Very first investor pitch I ever did could be an all time worst investor presentation. Straight out of school. Didn’t have a subscription agreement. Didn’t know what pre-money was. Didn’t even answer all the basic questions. I just had enough confidence to do the pitch. -MJ

Couldn’t identify his target market. Showed up on the wrong day. Kept calling the investor daddy-o. Wasn’t wearing any shoes… the kind of performance that wouldn’t just deny you seed capital, but that could get you arrested in 16 states.

If you are a VC or angel, and have a weak heart, do not watch this video! However, if you are fresh out of school, and looking to launch a startup… proceed with caution.

Coming out of school is a perfect time to get a start up going

When your young, you have an inevitable feeling of immortality. From the first time you ride a wheelie on your bicycle, to jumping off the jungle gym, you inherently know that everything is going to be okay. It’s only natural for the thickness of this bubble of invulnerability to wane over time, until it is finally gone and you become scared of even the minor risks.

“Being Young is a Fault That Improves Daily.” - Swedish Proverb

In the world of entrepreneurship, one of the greatest time spans you will have to take a risk is during your youth. Your adult enough to make your own choices, yet young enough to have little to lose. Your smart enough to understand that great risk can lead to great reward, and stupid enough to push in all your chips instead of folding.

Most young entrepreneurs make the mistake of thinking it’s an old professionals game. While this is true it some circles (especially investments and funding), for the most part you will never be more hard working or enthusiastic about your venture than at this stage in your life. Professionals can see this in you, and it is the best quality that you will never be able to put on a resume.

Simply put, being young and driven is better than being old and experienced. There are perks to being an expert as well. You may get better financing choices, and you certainly have more contacts, but being an entrepreneur is tough work that sometimes requires tough choices.

Show investors a great idea, enthusiasm, and Ramen Noodle receipts for the last four years - and they will see someone that can get an idea off the ground and knows how to live frugally.

Young entrepreneurs also are more likely to burn the midnight oil, travel relentlessly, and entertain prospective clients - then get up and do it again. Entrepreneurs don’t give up easily. When they are successful it’s called perseverance. Before they succeed, or if they fail, it’s called stubborn, bullheaded, arrogant, or foolish. Take advantage of this concept while your young. Arrogance is similar to confidence in your youth, but old stubborn people are a dime a dozen.

If you launch a successful startup, years from now the odds are you’ll look back on it and note how it wasn’t what made you money. Your pursuit of the original idea will likely either reveal a flaw, or expose you to a more compelling idea which is profitable.

Investors know this. Which makes direct communication between investor and entrepreneur essential. They are investing in you as much as they are any idea or technology.

All of a sudden, as soon as you talk to an investor, there’s this massive disconnect. That massive disconnect is why its so hard. Its not really about being smart at finance. And they’re not really trying to be smart about technology. Everyone’s just trying to get comfortable to make the investment. -MJ

As much as a potential investor cares about the technology you’re pursuing, they want to know they can work together with you when unforeseen circumstances arise. Your business may unexpectedly change, but you won’t.

Mathew Ingram has been covering business and technology for The Globe and Mail since CERN spawned the World Wide Web. Some Cambrian House community members have been asking about funding outside of Silicon Valley and he was nice enough to share his thoughts.

Mathew Ingram person,

Beyond Silicon Valley, the American startup hub shortlist starts with New York, Boston and Seattle. What would a Canadian list look like?

From what I can tell — and I can’t claim to have done an exhaustive survey by any means — Toronto, Vancouver, Ottawa and Montreal have fairly active startup communities, judging by the number of DemoCamps and StartupCamps and so on.

Obviously the West has some activity as well, as StumbleUpon and others (including Cambrian House of course) prove, but I think it’s more fragmented in places like Calgary and Edmonton and Regina and so on. And one of the benefits of Web-based businesses is that they can pop up just about anywhere, with teams of people who may not even live in the same physical area working on them.

Thank you for listing Regina after Calgary! So how can someone launch outside of a startup hub?

Although it’s true that Web businesses can start and effectively be run from just about anywhere, it’s also true that people are people, and they need human contact — and startups in particular thrive on the energy of other entrepreneurs, people who are also struggling with launching a company, or have done so in the past; that’s why
StartupCamp and DemoCamp and other social events are so powerful, and I think that’s one of the main benefits of something like mesh or meshU — just the chance to bump into or hear from smart people who are trying to save some of the same problems that you are.

The American recession (officially described by the White House as “tough times”) is looking rather ominous. Do you have any survival tips?

