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Lessons I wish every startup founder learned early – Techstars’ Eamonn Carey on the traits he looks for in entrepreneurs

May 13, 2019

Written by Lucy Fuggle

Communicate succinctly. Build relationships. Be open. Read widely. And don’t be an asshole…

Eamonn Carey knows every nook and cranny of the European tech sector. As managing director of Techstars London, Eamonn invests in early-stage entrepreneurs, brings companies into fruition, and nurtures founders through the twists and turns of their startup journey.

During our recent conversation with Eamonn about Europe’s current tech landscape, he also passed on a gold mine of actionable advice for founders. Get ready to make notes, update your to-read list, and subscribe to a new podcast or two…

Eamonn, you come into contact with entrepreneurs every day… while you’ve mentioned the vast talent out there right now, what do many founders do wrong that really annoys you?

I could probably write a book on this one. There are a lot of things. For one, founders have a tendency to explain the company or the problem they’re solving or the product they’re building in the most complicated way possible. They don’t realise that they’re frequently the smartest person in the room, especially in meetings with investors. We meet a lot of founders who struggle to explain in a simple and succinct way what they’re doing and why anyone should care about it.

Many founders also don’t think enough about building relationships with investors. Getting a cold LinkedIn message saying, “Hello, here’s the terms sheet, we’re raising 2 billion and you need to sign it by tomorrow” isn’t going to happen. 

Compare that to a founder who comes to Techstars event, engages on Twitter, or sends a couple of emails saying, “Hey, we really like this thing you did” or, “I’d love to share a couple of screenshots of what we’re building.” Don’t be afraid to reach out. I am always happy to chat on Twitter and reply to emails, as are many others at Techstars.

The other pitfall is not being brief enough. As I was taking the bus into the city this morning, I was reading LinkedIn messages I’d received with 15-20 paragraphs. No one has time to read that, especially if it’s a cold message. You need to get people excited as quickly as possible.

There’s a whole raft of other things that go with that. Some companies go for too much growth without thinking about the technology and architecture and how scalable that is. They don’t coherently think about the business model.

We’ve seen a lot of founders assume that just because they’ve built a product and launched it and emailed a couple of their friends, somehow the world is going to care. It’s a little bit like that Kevin Costner film [Field of Dreams]… “if you build it they will come.” I wish that were the case — I’d have way more successful companies in my portfolio if it were.

The reality is that you’ve got to think very carefully about who you’re building the product for, why you’re building it, what the story is you’re going to tell them to make them care, what is it you’re going to do to help improve their life.

I love seeing a very systematic approach in founders. When we see something more slapdash or more haphazard, it can be frustrating.

If you could condense your best piece of advice for founders into one sentence and put it on full display in every coworking space, what would it be?

Don’t be an asshole. The single best thing I’ve ever done, both as a founder and as a mentor and more recently an investor, is saying yes to lots of things and trying to help as much as I can.

My view is always that no conversation was really an absolutely terrible one. I’ve obviously evolved that to think that some are terrible ones, and you avoid some, but I think being open, frank and honest with people is really important.

We had a company at Techstars a while ago who, in all the update emails, said, “Everything is amazing, everything is brilliant, growth, growth, growth.” Then I got another email saying, “We’re about to run out of money, can you help us raise half a million pounds?” I said, “How soon are you about to run out of money?” “In about three weeks”. If I had known this three months ago, the answer was probably yes, I can help you.

Being open, being honest, and not being an idiot is probably the best thing a founder can do. Sometimes people worry that if you’re honest and say you’re struggling with something, people might take that as a sign of weakness, but it’s anything but.

Are there any books that you particularly recommend to founders, or other podcasts, sources of advice, or talks?

I think there are some brilliant books. The High Growth Handbook: Scaling Startups from 10 to 10,000 People that Elad Gil released with the folks from Stripe last year is amazing. It’s probably one of the most valuable texts for anyone starting a company.

Scott Belsky wrote a brilliant book called The Messy Middle that came out last year. It’s probably for companies that are a little further along and struggling with the stuff that happens when you grow, but it was a phenomenal read.

I’ve just finished one recently with a terrible name, Recruit Rockstars by Jeff Hyman, but it’s actually amazing. I bought it three years ago but never read it, because of the title. But then I read it and it was incredible. It’s a step by step guide to hiring people, but it’s done in a very systematic and thoughtful way. I’ve sent it to pretty much all of the CEOs in my portfolio and they’ve all implemented some or all of the strategies and tactics from it.

