Setting Milestones for a Series A

As commerce seed investors an important factor for us to consider is whether the company will be able to raise a later Series A. This isn’t a popular thing to talk about but it’s reality.

Why do we care? Because when you are a large investor in a seed round you are investing in a stage that has an expiration date. Seed investors rarely have the capital to fund a company through a 5-10 year growth cycle. This is especially true in commerce companies with physical products or operations.

We need to be cautious and minimize the probability of finding ourselves in a sunk cost dilemma 1-2 years in the future when a company has no traction, no cash and no potential investors.

We’ve been right about 60% of the time. It is still very early.

VTF Capital Seed Follow-On

Smart investors think of a company’s life story in milestones. Milestones are fundraising related, metrics related and product related and they occur at sporadic points in a company’s growth.

We have the same conversation with every founder we invest in. What’s the next milestone? What does the company need to look like at that point to achieve that milestone?

This is not an evaluation question but rather a collaborative one. It is natural for founders to want to do 4-5 things in the next year. In my view, it is better for a company to be healthy and growing in five years than for it to do 4-5 things in one. As an outsider I have the benefit of keeping that restrained view.

There are rare times when a company can do it all. But often the 4-5 things are aspirational goals a founder sets for the company. On deeper study, I’ve generally found that those 4-5 things are what the founder actually sees the company doing over the long-term. In the hype of pitching investors, he/she believes she must put it all on the table right now. It’s helpful to recall that humans are generally bad at estimating what they can do in a year.

But regardless of capacity, the question one must ask when setting milestones is whether or not all five things are relevant to achieving the company’s goals between now and the point of the milestone (e.g. end of cash runway).

Let’s say your vision for your company is to be the end to end marketplace platform for consumers who buy eggs. To achieve that vision you will build strong technology that manages:

  • egg production
  • egg distribution
  • egg retail sales
  • egg feedback ratings
  • payments for eggs

Today you have 20 farms and 400 retail customers and you are raising a $1M seed round. That money will last you 18 months.

The two things you want to focus on are:

  • What will the company do at the end of the cash runway?
  • What will the company need to look like in order to do that?

Fundraising stages, from early to late, exist on an investor motivation spectrum of faith to spreadsheet. The earlier the investment, the more the investment is a faith investment in the market and the team. The later the investment, the more the investor is concerned with spreadsheets. That is to say, for example, how their capital turns $1 of sales into $4.

If you are planning to raise a Series A, then you must consider what your company needs to look like to Series A investors at the point you need to raise capital from them.

Series A investors invest in both but are to the right of the midpoint preferring companies that show strong metrics-based performance. Yes, some Series A investors say they are more focused on the team and the vision than performance. This may be true for some but my experience in dozens of post-seed financings is that Series A investors overwhelmingly look at data first.

  • What metrics will matter to them?
  • What metrics will they use to determine if their capital can be used as an accelerant to growth?
  • Will your metrics demonstrate strong adoption and product market fit?

The more disparate metrics you have, the lower the probability your performance of each will demonstrate dominance (aka traction…a word I hate).

Investors can connect dots and see what’s possible. When deciding what the company should look like at the next milestone you should err on the side of highlighting your ability to execute.

You want to be able to say (using the egg example:

  • We set out to onboard and process retail orders for 2,000 retail customers. We did that and here’s the data. (note this is not necessarily a revenue/monetization requirement. We’re using an egg example where a successful transaction is someone buying an egg. Active users, participating users, etc. are similarly useful metrics depending on your business.)
  • The next step if for us to own these three parts of the market. You can tell that we can execute, you are investing in that growth.

Conversely you can say:

  • We want to own the entire egg market so we built the technology that does all of these things.
  • We have 100 retail customers, three distributors and are in final talks with 3-4 farms.
  • The market potential is about 50,000 customers and we have a plan to go after them. We have less than 100. But here’s our sales funnel. The ones noted as “pre-qualified” are ones I have email addresses for. I’m confident they’ll close. (this is a real example)

In the latter, the Series A investor sees undisciplined product development and mediocre results.