I think the best advice is just to be as lean as possible. Focus on the things that matter, not the Aeron chairs and foosball tables and so on, and if you don’t have to get financing then don’t — the best way to get financing is to not need it. And I think it is true that the economy has had less impact on startup activity in this cycle than the last, if only because companies can do so much more with so much less now, thanks to Web services such as Amazon’s S3 and EC2 and Simple DB and so on.

Sounds like someone isn’t very good at Foosball.

Mathew Ingram will be attending the MeshU startup workshop on May 20th in Toronto. Ontarian members of Cambrian House community check it out!

“Why are you holding my hand?”

    “Where’s your other hand?”

“Between your term sheets.”

    “Those aren’t term sheets!”

When it comes to venture capital, how close is too close?

On one hand, VCs can offer invaluable support to your startup. Beyond financial, they’re trying to leverage their experience so you don’t repeat the same mistakes they’ve either made themselves or bore witness to.

But on the other hand, do you really want someone nosing about your business while you’re trying to get some real work done?

< awkward pause />

Yes you do. There are only upsides to tight investor proximity. If the thought of your potential VC popping by unexpectedly to see how things are going gives you pause, then either you should find another investor, or share that concern with them to make sure you’re both on the same page.

Proximity is less important as your business becomes self sustainable, but while nascent the (often quoted) rule of thumb is still one hour’s walking distance.

“In the beginning of your firm, it’s all risk. It’s this baby in the emergency room. You don’t want your doctor talking through a screen, asking people what is going on.” - MJ

So unless you live in a town filled with venture capital, what are your options? Look for angel funding, move, or bootstrap it yourself. If you’re bootstrapping, look to leverage modern trends like crowdsourcing, open source software and public APIs to keep your costs down.

“Silicon Valley dominates, then Boston, then Seattle, Austin, Denver, and New York. After that there’s not much. Even in New York the number of startups per capita is probably a 20th of what it is in Silicon Valley. In towns like Houston and Chicago and Detroit it’s too small to measure.” -Paul Graham

Is stalking Angel Investors wrong?

There’s no easy way to answer this question. Some say stalking should only be used for celebrities. Others say it is only unspoiled virgin brides who ought to be stalked.

The truth is, stalking is the least effective use of your time. Any indication of disinterest means the conversation from that point forward will be strictly educational in nature…

Unless your idea is crap, or you stop looking for money, you will eventually find someone who will consider investing. And its extremely important that you look fundable at that moment. While you might consider yourself a person pitching a piece of technology or concept (and ultimately it is you who is being invested in), it is your company which serves as the interface for the investment.

You’re not going to have an investor wait while you customize a private equity investment template are you? That would be a pretty poor interface.

You are at your family’s annual family gathering. Your sister brought “Alan”, another strange guy in her history of strange guys. Before dinner, you blather on about a great business idea you’ve been pursuing. Blah blah blah… you’re quite the little chatterbox!

After, as the turkey and potatoes start dulling your mental reflexes… Alan approaches you with a check book and says “I like it. I just came into a little money from selling my company. What size stake would I be able to get?” You just stare at him like a deer in the headlights. Alan’s an Angel Investor, and you are about to miss a great opportunity.

If you were put on the spot for financing for your idea, how would you answer?

A little bit of stumbling might be understandable if you got asked out of the blue through pure serendipity. But what if you went to an investor forum and you didn’t know about pre-money valuation and share price? You don’t think this ever happens?

MJ was discussing his experience at the Y Combinator Demo Days and compared it to his experience at the Angel Forum…

Here is the part that is so frustrating as an investor:

Everyone is asking for money and I am asking, how much money do you want? For how much of the company? And no one can answer that question. In fact not one person answered that question.

Perhaps they didn’t know, or perhaps they have been coached to not set a valuation too early as MJ suggests. The idea being you don’t want to sell yourself short and undervalue yourself. But the reality is that…

When you are a startup, the way that you are valuing your company, it is not like it is anything real, it is completely made up. I don’t know why anyone doesn’t say that out loud, but it just is.

It is is about how much money you need to get to next definitive risk reduction point.

Your pre-money valuation then can be easily determined based on what you need. Investors aren’t going to invest for less than 20% and no one should probably be investing more that 40%. This gives you a clear range to to set your pre-money valuation.

So what does this mean to you? If you need money from investors, you need to have your ducks in a row.

Start with answers to the following questions

• What is the next definitive risk reduction point?
• How much money will it take to get there?
• How much of the business are you willing to give up? (20%-40%)

No idea how to answer these questions? Head on over to the Cambrian House Forums to ask the Cambrian House community.