There’s another one called Trillion Dollar Coach by Eric Schmidt. Same thing – terrible name. I only finished reading it last weekend but it was an incredible book about leading, managing, guiding, mentoring and coaching people. It’s a skill I’ve learned over many years, and it’s something I do a lot more now. If I had had that book when I was starting out in my career, I would’ve been an immeasurably better manager.

In terms of podcasts for entrepreneurs in particular, what Harry Stebbings has done with the Twenty Minute VC is incredible. You’ve now got this incredible archive of information from very smart people in the industry telling you what they like, and don’t like, and what’s good and what’s bad and in and out, that kind of stuff. For founders that’s unbelievably valuable, to understand trends within VC or trends in M&A, etc. I recommend people go back and listen through those.

Likewise, a16z, the Andreessen Horowitz podcast has always been interesting from a general news-digest point of view. I really like the Exponent podcast that Ben Thompson from Stratechery does which is brilliant. And theinformation.com has a good news podcast, probably a bit too Silicon Valley focused at times, but good to keep your finger on the pulse of what’s happening there.

The other one that’s interesting is 996 by a VC fund called GGV Capital who invest in Chinese companies. 996 is just a bunch of interviews with really successful founders of the big Chinese companies, the TikToks and LimeBikes and WeChats of this world. It’s brilliant. It’s a snapshot of a very different culture, a very different way of thinking about things, of one of the biggest markets for the internet and for mobile in the world at the moment. There have been some episodes of that which have been astonishingly good.

There’s an old saying that all good leaders are readers. I think that now probably applies to podcasts too, especially for tech leaders.

Definitely. If I’m interviewing people for jobs in portfolio companies, one of the questions I’ll always ask is, what are the last couple of books you’ve read? What are the websites you go to every day? What are the places you go to get news and opinion? Who are the people you follow?

To my mind, the most interesting people I’ve ever met are those who are interested in other things and have taken time to read books and listen to podcasts. And they’ve done that not just in the realm of tech.

One of the nicest things in this industry is going to a tech conference and talking about the industry all day and then going and talking about food, or wine, or sci-fi books or who knows what in the evening, and connecting with people as a human being rather than a fellow acolyte of the internet.

Absolutely. I also wanted to get your thoughts on building companies. Where would you say is the best place to put your money as a funded startup?

It depends on the company, but the reality is that the thing that will help you grow and scale and be successful is people. So right from the beginning, make sure you’re surrounding yourself with the right people. When you’re finding investors, do your due diligence on who’s giving the money to you before you take it.

One thing we do badly in Europe is not starting boards early enough, even informal advisory boards. Having a group of people that you talk to and discuss challenges with is a good habit to get into.

So surround yourself with great people from an investor and board perspective, but then you need to really focus on hiring people who are going to be the bedrock of your success as you go into your next funding round or move towards profitability. That’s really where you need to spend the largest amount of time and energy – going out and meeting people, building networks, tapping into networks you’re part of already to get access to great talent who can help you grow and scale your company.

After you’ve got the right people around you, invest in marketing – if it’s right for who you are and what you’re doing. I use marketing as a pretty broad church that encompasses everything from advertising and PR right the way through to hiring a BD person, or someone who’s a hype machine and goes out and talks about your company.

We’ve seen amazing companies – great products with phenomenal teams – who have failed to tell the world they exist and so have been unsuccessful. You’ve got to obviously build an amazing team, but then you’ve also got to build a function within that team to say, “Hey this is who we are, this is what we do, this is how you can use our product, this is how you can give us money for our service.”

I think particularly with seed-stage companies, people and marketing are the two biggest areas. If you can’t get the hiring processes right you’ve never going to be able to scale, and if you can’t get the marketing pieces right you’re never going to be able to generate revenue. You can hope that maybe you find a VC who’s kind or stupid enough to continue giving you capital – and that’s always a possibility – but the reality is that to build a strong, scalable business, the foundations of a great team and a great messaging and marketing strategy are the key.

On the other side of that, what are your thoughts on founders who invest a tonne in their sales and marketing when the product needs a tonne of work?