In the former, she sees restrained, patient product development, exceptional execution and demonstration that people want what you’re putting out.

For most investors, the former will be a better investment.

In my past life as a founder, I ~~just~~ knew I would raise Series A capital when I needed it. I never stopped to consider how.

At SHIFT we had exceptional technology to manage a large fleet of on-demand cars, bikes and multi-passenger buses. We were the first and still only outside company to build access control and telematics systems for Teslas and smart cars. We built the hardware and software in-house. Our customers could access one of 98 cars within five minutes using iOS and Android apps. Our backend automation systems powered a 24/7 recharging and rebalancing operation for an electric fleet in the largest centralized electric vehicle charging station in the US. We were a fantastic engineering operation. We demonstrated we could execute. If only our business goals were to be the best vehicle fleet operator on the planet.

I came away from meetings with large Silicon Valley VCs with a set of metrics related to the business we were actually in. “If you get to 5,000 paying members in 8 months we’ll invest $5M” one of them told me. “Show 4,000 paid transportation uses in three months and we’re in for $4M,” said another.

We were asking them to help us become a billion dollar company. The question they were considering was whether there was reasonable demand for this to be a billion dollar company. We presented ourselves a consumer transportation product, not a backend vehicle operations company. The funny thing is, we put 99% of our effort towards being the latter, not building traction towards demonstrating that we could actually build the consumer side of the business.

In the process of building great technology and a great operation I forgot to focus on what we needed to look like to the person who would get us through our next milestone. And by the time I realized that, I didn’t have two more years to build the company towards that outcome.

Be the founder that thinks this through. Proactively share your plans with your investors. It will help you separate the smart investors from the not.

Thanks to Will Young and Patrick Olson for reviewing drafts of this post.

Seth Godin Q&A from Tim Ferriss Podcast Notes

Seth Godin is among my favorite thinkers. He has a way of whittling down subjects to their critical essence. He cuts the bullshit with a very sharp knife.

He recently did a Seth-only recording of answers to listener questions from his first podcast interview with Tim which I’ve listened to repeatedly. I thought these notes might be helpful to someone so here they are.

Q&A with Seth (TFS Episode 177)

From Aug 2016 Q&A podcast.

Find your tribe to lead. You don’t build a tribe. They already exist. Nike found runners. Harley found the “1%.”

Find the smallest possible group to serve. Serve first. Small seems scary and without life boats. Large seems worth it. But small is the most effective. What does this community need to be served best?

You can’t go to someone and say pay me a bunch of money and tell me what to do. Instead what’s valuable is people who:
(side: school ought to teach)
1- how to solve interesting problems. how to do a things you can’t look up on the internet. how to do a think where no one can tell you how to do it.
2 – lead. have the guts to say follow me.

To get to do the things we want to do in today’s world, we have to figure out how to move forward. We have to figure out where the fear is.

Your business can be about:
1- engaging with people who trust you
2- delivering value to them
3- making enough money to do it again

Brand alignment. Seth took an approach with his first books that his brand was he was a Stanford MBA who knew more than the editors did about business. They didn’t buy the book. So he deliberately changed his brand. Stopped putting spreadsheets in proposals, wearing suits. Listened to what they needed from him. The mindset requires to commit to the marketplace, not your brand. Can’t sell steam shovels, then life insurance, etc.. No one can figure out who you are.

Meaningful specific vs wondering generality (this looks for the “next thing” all the time…can’t build a brand).