Last week, we invited Hal Josephson (not this Hal… Hal Josephson is one of CH’s advisors) to hang out with us in our Calgary office. Hal is currently President of MediaSense in San Francisco, lives in New Zealand part-time and helps businesses understand and break into the Asian market. He was one of the founders of 3DO, was Vice President of Infotainment World (producers of E3), was behind the movement of community television, and more. To say Hal is awesome is an understatement.

On Thursday, July 19 Hal presented at a Cambrian House “Lunch and Learn” where we ate tasty Thai food and learned about Business Development – and how BizDev differs from, but isn’t mutually exclusive from, PR and Marketing.

Here’s a copy of his PowerPoint, and video of his presentation:

For most start-ups, finding the mentorship and friendship of successful business leaders is tricky. After all, how do you get into the “club” without being a successful business leader yourself? It’s like trying to fit in with the high school quarterback and his buddies when you’re the young, skinny freshman…

Luckily, Cambrian House has a couple things going for us that have helped attract some amazing people like Hal into our world.

1. We believe in crowdsourcing – thus, the wider we cast our net and leverage our networks and our networks’ networks; the more likely we are to meet wonderful people.
2. We hang out with other entrepreneurs - many of whom have worked with other entrepreneurs from a variety of industries: energy, technology, entertainment, etc. so we meet fascinating folks who provide a variety of advice.
3. We believe people invest in people – so when we first meet someone we want to develop a relationship with, we find it best to “get to know them,” and develop friendships and trust first. After all – the best supporters are the ones we can call friends.

Hal is certainly a friend. And, I think his business development tips boil down to a few key points: trust, reputation and reciprocity. After all, people invest in people.

I mean come on. Macs are popping up everywhere.

Just yesterday I caught my best friend, who has been a proud Mac hater for years (he is also the President of the FireFox hater club), sitting in front of an iMac casually surfing the web, using Safari, asking a colleague whether iMacs comes with dual core processors.

Sheesh! What’s the world coming to? Macs are everywhere!

Is it an East Coast West Coast thing?

Whenever I travel out East (New York, Boston) I feel corporate and safe carrying my PC. PCs seem to dominate the conferences and landscapes out there. At a conference out East, I could sit down at a table in my freshly pressed white collar shirt, dig out my fillintheblank consulting card, pass it across the table to a similar dressed young man, and start swapping squash tips after we talked about rising interest rates and their impact on the economy.

I feel safe, comfortable, and secure with my PC out East.

On the West coast it’s completely different. No one carries a PC. Whenever I attend any event in San Fran I always feel self-conscious when I pull out my PC. People stare. They whisper. They look at me with pity - like I am the only one who hasn’t discovered the Caramilk secret.

I overhear them ask their neighbors, ‘Who’s that poor sap with the PC?’

‘I don’t know?’ their neighbor replies. ‘He must be from out East.’

Then they knowingly stare into each others eyes, and simultaneously turn to their halter sacks, where they every so delicately remove the soft, velvet sheet covering their most precious possession - their MacBook. As they lift the lid the room brightens every so slightly with a divine glow, as if the gods themselves have blessed this sacred event.

Is it a way of life thing?

I want to buy a Mac just so I can hang out with all the other cool people. We would watch An Inconvenient Truth together, talk about the Democrats and how Gore was robbed in that election. We would swap VW stories, share free love, good karma, and feel for everyone currently trying to upgrade to Vista.

I know I am saying nothing new when I credit Apple for creating not just a great technology company, but a great way of life company.

Owning a Mac is a way of life.

So what’s a guy to do?

My wife and I almost bought or first Mac this year (I was so excited!), until a very cheap PC laptop fell into our laps for almost nothing, which replaced our old 400MHz Pentium II Dell Inspirion that I got in 1998 for $4500 (don’t laugh I got my money’s worth).

I further justified the PC by convincing myself that it would be very painful to transfer all my Quiken files, Outlook contacts, Black Berry (not to mention favorite computer games) from my PC to my Mac. So maybe I am not ready to take the plunge just yet.

But I still long to hang with the cool kids. I want to walk into my local Star Bucks, sit down with my vendi-whip-cream-topped-raspberry-mocha-chip-frappuccino, open my knapsack, flip open my brand new shiny MacBook, and seamlessly connect to the global conscious they call the Internet and rejoice with all my other Mac friends.

Am I the only one feeling this?
Has anyone taken the plunge and become cool lately?

Mac or PC?

