6 Things Before You Pitch” guide:

  1. Have a vision. “You need to know not only what’s going on today, but how is what you’re doing improve that world.”
  2. Have a significant problem. “A really important question I ask entrepreneurs is, ‘are you a painkiller or are you a vitamin? Facebook is a vitamin. We don’t need it, but it’s a pretty compelling vitamin. But a firewall is a painkiller, so a company has to have a painkiller.”
  3. How do you solve that problem? “How do you generate an unfair competitive advantage? If you really want venture funds, this is the most important part.”
  4. Market opportunity. “You have to go after really attractive markets, or create them.”
  5. Qualifications of the team. “Most investors will make one sector bet. You have to make sure you have the silver bullet that investors will want to hook their spurs into.”
  6. Money needed and milestones to achieve. “Go focus on the investors that have the highest percentage chance. The more research you do, the better off you’ll be.”
Photo via RootStartup.
Photo via RootStartup.

Blaylock also listed seven risks that investors are looking for and said entrepreneurs must have answers for each before they pitch:

  1. Technology risk
  2. Product risk
  3. Market risk
  4. Management risk
  5. Scale risk
  6. Capital risk
  7. Exit risk

A few other tips and hints from Blaylock:

  • Only fools focus on the exit. “I do not freaking care what exit I can have out of my business,” he said. “That’s not what the focus is. Superior execution equals more liquidity options.” Blaylock added that “the right exit is what you want for your business.”
  • Focus, focus, focus. “Think about your product and cut your feature set in half, and then cut it in half again, and then ship it. That is what I recommend.”
  • Finding the right investor marriage is key. “You’ll generally be, on average, in that deal with that investor for seven years.”
  • Don’t ask for money until you’ve left your day job. “Why would I finance your deal if you’re not willing to take the risk, and I’m taking all the risk?”
  • Don’t get excited about a VC taking a meeting. “It’s their freaking job to understand the market and take these meetings. It’s your time, not their time — make sure you qualify.”
  • Introductions are critical. “Portfolio company CEOs are easy to find and usually extremely valuable references into a fund.”
  • Check your emotion when speaking with advisors or mentors. “What I tell those guys and gals that are my mentors and advisors is, I’m not asking for anything standard, I don’t want any of your time — I just want you to know when I call you, you can’t wait to pick it up because you know I prepared and it will be intellectually interesting. That’s just a baseline I really recommend you think about.”
  • Put NDAs away. “A smart investor won’t sign it. If you’re dealing with corporate, that’s different.”
  • People who say they can help you raise money are a waste of time. “It’s not their vision, it’s not them having to fund a business — they just want to help and often times want a percentage.”
  • It’s about the team. “It’s not about anything other than the execution, the team, and the market you’re going after.”
  • Have a minimum viable product. “This will really help you, especially if you have traction.”
  • It’s about focus. “Don’t go down the alley of unimportant things. Focus on what’s important. It doesn’t matter how you start — what matters is how you execute.”

Finally, Blaylock showed this viral video of a man dancing at the Sasquatch music festival and explained how it related to entrepreneurship.

This is an entrepreneur. He’s half naked, he’s very comfortable in his skin. He’s doing something no one understands because it’s in a format that is not really that orthodox. Then comes his co-founder. Now what he’s found is the first follower. The first follower doesn’t get it at the start. He thinks there’s something there, but he’s not sure. Then he’s starting to get it. The first follower is incredibly important as an entrepreneur because you’ve found someone else that’s as crazy as you are. Then what happens is, after a while, they start synching up, then in comes the first engineer. The first engineer goes, ‘hey, this is kind of interesting.’ He doesn’t totally get it, but he’s kind of in the same vicinity as these guys. He thinks it’s pretty cool. Then, you’ve got some guys in sales and you’re going to tell them about this great product and those are your first sales guys. Now you’ve got the founder, the co-founder, the investor, then you have the first customers. The first customers say, ‘this is a great thing.’ Then you bring in early evangelists. Then, all of a sudden, more and more people start coming. When you have the bikini-clad women running for your deal, you know you have something that’s really, really cool. It just started as this crazy thing that nobody got and you were doing it alone naked in a birthday suit. Over time, that entrepreneur was crazy enough to do something that he was very comfortable with and he was able, through influence and traction, to go ‘hey, I can find not only a company to build, but an ecosystem around that and people didn’t really understand when I first started out.’

If there’s one piece of advice I give entrepreneurs — and you have to be rational about this — it’s to never stop believing in yourself. Never ever stop believing in yourself. A lot of people won’t believe in you, but if you believe in yourself and you’re rational about that — don’t drink your own Kool Aid aid, don’t be a Jim Jones — but if you really believe in yourself and you figure out how to survive through low burn, etc., you will be a Cucaracha — a cockroach,  and that is a very good thing to be in entrepreneurship because you survive nuclear wars.

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