Inside the 500 Accelerator is a weekly series by 500 founder Troy Sultan. This week, Troy shares takeaways on what it really means to “run experiments,” the black box of startup legal, and when startup founders finally get to take a vacation.
4 weeks in, we’re finally getting settled. We’ve developed a cadence among our team, our work, and we’re even having fun when no one’s looking.
The first quarter of the program was intense: ~150 new people to meet, names to remember, companies to understand, relationships to build, questions to field, pitching to do, announcements to make — all while maintaining our daily duty as startup firefighters.
I spent much of month 1 understanding the landscape. What levers exist here? Who controls them? Which ones might we be interested in pulling, now or in the future? How can we be helpful?
An accelerator might be viewed as a 3–4 month experience which comes and goes; the goal being to extract as much value as you can before the ride ends. I think it’s more interesting to approach the experience with the next few decades in mind.
How can we create residual value — for a lifetime — from a 4-month experience we have today?
Although it’s wild that we’re already one quarter through the program, it’s also exciting because we’re finally getting comfortable (don’t worry — not too comfortable).
Here’s a look into week 4, the week we started to feel at home:
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:
- Negotiate term sheets
- Strategic decisions
- Everything else
- 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…”
~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.
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
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.
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.
I’m invigorated. We all are. As a team, we were maxing out when we joined 500, so I spent the first couple weeks heads down to get above water. Now I’m letting myself loosen up.
We’ve spent time drinking with batchmates, sharing war stories, backgrounds, weekend plans. Interestingly, this “non-productive” time is helping me focus better while heads down.
And luckily, the wonderful souls behind Worthix initiated a Friday tradition that’s growing in momentum:
Check out next week’s post for a breakdown of the #ArtOfThePitch workshop and pitch prep, term sheets and equity, our first team offsite while at 500 and more.
Thanks for following along 🙂 If you’re enjoying the ride, it’d be awesome if you hit recommend below. You can also follow me on Twitter, and check out Resource for elite-quality candidate sourcing, on-demand.
Read previous posts:
- Inside the 500 Accelerator, Week 0: Growing Fast & Getting (Highly) Uncomfortable
- Inside the 500 Accelerator, Weeks 1 & 2: Content, Progress, & the Original Name for 500 Startups
- Inside the 500 Accelerator, Week 3: Marketing Hell