$OAKS Acorns, a consumer banking, savings and investment company has agreed to go public via a SPAC $PACX for $2.2B. The company did $71M in 2020 revenue and is growing at over 70% YoY.
$OAKS / $PACX will have $465M cash for the company post the merger.
$OAKS Acorns doesn’t allow its 4+M users to buy or sell individual stocks. Instead, it helps them build balanced portfolios for the long term via its signature service, which deposits users’ spare change into index funds.
$OAKS Launched in late 2014, Acorns helps users invest in stocks and bonds and operates on a subscription-based model. It has 4M subscribers.
$OAKS / $PACX Acorns. The Irvine, California-based company counts $PYPL PayPal, BlackRock $BX and Comcast Corp among its investors.
$OAKS Acorns said that they aim to pass along 10% of their respective positions in the new company to eligible customers through a share-ownership program.
$OAKS grew to over $71M in revenue +70% YoY and is expected to continue to grow at that rate in 2021. At 17X 2021 revenues for 70% growth, this seems like a good value, especially since this is more like a SaaS business, but I think shares wont head higher until 2H 2021.
Comparable valuations are higher, but Acorns $OAKS will suffer from SPAC rejection for the near future. Most investors are staying away from SPACS at the present moment, so I expect shares will head to between $7 – $9 post merger.
Outside of Silicon Valley it is extremely hard to raise any financing for a startup. It is not unusual to hear about a $250K – $500K round taking more than 2 or 3 months to close. If the entrepreneur is a first-time founder, without any pedigree (top tier school, well known previous employer) expect it to take longer. In fact according to the data shared by Mar Hershenson (slides below) angels now are not investing until you have some traction.
There are many reasons why angels take so long to invest and insist on multiple meetings, due diligence and more data before they invest relatively small sum of money such as $25K – $50K. Besides the usual reasons such as “hard-earned money”, “better investment options elsewhere”, etc. there is one issue that rarely gets discussed outside closed rooms or in private messages.
The lack of information sharing by entrepreneurs once a round is closed.
I dont think it has anything to do with if the company is doing well or not. Some entrepreneurs just don’t keep their investors in the loop – writing that off as “busy work”, “don’t have time – building the business, gaining customers”, etc.
Looking at my investments alone, 3 of the companies have founders who were referred to me by friends have founders in this bucket. Before my investment, I would get an email or WhatsApp message every 2-3 days with a request for follow-up meetings. One of them was very persistent, following up with me for 5 months before my investment.
After the investment however, radio silence. Now, I have to reach out to them every 6 months or a year to find out how they are doing. While previously I would get a response to an email in a day, now 50% of emails are not being responded to.
To be honest, I understand that entrepreneurs are busy. Unlike VCs who have information rights and have an ongoing cadence with the CEO as part of the board, angels rarely do. Angel investments are mostly passive, with a promise to help with “network” and “connections”. In many cases these are marginally relevant to the entrepreneur.
I have however now developed a new set of checks to ensure I don’t go down the path of an incommunicado entrepreneur.
I ask to be sent their weekly / monthly update to investors or the team for 2 months. The quality, timeliness and consistency of the emails gives me a clear indication about if the entrepreneur is even going to keep others in the know or in the dark.
This is only one of several checks but, if you are an entrepreneur, having a frequent (monthly) update on highlights, low-lights and insights about your business, key milestones and next steps helps you and the investors find ways to help you.
I have a friend who started a new SaaS company for larger (1000+ employees) organizations. The product is aimed at enterprises and must be “sold”, not bought, meaning while some of his potential customers have this problem, they are not actively looking for a solution. Instead they have used a band-aid to provide short-term fixes for the problem. There are no opportunities for a self-service solution, where someone can “try” then “buy”.
After the initial 5 beta customers (all paid, $120K ARR), and terrific feedback from them, he started to think about raising a $1-$2M round of funding. He had previously raised $300K from angel investors.
The approach to raising his round began with a discussion with his angel investors who each made 1-2 connections to other follow-on investors.
Many of those follow-on conversations turned into “we will wait until you are further along” passes or “you still need more traction for us to get involved” meetings. The company is in Seattle, so the number of investors in the target list was less than 10. A few meetings were in Silicon Valley as well, with similar feedback. None of them mentioned the market was small, but a couple did mention that it was likely a bigger company might be able to build this.
In search of traction, he started to think about hiring a sales person to increase ARR. His website is functional, mostly informative and has the basics. He is spending $1-2K per month on Google ads, getting 4-5 inbound requests from those efforts, but the pace of customer acquisition was slow.
