Inside the 500 Accelerator, Week 4: Growth Experiments, Startup Legal & Tequila

CONTENT

This week our calendar thinned out slightly to make way for execution mode. Coming out of MHW, we’ve defined our OMTM and a pipeline of 30 experiments as the backbone of our growth engine. More on this in a bit.

With that, we did have a few talks and events sprinkled throughout the week that covered Legal 101, managing the cap table with CapShare, pitch prep, a mentor mingle and a batch field trip to the Mountain View office. Here are the deets:

Second official batch meeting w/ Marvin

We welcomed a new EIR to the 500 family and… got yelled at for leaving too many dishes in the sink. #TheStruggleIsReal.

Those beginning their fundraising process now were encouraged to talk with Marvin and the staff to collaborate on their approach before taking investor meetings.

Startup Legal 101: Neil Dugal

Neil gave the batch an pointed talk breaking down the SV legal landscape and how to manage the relationships you have with your counsel.

While legal isn’t the first priority in an early-stage founder’s mind (ask for forgiveness, not permission…right?) there are numerous legal hurdles to overcome when prepping to raise capital, and there’s many ways it can go wrong without professional help. Personally, I think the entire legal industry needs professional help, but that’s a story for a different day. Takeaways from Neil’s talk:

Law firm hierarchy:

Partner:

• Negotiate term sheets
• Strategic decisions
• Connections

Associate:

• Everything else

Paralegal:

• Records and paperwork
• Cap table maintenance
• Logistics, signature pages

If you’re getting billed the partner’s hourly rate to do cap table maintenance, push back and make sure the partner only spends time on high leverage tasks.

What you should pay:

• Incorporation: $2.5k — $5k (more for conversions from foreign companies)
• Note financing: $5k — $15k
• Seed financing: $7k — $20k
• Series A financing: $30k+ and Lead Investor legal fees (usually capped at $30k, maybe higher if term sheet isn’t as clean)
• Trademark prosecution: $2k+
• Patent Prosecution and Application: At least $15k, likely a lot more
• Copyright Prosecution: $150

What not to do:

• Avoid over optimizing early stage legal work (use standard founder vesting, etc.)
• Do not use LegalZoom, do not do things yourself, maybe use Clerky
• Do not “delegate and forget”
• Do not be cheap
• Do not micromanage
• Do not email your law firm partner on every single matter unless you want to pay their rate (they’ll bill you for email)
• Avoid being special. Standardization will reduce your fees in the long run.

Field trip! B16 heads to Mountain View for B15’s Preview Day

We Caltrain-ed into the future to watch B15’s preview day pitches, just one week before their demo day. It was inspiring (and scary as hell) to see where we’ll be as a batch in a few months.

The companies in B15 seemed a bit later stage than our batch, and were tacking very different markets. While every pitch was eerily dialed-in, I found them too cookie-cutter for my taste. Originality excites me, and although the companies and numbers were really impressive, I felt like I was watching an episode of Shark Tank. If demo day is a platform to raise your seed, I’m not sure this format would get early stage investors overly excited. If it we’re a platform to showcase 500 companies to LP’s, it was executed perfectly. But then again, what do I know?

Queue Don LaFontaine voice:

“Imagine a world where eating ice cream cake gives you abs…. Hello, and welcome. I’m Troy, the Founder & CEO of…”

Mentor Mingle

~30 mentors from the 500 family introduced themselves, described their backgrounds and specialty areas, and how they can best help us. We then spent the next several hours getting to know the most relevant mentors over food and drinks. Good times! We met an awesome executive recruiter, a Co-founder of NerdWallet (they’re 2 floors below our office) and the Head of Growth at Coin, among others.

500 PEOPLE

Batchmates

We’re getting to know our batchmates beyond their title of “Founders of X”. We’re officially beyond the “new people, new office, new system”. All positive, cozy vibes this week.

We’re also getting to know our POCs and their getting to know us enough to really see where we plan take Resource in the long term, rather than letting what we are today define us. After healthy contemplation, we pitched today’s business to the 500 partners for our interview, and now that we’re here, we’re building on that to sell the grander vision.

We’re refining our story (with their help) and settling into new routines, practicing restraint in what we “yes” to vs. what we ignore for not being best use of our time that day. This is getting easier each week.

I’m not sure I should admit this one but….. We’re actually starting to have fun

 

500 Alumni

I met with several alumni this week including two founders who’ve gone through 500 twice (who’ve since sold their companies) and another semi-recent alum actively raising a Series A (best of luck my dudes!).

A common thread in these conversations was fundraising. Here’s the best piece of advice I got:

“Until you can take a 3 month extended vacation from your company without any numbers going down, you’re not ready.”

The other conversation was tactical content marketing advice. We devised a quick and dirty podcasting and broader blog content framework that we’ll test in the coming months.

My last chat was with an alum who now runs 500’s Korean fund who broke down his experience raising a fund as a VC/GP and compared it to his experience as a previous founder raising VC. It was fascinating.

The process, psychology and timelines are vastly different than a founder’s fundraise — longer sales cycles, a pitch focused almost purely on track record and returns, and an audience who’s managing stock piles of cash. As the GP, you’re just a sliver of one category inside a much larger, diversified portfolio.

One day..

STARTUP PROGRESS

This week we ran our first growth experiments: a change to the CTA on our landing page, a new approach letting customers sample our product for free, and a segmented outbound sales effort built and supported with our own sourcing team and software.

We’ve seen immediate results at the top of our funnel but the jury’s still out on conversion numbers (there’s great anecdotal numbers but I’ll wait for a larger sample to report findings).

We’ve also shipped major product improvements this week (thanks to a herculean effort by Wade) and tightened the feedback loop with our customers.