I have seen instances where that has been reasonably successful, but it’s been a single digit percentage of the time. Usually, this happens instead: you spend a lot of money on sales and marketing, you maybe sign up a couple of users, and they give you a bit of revenue. Then a month or two later, they realise the product’s a lemon. Or the app crashes after two minutes. You’re never going to get those people back.

I know founders often get the short-term pressure from investors saying, “Hey, you need to get to 100,00 users or 500,000 users and that’s what’s going to trigger your next round of funding”, or “that’s going to allow you to monetise at a rate that will keep the lights on.” But the reality is that if the product isn’t ready for it, all you’re doing is putting people into a leaky funnel.

We talk about this a lot internally at Techstars. We’re really good at accelerating companies. One of the challenges that comes with this is if we get the wrong type of company, at the wrong stage, with the wrong team, and some of the pieces are not quite there… that kind of company will accelerate quickly into a brick wall.

Companies need to think about this first and say, “Ok, if we’re going to go all-in on growth and marketing, etc., are all of our ducks in a row?” If you’re going to spend tens or hundreds of pounds in marketing campaigns and all you’re left with in six months is a bunch of one-star reviews on the Play Store, then that’s misplaced capital.

So what would you say really matters when you’re scaling a startup?

Are there any metrics you really pay attention to, perhaps between acquisition, churn and retention?

It depends on the company. As you’re growing in the early days, you’re looking at total number of new users, how many users are converting – perhaps between downloading an app and actually using it. You’re looking at day 1, day 3, day 7, day 10 retention. You can get a million users for a product, but you might actually only have a thousand of them using it every day, week or month… I’ve seen this many times.

Tracking the usage of the product, whether B2B or B2C, is really important. Nowadays there’s a barrage of stuff to capture your attention. If you’re not building something that people are engaging with on a daily, weekly or monthly basis – depending on the product – you’re in trouble.

And then there’s company scale, of course. You start looking at revenue and conversion from free to paid or retention both in terms of users and contracts and subscriptions. When you get further into the series A world, you’re looking at LTV over CAC and the more financial metrics.

We say to companies coming into Techstars that we’ll sit down and talk about 3-5 big questions or big problems or big goals you want to hit. In most cases, for B2B companies, they’re going to want to have lots of sales conversations and get to a certain number of pilots or PoCs or paid deals. For B2C companies, they’re going to be looking at how they get to 1,000 or 5,000 or 10,000 or 100,000 users.

For later stage companies, it’s much more about what the sales funnel looks like, how you’re getting people from initial email to proposal to close, what the percentages look like, and what’s affecting those. You get a lot more granular. It’s a pretty broad church of what we’re looking at.

I know a few SaaS companies that are quite caught up with the Rule of 40 lately. They’re further along the journey, but it’s a pretty useless metric for early-stage.

Yeah. When you’re doing hundreds or thousands of pounds a month, or even a hundred thousand pounds a month, in revenue, then you can start thinking about that. It’s more applicable for companies that are at a certain level of maturity, products that have been in the market for 2 or 3 years and they need to start thinking about profitability versus R&D and those expenses and managing that.

I think certainly at a very early stage, it’s like anything… you can implement all of these different schemes and read any number of books about the perfect way to run a business. But when you read it, remember: yes, you can run a business like Google when you’re the size of Google, but when it’s five people in Huckletree in Manchester with no customers, that’s the last thing you should be thinking about.

Exactly, a similar point came up from Patrick Campbell from ProfitWell at Turing Fest 2018.

Yeah. Patrick’s one of the best speakers I’ve come across. He did a talk for Techstars companies a couple years ago, and I think it’s still one of the most top-rated talks we’ve ever done.

To wrap things up, is there anything you wanted to add about building startups in Europe, or what you wish people would do more of?

I wish people would collaborate more. It’s getting better, but during my time running one of the Techstars programmes in New York, I found that the U.S. market is probably more collaborative in terms of conversations between founders or VCs or others. There are more introductions being made, or at least it felt like that.

I’d love to see more cross-border M&A, or more cross-border investment. We are beginning to see the green shoots of it, but it needs a little bit more work. But I’m incredibly bullish on European tech right now. So fingers crossed.

Read part 1 of our interview with Eamonn, for his take on the challenges facing European startups in 2019 — from Brexit to funding to talent and diversity.

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