He did connect with a BD / Sales person who he knew from his previous company and started to talk about having her join the startup. She was making $200K all in (base + commission) and wanted some assurances that she will be able to make that in a year. After realizing that it won’t be possible to give her that confidence, he looked at trying to get “commission only sales reps”. No luck there as well.
He finally got a friend-of-a-friend to recommend a young, sales person in New York who wanted to explore a career in technology after selling electrical equipment to large companies for 3-4 years. He was able to get the sales rep for $120K (60K base) all in, a jump of $20K for the rep from his previous position, if he hit his targets. The rep was to generate $500K in initial revenue from large companies in the New York / New Jersey area.
The first 2 weeks of the sales rep’s time was spent in demos and learning, while my friend helped him build a target account list. Then the rep started to build his “email list” of IT directors and managers with the titles that fit the company’s profile. That took 7-8 hours a week to research, collate and build over 2 more weeks. The rep also went back to his connections to ask for referrals to the right person in their organization, which resulted in 3 follow-on meetings.
They built a list of 250 targets with names & email addresses after combing through LinkedIn and another “IT database” from a vendor (DiscoverORG). After 1 week of emailing and cleaning email addresses, some of which bounced, trying different messages and subject lines (A/B testing), they got 2 emails back – both asking them to “remove me from your email list”.
2 months into the process, my friend realized his company was not ready for a sales person.
They did not have content, enough inbound traffic or interest to make the sales person effective. While he identified a few marketing tools – whitepaper, videos that he needed to get done, they were in the works, and he was using contractors and his own time to focus on those, which slowed things down.
He let go of the sales person 3 months after he hired him.
His angel investors provided bridge financing for another $150K for him to hire a marketing person instead and my friend eliminated 1 developer to make room for the marketing budget.
He hired a freelance marketing director for 3 months on contract and is the primary sales person, with a vastly improved website, whitepapers, 3-4 blog entries each month and has appeared in a conference as a speaker as well.
Sales person for 3 months – total spend ~$18K ($15K salary, plus travel expenses, LinkedIn navigator subscription, email tool – Outreach, database subscription – Discoverorg), etc.
> 23 meetings, 3 follow on discussions and no sales.
Marketing person for 2 months – total spend – $23K ($15K monthly retainer, plus whitepaper content, blog content, travel for conference, etc.)
> 32 meetings and discussions, 5 inbound inquiries, 3 initial pilots, 1 sale for $28K.
While not definitive, I see this consistently with SaaS and enterprise sales startups. The return on marketing dollars over sales is higher, more immediate and sustained.
Most technical founders think they only want a “sales closer” not marketing guy that “creates content” and does some “google ads”.
They dont realize that to make the sales person effective, they need marketing in the first place. Thoughts?
I had a chance to participate and read the Global best practices survey by Unitus Seed Fund, where 78 co-working spaces, incubators, startup academies, accelerators and hyper-accelerators were surveyed and interviewed about their programs.
While, we tend to gloss (“at a high level, they are all accelerators”) over the details and differences, this report actually lays out a “maturity” curve for entrepreneurs. Most people might start out at a co-working space and a far fewer set of them end up graduating from a “hyper accelerator”.
For insiders, a hyper-accelerator is a 3-4 month pressure-cooker style program with a big focus on “pitch preparation” and “getting fund ready”.
While I have talked about needing a better way to measure “success” for these programs, in the absence of one, funding is one that we will all use.
Measuring funding within 6 months of graduating from the program is what they looked at more closely. Things look good or not-so-good depending on your point of view.
Hyper-accelerators get over 70% of their companies funded within 6 months (keep in mind all this information is self- reported), and “accelerators” – which I presume is a slower, more open program get only 30% of their startups funded within 6 months of graduating, unless you count getting into another “Accelerator” as success. I don’t think startup academies are really focusing on “funding” but they do miserably if they did.
The things I learned:
Hyper-accelerators spend a lot of effort, money and time to “recruit” applicants. From the survey, they accept < 7% of applicants. It seems to me they are modeling their programs like the Ivy League college application programs, which gives credence to the theory that they are the new age MBA programs.
Accelerators and Incubators are hosting startups for 6 to 12 months, which is a long time, even in places such as India and other locations where funding is rare and scarce. This is typical in University accelerators and for student entrepreneurs in particular, but even for-profit accelerators are running programs that are fairly long.