How do you decide what is essential, indispensable or useless for your attention? Comes back to brand, the promise, what you stand for, “to the change you are seeking in the world.” If you are trying to make a specific change it is easy to be specific, even more if you know the person or group you want to change.

it’s not difficult for Nike to decide to do or not to do because they’ve decided what they stand for. Nike isn’t going to sell corn chips. Nike had an agreement with Sears not to advertise in the Sunday circulars. Sears broke that at one point. Nike asked the Sears folks to come to HQ and made them sit in the lobby waiting for a meeting from 9 to 5. The reason? To demonstrate that they are serious about their promise and their business. And their promise isn’t to treat retailers well.

The brand is boundries, a narrative. Online comments, for example, are anonymous, general. They are not the small group. They will push you to be more general. That does not affect change.

To be the purple cow, you can focus on a small group of people and endeavor to be the consistent, regular choice. You get the gig because you are better: at knowing them, being flexible, going the extra mile, keeping your promises. You un-commoditize your work by being human.

To stay focused on a project. At some point you need to decide who you are, decide the scale, decide what the brand is when people hire you, when they engage with you. You have to embrace the the niche you select and find the people who want that thing. Others can’t replicate that because you are focused, they are general. Helpful with conferences, project selection, etc.. Does this help my customers because it helps me make it easier to deliver on my promise.

Off-Price Retail

From The Off-Price Market Is Switched On, Apparel News

He also estimated that in the last two decades the competition has driven down the price for off-price goods. Goods are at least $2 to $3 cheaper today compared to the 1990s.

In any race to the bottom there is a bottom….

I study the role discounting, indirectly, for a living. I believe this market trend is the second of three phases in the evaporation of big box retail.
First, we had new stuff close by. That lost its luster thanks to e-commerce. Today, we have cheap stuff close by.
Once that loses its luster we’ll look to retail places to provide consultative experiences. They will be places that don’t just answer questions but help you ask them.

Kevin Kelly on being late

Kevin Kelly is a fascinating figure. His work and how he organizes his life always inspires me.

I’m almost finished with his newest book, The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future. So far I recommend it. I’ll share notes when I finish.

The internet surfaced something he said in a recent seminar at with The Long Now Foundation.

I think it bears repeating over and over again. Our world is a stream of information. These undistilled bits naturally push us to compare ourselves to others. We measure ourselves by external markers. And we conclude that we suck.

What potential greatness do we banish to oblivion when we wrongly assume that we’ve missed our opportunity?

Remember this:

We are at the beginning of the beginning — the first hour of day one. There have never been more opportunities. The greatest products of the next 25 years have not been invented yet.

You‘re not late.

Patrick Hipp on Millennials

I have this light friendship with a person, let’s call him Bob. And every time I ask Bob what’s new, he replies “Oh, you know, millennials.” He analyzes millennials for a living.

I don’t know what he does, who he studies or what he means. This article helped me frame why.

It’s long and I’ve read it top to bottom 2–3 times.

It’s not a strategic blow-your-mind piece. It’s just what needed to be said about the seemingly never ending stream of “what do millennials care about” babble.

I was born in 1981. I did not have the internet as a child. I was 13 and living on a farm when Netscape Navigator was released.

My family’s first cell phone was in a bag that weighed at least 10 pounds. I can’t see how my world view is even slightly the same as a person who never knew the world without an iPhone.

Fuck You, I’m Not A Millennial

Well, for those born between 1975 and 1990, let’s say, our formative years looked nothing like those of the Millennials. Our television came in largely via antenna, our movies were on VHS, our music was on cassettes. The internet wasn’t around, and by the time it was in any way that meant something, you could be disconnected by someone picking up a phone somewhere else in the house. We look like digital natives, but only because we grew up in tandem with the internet, as if technology was designed like the progressive grades in elementary and high school.


Last week I was traveling in Boston to spend time with two of our portfolio startups.

I spend a fair amount of time with Ministry of Supply. It’s one of our key investments but more than that, I always feel smarter after a day with their team so I jump at the chance to work with them.

In technical VC jargon I’m officially an advisor and last week attended a quarterly board meeting. The way Gihan runs a board meeting is inspiring.