And where does Feisty-Fawn-Ubuntu fit into all this?

Ali and Hadi Partovi (of iLike.com) are two entrepreneurs who recently gave a talk called Is My Idea a Winner at the YCombinator startup school.

Ali was a co-founder of LinkExchange which was acquired by Microsoft in 1998. Hadi was a Group manager at Microsoft responsible for Internet Explorer and MSN.com. He co-founded Tellme Networks and eventually joined his brother at GarageBand.com (which turned into iLike.com).

After listening to the podcast, I thought their advice was good, and worth sharing.

Here are some of the highlights (along with my own commentary and thoughts):

Can you easily explain your customer’s needs in one or two sentences

As Ali and Hadi point out this is different than an elevator pitch. The elevator pitch is great at explaining what you do. But a customer pitch is focused purely on what’s in it for the customer.

Google � finds stuff
eBay � auctions
iPod � brings music to your ear

In just a few words, try to summarize what your product or service does for your customer. This exercise can be harder than it sounds, but it prevents you from trying to be everything to everyone and feeds all other aspects of your business from marketing, to sales, to pitching investors.

Look for ideas that scale

There are lots of ways to build profitable companies off human labor. You are not going to change the world however starting another law firm. Ideas that truly pop are ones that scale.

It may cost Microsoft $1Billion dollars to cut the first version of Vista, but each one after costs a dollar.

Web 2.0 startups have huge upside, if they can figure out how to use software and technology to reach and influence many people, with little relative effort (i.e. FaceBook).

Will your product naturally recruit new users?

How viral is your product?
Will people talk about it?
Will the value each customer gets increase as the community of users grows?

If you can do that, you have the elements of a natural monopoly. It is much harder for competition to enter your space once you have all the customers. eBay may not have the best UI, slickest design, or the greatest technology, but they have locked up almost all the buyers and sellers.

What’s your added value

I love this definition of added value:

Added value = Size of pie when I am in the game � size of pie when I am not

An advertising company may make $10Million/year by having Proctor and Gamble as a customer. If they were to fold however, P&G could simply take their advertising dollars somewhere else.

Compare that now with Google. Google has thousands of customers who each spend $100/month. If any one customer were to leave Google, it wouldn’t really hurt them. If Google were to fold however, a lot of people would be hurting � that’s added value.

The brother’s advice is to try and look for opportunities where you bring all the value. When you are dependent on a single customer, they have you by the short curlys and get all the leverage and value from the relationship.

A piece of a smaller pie, is better that no piece of a bigger one

One of the brother’s jobs at their startup was to negotiate strategic deals with Yahoo and Microsoft. Something he learned early was that it was better to leave something on the table, and get the deal signed quickly, instead of holding out and trying to wait for the perfect deal. He recommends startups let the other side get a bigger piece of the pie, and accept a less than perfect deal, but get it done.

Make sure you love what you do

The brothers strongly encourage entrepreneurs not to start companies for money or fame. They should start their companies because they literally love what they do.

Success is 1% inspiration, and 99% perspiration � Thomas Edison

Working at a startup is like a roller coaster. There are ups. And there are downs. And unless you love what you do, you’re not going to make it through the downs.

Check out this and other YCombinator podcasts here.

As I was riding my bike to work this morning, I noticed my knapsack felt a little light. I reached back, and much to my dismay, realized I had forgotten my laptop at home.

Rats!

I hate it when that happens. I could picture it sitting at home, on the kitchen table, open to the BBC news where I left in a rush.

Instantly my mind started to race - what was I going to do? My laptop is my life!

Everything I do is on there:

• email
• the web!
• build our product
• instant messaging
• my music
• my blog
• other peoples blogs
• iTunes

How was I going to work without my laptop?

The thought of returning home to pick it up hurt too much. I was just going to accept that for one day, I wouldn’t have my laptop. As soon as I accepted my fate, a funny thing happened. My brain instantly started constraint resolving. My brain started to figure out ways I could be productive without my laptop.

Without my laptop, I could do things like:

• interact more with the team
• write a blog on paper and pen
• plan ahead
• talk to people
• think about how to improve our product
• pitch in and help out others
• test our latest release pairing with someone else
• review our latest designs

Suddenly the day didn’t look so bad. I could contribute. I could be productive. Man has worked for thousands of years without laptops. I can work for one day without mine. Laptop smaptop - look out day here I come!

It was with that attitude that I took on the day and had the most productive day ever.

So don’t despair if you forget your laptop at home - all it not lost. Think about all the other productive things you can do and prepare yourself for one of your most productive days ever.