The average number of investors that attended the “demo day” for the best quartile was 175 – which is large. Most ecosystems don’t have that many investors – active or passive, so I am not sure I believe this reported metric. I don’t doubt the survey, but I believe the self-reporting favors a looser definition of an “investor”.
Things that I found interesting for entrepreneurs to focus on:
Entrepreneurs cite as peer-to-peer learning as the #1 significant benefit – which means the better the cohort, the better off you will be. The best question then for entrepreneurs to ask an accelerator before the “commit” to joining a program is – “Give me a profile of the other startups that are going to join the program”.
Mentor engagement, which is often touted by the accelerators as their key benefit ranks only 2.5 out of 5 in terms of their satisfaction. Since more connected mentors has resulted in more funding, this is fairly important. Most (over 70%) of the programs allow startups to leverage 1 to 7 mentors during the program, so a key question for entrepreneurs to ask would be “How much time will entrepreneurs commit to help our startup”?
Engaged alumni creates a better probability of success is what the survey also found. Programs that used their alumni in more ways than to just provide “an online chat room” or “a mailing list” scored better in terms of funding and progress. So another key question to ask is “How many of your alumni are still engaged with the program” and “How do the alumni get engaged to help and mentor the current cohort”?
It seems to me that the questions I’d get a lot – “the deal terms – what % of the company for how much in funding” and “how much time do we have to be in the office” – are largely incidental – so both accelerators and startups should just seek to find a happy median – maybe take the top program and the bottom programs and meet in the middle and put that aside.
In the last 3 years at Microsoft Ventures, 7 teams have been “acqui-hired”. 2 were from India, 5 in the US. I had a chance to be up close and see the action, the challenges, the frustration, the joy and the sigh of relief that the entrepreneurs face with these deals.
Acqui-hires fall into 2 buckets – those that save face and those that are incrementally progressive.
While many of the acqui-hires seem like a face-saving opportunity for the founders, they are pretty traumatic for the employees and almost always a poor deal for the angel investors, with exceptions.
The incrementally-progressive ones land the early employees great jobs in the new entity, provide a small return for the investors and allow the founders to get a small win under their belt.
I think about acqui-hires with the focus on the 3 main constituents – the early employees, the advisers and investors and finally the founders.
You could debate who comes first and who should be considered later, so this is only one model for thinking about this.
1. Return on Risk (ROR) for early employees. Most of your employees (if you hired great folks who were already in other great companies) have taken some form of risk to come and join your startup. Assuming that many left opportunities that were considered less risky than yours, I suspect they would expect a sufficient return on the risk taken. Most good employees, will get an offer from your acquirer, which, I think is the main reason why they are acquiring your company in the first place. The best way to give them a return on risk is to help them “true up”on their salaries they forwent.
2. Return on Time (ROT) for the first few hires. In most acqui-hires, I have seen that the acquiring company does not value the product / service that has been built, but instead likes the team. Building a new team who work well together takes time and energy, which is why they chose to acquire a team instead. A good way to help your early employees a return on their time spent (and you as well to hire, recruit and build the team) is typically via a “sign on bonus” for the entire team.
3. Return on Investment (ROI) for your early investors: If you take money, it should your responsibility to return it if you make some money. While many founders feel that angel investors fully know the risk they undertake when they invest in startups, the responsibility to return money does not go away when things dont work out. What I have found is that most founders will end up going back to being founders again and if you leave a trail of destruction or burn bridges when you do your first startup, it will get much harder to raise money for the next one. If you can help investors get as much money back or return their invested capital, then you will go a long way in terms of building credibility for your next venture.
4. Return on Equity (ROE) for advisers. Early advisers dont invest money, but typically their time. While you might feel less responsible towards them since “they did not lose money”, they did give you time, some connections, advice and mentorship, I think you should try and get some for of return for their Sweat Equity. I have seen one or two founders, taking a portion of their “earn out” to buy out the adviser shares that have been vested. You dont have to do this, but it does help.
5. Return on Opportunity (ROO) for founders. While most founders are relieved just with any exit (given that many acqui-hires were to save certain closure) I do think that founder return is important. If you do get an opportunity to get a good package of stock options and sign on bonus from your acquiring company, I’d highly recommend you negotiate for that.
I have found that in 4 of the 7 deals that happened, the acquiring company would have gladly paid an extra $100K – $250K just so the various parties involved would be “made whole”. In many cases the founders just did not ask since they were desperate to get the deal done.