Much of the company’s actions stem from frameworks taught to MBAs with just the right dose of skepticism. Basically they think in business-speak but blend it with just enough reality to make it useful. That’s a rarity in strategic thought.

Dragon Innovation

I also spent a few hours getting my mind blown by Dragon Innovation in Cambridge. If you’ve purchased a startup-made physical product with electronic components, there’s a high probability they were the behind-the-scenes maestros who made it happen. They are the Foxconn-tamers and simply really cool people. I’ll be joining them for a trip to China this fall to learn about manufacturing first-hand.

Side note: if you’re making a physical product, check out their open source standard bill of materials. It will make your life 1000 times easier.

How to use email for interviews

This morning I read a fantastic New York Times including the email correspondence between Natalie Portman and the NY Times correspondent.

Apparently, Hotmail was responsible for the loss of years of past emails of the same nature. They rebooted the conversation for this piece opting to follow their past communication style over doing a candy shop interview.

The piece presented a deep view of both of them as humans. It was not a candy shop interview where Portman gave sound bite answers to sound bite seeking questions. It did not rely on what I call “the magic of a scheduled time.”

It’s a great example of how, when used correctly, email can be a fantastic communication medium.

The Emails of Natalie Portman and Jonathan Safran Foer

Outcome Prediction and Regret

I enjoy observing politics through a behavioral lens. Regardless of the issue the way we do things can be baffling if you can separate yourself from the issues and just observe the behaviors.

Take this (not scientifically valid) sampling of people in the UK.

The way we can make decisions with zero regard for impact is astonishing. We do it everyday. In most cases it is a choice between instant, delayed and deferred gratification. Votes like Brexit are more complex but born from the same behavioral lens.

Once the hypothetical we could not fathom becomes reality and we have the data to objectively measure its impact, we develop regrets. 

Regardless of your position on this is an interesting study happening in real-time. 

We are responsible for our fate.


For the first time in my life I’m conflicted about the prospects for the future. I’ve always felt that sanity could overcome hype. Or least contain the impact.

In news, election and business cycles there are two types of data: undistilled and distilled. The interconnectedness of today’s world means the ratio of undistilled to distilled information is rising.

This isn’t the first time in history this has happened. Advertising convinced us that smoking was healthy and sugar was good for you. We let short, pithy ads outwit our rational minds.

Over time a quiet but determined group of rationalists has made progress towards undoing that. But the fact that cigarettes are more accessible to most Americans than spinach demonstrates how difficult it can be for rational thought to beat manipulative marketing tactics.

We are more interconnected than ever before. Breaking news, social networks and floods of undistilled information compete for our attention. Volume increases volume. To stay in business the sources must keep you hooked. To do that they increase the noise to convince your monkey brain that you need what they are making.

This is not the media’s fault. Trump is not the media’s fault. It is too early to understand the lasting impact, positive or negative, of the UK’s vote and well too early to predict the fall election.

The problem is that the impact is spreading. What you choose to eat has little impact on your neighbor. But how the majority chooses to vote forces everyone to come along for the ride.

What has and will happen is our doing. We are not stupid. We are manipulatable because, well, science. Our brains do more things subconsciously than consciously. Have you breathed in the last minute? Did you think about it?

We’ve fed the media with positive feedback loops. Instead of challenging click bait headlines we click them. Instead of spending 30 minutes learning about a topic we comment on Facebook. Our brain doesn’t know the difference between reading a peer reviewed study and reading our crazy high school friend’s conspiracy theories on Facebook.

We are responsible for our fate. Developing an intelligent view of the world and opinions based on it is no one’s responsibility but our own. We can’t blame someone else for becoming morbidly obese and we can’t blame anyone else for political outcomes that damage our lives.

We cede control it when we click, share and read undistilled, biased marketing spin.

We must ask ourselves what kind of people we want to be. But first, check Facebook.