My only suggestion to you as a founder is to ask if you can. If there is a good alignment with the acquiring company and they wish to keep all the employees for a longer time, they would gladly negotiate some more money to help make the deal more attractive to all parties.
The reason for the $100K to $250K number is simple. If your team is 3-5 people, the cost of hiring a team alone will be covered at those numbers. So, in most cases, it will be a win-win for the company.
Yesterday I met an entrepreneur who has built his company in a suburb of Seattle, completely bootstrapped and without any outside investors. He is growing 30% YoY and the most amazing thing he taught me was that he gets all his questions answered on Quora.
This led me to take another look at Quora to understand where any entrepreneur could use it. Turns out there are a lot of use cases. Most people use it to get specific questions answered, but I know that Jason from Storm ventures has used it to build the SaasTr brand, another entrepreneur uses it for lead generation, etc.
One of the first places I got to these days to get an understanding of any market is Quora. It turns out many of the questions, competitive information and relevant market numbers are largely available on the Q&A site.
In fact here is a list of things you can use Quora for, but it is such a good waste of time as well, so I still recommend you Google your question and get to Quora than search Quora alone. When you do get to your question, browsing relevant questions within that topic are really valuable.
1. To understand what problems need to be solved that people face
2. To validate key features that are needed.
3. To understand competitive products
4. To learn about the key influencers in the space.
5. To keep up to date with strategies for growth hacking
6. To look for new people to hire (especially non developers)
In 2008 (before Angel List) there were roughly 1000 technology startups in India starting each year. of these about 50+ got funded by VC each year according to Thomson Reuters.
The percentage of services (consulting, IT enabled services, BPO, outsourcing) companies was about 29% – those that started and 33% of those that got funded.
The number of eCommerce companies was about 3% of the total.
Fast forward to 2014 and those number of companies starting at 22% of the total for services and 5% of the total for eCommerce.
The structural changes of the services companies have changed as well. We have gone from 8% of the companies in IT Services to 5% from 2008 to 2014.
While Thomson Reuters does not break out the data, anecdotal evidence suggest that there are a lot more digital marketing & design outsourcing companies now than before.
The number of eCommerce companies has been steadily increasing as a % of companies started, but has increased significantly as a % of funded companies and a % of total funding.
The only other category, which has grown (for which I dont have a breakout again) is software as a service (SaaS).
Over the last 7 years, the number of Micro Venture Capital firms has also grown. We have gone from none in 2008 to 5 in 2014, and I think we will end up at about 10 Micro Venture Capital firms (those that have less than $25 Million in capital to invest) in 2015. These include Angel Prime, Oris, India Innovation Fund, Blume Ventures, and others.
I have talked to about 5-10 angel investors and industry veterans who are all looking to start their own Micro VC, seed fund and combination accelerator or incubator in India over the last 3-4 months.
In 2008, the average amount of time it took to raise a fund (regardless of size) was about 9 – 12 months. That number is lower for Micro VC funds, obviously, but we have no way to know how long it would have taken.
In 2011 of the 3 funds that raised, the average was about 7 months.
This year, I am hearing funds that are < $25 Million close their raise in less than 4 months.
That means the time taken to raise their fund has dropped. It is easier for fund managers to raise their capital, they can do it in shorter periods of time and they can raise more than they initially desired.
The challenge for the fund managers seems to be no longer raising capital, but efficiently deploying it.
The gold standard for VC investing has been proprietary deal flow (startups that come to the investor for funding exclusively and go to no other investors). That’s becoming harder for all VC’s now.
If the number of companies starting up has grown significantly (as from the graph above) and the % of non services companies have grown as well, then there is a real democratization of founding startups.
So the problem has now moved to sourcing, building a brand for your Micro VC firm and convincing entrepreneurs that you are the “smartest” capital available.
The challenge for Micro Venture firms with no brand visibility or “magnet” founders is that their deal flow is largely limited.
From our own data, I can confidently tell you the “best” deals are usually referrals, but 3 in every 5 companies we get into our program are non referrals. Speaking to Accel and Helion last week, I confirmed that 25% of their funded opportunities were cold (unsolicited).
So while the Micro VC fund manager may have a decent network, their biggest challenge is going to be that they will not be able to attract at least a quarter of deals which come because of having a good brand in the startup ecosystem.
The problem for a lot of the Micro VC’s is going to be that they have poor quality deal flow or deal flow that’s not proprietary.
While they will still go to many events, and review Angel List startups, I suspect they will have a tougher time getting good quality companies to apply.
The bottom line is that now it is as hard for the investors to get good companies as it is for the entrepreneurs to get good investors.
“Every morning in Africa, a gazelle wakes up, it knows it must outrun the fastest lion or it will be killed. Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn’t matter whether you’re the lion or a gazelle-when the sun comes up, you’d better be running.”
― Christopher McDougall, Born to Run: A Hidden Tribe, Superathletes, and the Greatest Race the World Has Never Seen
There are many skills we ask of entrepreneurs – sales, hiring, marketing, product management etc. Of them fund raising is probably the most detested among technology entrepreneurs and the most desired among investors. If there are 3 things most seasoned entrepreneurs will tell you that you need to focus on as the CEO is to set the vision and product direction, hire great people and make sure there’s enough money in the bank.
The fund raising landscape, though has dramatically changed over the last 7-10 years for technology startups.
Used to be that most startups went from bootstrapped (for 6 months or less) to friends and family round (for the next 6 months) to an angel round (lasting 12 months) and then, if successful to a institutional venture capitalist (lasting 18-24 months).
It is not unusual to hear of 7 or more funding rounds BEFORE the institutional venture funding round these days for the 80% of the startups that dont have “unicorn type” growth. This crushes previous investors and makes the entrepreneurs more vulnerable to the situation when there is an exit at the company and the entrepreneurs make literally no money at all.
What are the sources of capital now available to entrepreneurs and when should you chose them?
That’s largely a “it depends” type of question, but here are your options.
1. Most entrepreneurs start with a bootstrapped model. It used to be that you had to keep 6 months of capital for yourself to sustain before you started, and now that has remained 6 months or become closer to 12-18 months. If you show quick traction, expect external investment soon, else expect to be in for the long haul.
2. Friends and family are typically still a good option, but increasingly I am noticing ex colleagues who have worked at startups or large companies who trust you and have experience in the market or customer problem you are trying to solve are a good option.
3. Crowd funding sites like Kickstarter, Indegogo, Fundable and Funding Circle are a relatively recent option for hardware startups, but are increasingly becoming a good option for “validating” true customer need and initial funding for many startups as well.
4. Angel investors are still a viable option, but increasingly angel groups are becoming a better source of the next stage of capital. They provide not only the ability to get money quicker than venture investors but also provide valuable expertise, advice and connections to help rookie entrepreneurs along the process.
5. Accelerators are relatively new source of funding, advice, network and mentorship as well. From fewer than 10 that existed 7 years ago, there are over 500 of them across the world, with many focused on specific verticals and industries that have domain expertise to help you further than a generic seed fund.
6. Micro Venture Capitalists (Micro VC) or Super Angels or Seed Funds are a relatively new phenomenon as well. From fewer than 10 Micro VC’s 7 years ago, there are over 250 of these small check-size, quicker to move investment options.
7. Angel List Syndicates are the latest option available to entrepreneurs now in the US and India (via Lets Venture). These syndicates allow any investor who has expertise in an area to help syndicate their “deal” with other interested High net worth individuals. They are usually led by an experienced and very well regarded entrepreneur and the value to this individual (besides the carry, a small portion of the investment in ownership or future exit option) is the reputation it builds for that individual.
Most of these new options come with their own pros and cons, but they are relatively recent phenomenon. If you are an entrepreneur I’d highly recommend you spend time reading up on all these options before you embark on your funding path. The best sources are usually blogs written by experienced entrepreneurs who have recently gone through the process and have the knowledge and desire to share.
On Wednesday I had a chance to interact with 31 entrepreneurs in the IoT space at Plug and play technology coworking space in Sunnyvale. There were 10 companies in the Healthcare IoT area, 11 in the connected car and 10 in the home automation (IoT) space. Plug and play has 3 sponsors for their programs including Bosch, Johnson and Johnson and StateFarm, so the companies chosen were deemed a good fit for those sponsors to help them with innovation and startup scouting.
The interesting part that was very obvious to me when I looked at the list and later spoke with many entrepreneurs was that 19 of the 31 had gone to another accelerator program before this one. Of the 10 companies in the connected home space, 3 were from the Microsoft Accelerator itself. Of the 31 companies, 28 were outside the Silicon Valley, which makes sense (that they would want to move to the valley). Two that applied were from YCombinator as well, so, there were not just companies from tier 2 accelerators.
I asked the entrepreneurs why they felt the need to go through another 3-4 month program after they had been to one before.
The not so surprising conclusion is that for many (not all) companies, the 4 month accelerator model is largely insufficient. I did learn that most entrepreneurs did value the support, mentorship and advice provided by the accelerator program they were with before, but many had insufficient “traction” to justify a series A after their “acceleration”.
Which means about 650 (800 minus the 150 who secured VC funding) companies that “got funded” after an accelerator program, have not secured Institutional funding from a VC, but either from angels or from other accelerators.
If you look at the angel data from the US, of the over 4000 deals funded by angel investors in technology, < 5% or about 200 companies have been through accelerators before.
The result is that 450 companies that were claimed as “funded” after an accelerator program actually went to another accelerator.
Going back to the numbers above, if out of the 1200 companies funded by accelerators, about 450 (or 30%) went to another accelerator and 20% of them (on average) shut down, fail or close, then really about 50% of the startups from the accelerator programs or about 600 companies should be technically “funded” institutionally, but that number is 150. So, there are 450 “zombie” companies.
So the question is – what has happened to the “zombie” companies?
There are only 3 possible answers:
1. More companies have shut down that the numbers reported by accelerators.
2. Many companies end up becoming “cash flow positive” or “break even”, so they chose to not raise funding, but instead grow with “customer financing”.
3. More companies are “zombies” or walking dead – trying to raise funding, not succeeding, but not growing fast enough to justify institutional Venture funding.
I have my hypothesis, that it is #3 that makes up most of the “zombie” companies, but I’d love your thoughts.
If the measure of value that an accelerator provides (as measured by entrepreneurs) is funding, alone we are failing big time.
Over the last 2.5 years I have had the chance to closely observe over 70 startup teams for more than 6 months each (some a lot more) to find out which of them succeed (by their own definition) and which of them fail.
The thing that struck me 2 nights ago at the TIE dinner was a question that was asked by one of the solo founders – why do investors insist on having co founders if one of the biggest reasons for companies closing is “founder issues”?
If you look at the data from multiple sources about the biggest reason for failure in technology startups, I am struck by how high “co founder issues” comes up in the reasons for a startup folding.
After “no market need” and “ran out of cash” – which by the way is another way of saying there was no market need, the biggest reason was team and co founder issues.
Initially that struck me as odd. I mean, as investors, we keep telling entrepreneurs that we don’t fund solo entrepreneurs. Or that we invest in teams. Or that we like a well rounded hacker, hustler and hipster teams. Most investors have a bias against solo founders. We are prone to say – if you can get one person to join you as a co founder, why should an investor join you?
I have one theory around why we do what we do and say what we say. I am going to say it is a theory for now since I have not validated this and certainly can’t speak for all investors.
The reason is that the biggest reasons for failure (poor co founding teams) is also the biggest indicator of success.
Historically, great technology companies have 2 co founders.
Most investors pattern-match.
So, they tend to talk to 20 folks and form an “informed opinion”. If you look at startups in the technology space historically, the 2 co founders insight has borne out more often than not – Microsoft, Apple, Yahoo, Google, etc.
So, as investors we assume that data (that 2 cofounders is better) trump judgement (that sometimes a solo founder can be just as good – DELL, Amazon, eBay, etc.
So, the question is – why we do insist on having a 2 founder (or more) team than a solo founder?
The answer is fairly simple – investors, like entrepreneurs have biases, or a deviation in our judgement.
If you are a pattern-matching investor, with not much operating experience, then you will go by “best practices”. Then you find other ways to rationalize those decisions. For example – you will quote how startups are very hard and during the hard times you need someone (your co founder to keep your spirits up), or that you need folks with complementary skills to form a company, etc.
Those are largely true and maybe not rationalizations at all, based on the experience of many investors, but I have found that early stage (angel investors) tend to have these biases formed and opinions they have been “handed down” from seasoned investors, who have their own biases.
So, what does this mean if you are a solo founder and still need a “cofounder” since your investors are telling you they invest in teams.
Ideally, you should look for people you want to work with and have worked with before. Note, I did not say “you know well” – that’s necessary, but insufficient. If you worked with them that’s the ticket.
If you don’t have that person and keep getting feedback from investors you are trying to get on board that they don’t fund solo founder companies, what they are really telling you is that there’s other problems that make them not want to invest.
The problem might be that dont know the market, dont understand your product, or any number of other reasons.
That’s the real problem to solve as a solo founder, before you solve “let me get a cofounder” problem.