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What is Venture Capital? Venture capital is oftentimes a glorified funding option in Silicon Valley and the startup world. In short, it is a funding option that allows VC funds to buy equity in a startup. In turn, a startup is giving up a percentage of its ownership with the hopes of growing its valuation and creating a successful exit for everyone on the cap table. As put by the team at Investopedia, “Venture capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks, and any other financial institutions.” To better understand the topic, find out more about the types of venture capital funding, when it’s used, potential benefits and pitfalls, the origins, and what it’s like to work for a venture-backed business. Related resource: How to Get Into Venture Capital: A Beginner’s Guide Who is Involved in Venture Capital? To better understand venture capital, you need to understand the people and players involved. For a quick rundown check out the definitions below: VC Fund — As put by the team at Investopedia, “Venture capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks, and any other financial institutions.” General Partner — As put by the team at AngelList, “The general partner of a venture fund raises and allocates investor capital and supports the founders of the companies they invest in.” Limited Partners — As put by the team at VC Lab, “Limited Partners (LPs) are investors in your fund that provide capital. The most common types of LPs are high net worth individuals, pension funds, family offices, sovereign funds and insurance companies – just to name a few.” Let’s start with the entrepreneur or startup founder. If a founder is looking for capital for their business they might look to venture capital. As we mentioned above, venture capital is an equity funding option for startups. VC firms and funds invest in many companies (and the best ones are able to raise multiple funds). At the end of the day they are looking to create outsized returns for their investors. So who are their investors? Limited partners. LPs have limited control over the management of the VC fund. However, it is important to understand the LP <> GP/VC fund relationship to understand a VC fund’s motives. Limited partners are generally large investment firms that are investing across many asset groups — many of them public markets. As investing in VC funds is typically a small % of their overall portfolio, it is important for VC funds to generate returns in line or greater than the public assets in their portfolio. Because of this, VC funds will turn to founders and startups with the potential to create massive returns. Related Resource: Understanding Power Law Curves to Better Your Chances of Raising Venture Capital How Venture Capital Firms Work To best understand how a VC fund works you need to understand where they get their capital from and how they make money themselves. As we wrote in our Ultimate Guide to Fundraising, “In simplest terms, VCs go through a consistent life cycle that goes something like this: raise capital from LPs, generate returns through risky venture investments, generate returns in 10-12 years, and do it again.” At the start of a VCs lifecycle, they raise capital from limited partners (LPs). LPs are generally institutional investors (pension funds, endowment funds, family offices, etc.) that use venture capital funds to diversify their investments. From here, a VC deploys the capital they’ve raised from LPs into startups and other investments with the goal of generating returns for their LPs. Venture capital funds have traditionally been a very risky investment (with a huge upside) so LPs will generally only put a small percentage of their capital into venture funds. As Scott Kupor, Managing Partner at Andreessen Horowitz, mentioned in his book, Secrets of Sand Hill Road, “If you invested in the median returning VC firm, you would have tied up your money for a long time and have generated worse results than the same investment in Nasdaq or S&P 500.” 10-12 years after raising a fund, VCs are expected to generate returns for their LPs. If a fund manages to generate meaningful returns for their LPs they will raise another round and repeat the cycle. In fact, VC funds follow a power law curve — a small % of funds, generate a large % of returns. Internally, VC funds also follow a power-law curve — meaning a small % of their startup investments create a large % of their returns for LPs. This means that VC funds are in search of startups that have the opportunity to generate massive returns and “return the fund” to their LPs. As we wrote in our post on power-law curves, “This means that a small % of VC funds take home a large % of venture returns. VCs are constantly working to make their way into the “winning” part of the curve so they can continue to attract capital from limited partners. How does a VC fund become a “winner?” The best VC funds portfolio returns also follow a power-law curve. A small % of a VC fund’s investments will yield the majority of its returns. What does all of this mean for a founder?” Only a small percentage of funds create large returns, which means a majority fail. If a VC fund fails it means that its investments are also failing — or failing to generate the huge returns they need. Related resource: Understanding the Advantages and Disadvantages of Venture Capital for Startups Private Equity vs. Venture Capital Venture capital is technically a form of private equity. However, venture capital focuses on all equity and smaller investments that reward high-risk, high-reward scenarios. On the flip side, private equity firms are generally geared towards later stage companies that have a proven track record. Related Resource: Private Equity vs Venture Capital: Critical Differences Angel Investors vs. Venture Capitalists An angel investor is generally a wealthy individual who is looking to invest spare cash in an alternative investment. Unlike a VC, angel investors are not professionals nor do they have limited partners investing in them. Angel investors are typically more hands-off and can be a great source for introductions to other investors, customers, and others. Related Resource: How to Find Investors Types of Venture Capital Typical explanations of the types of venture capital divide it into three main groups, based on the business stage that needs funding. This list provides a brief explanation of these venture capital types and the various business stages that they may apply to: Related Reading: A Quick Overview on VC Fund Structure Early-stage This might include seed financing, Series A funding, etc. which is usually just a small amount of capital that will help the founders qualify for other loans. True startup financing provides enough capital to finish a service’s or product’s development. In contrast, startups might also get first-stage financing after they have finished development and need more funds to begin operating as full-scale business. For example, Crunchbase and newsletters are full of new VC deals being completed every day. You can check out Uber’s timeline of early-stage funding rounds here. Expansion This kind of venture capital helps smaller companies expand significantly. For instance, a thriving restaurant may decide it’s time to open more locations in nearby communities. Sometimes, it also comes in the form of a bridge loan for businesses that want to offer an IPO. For example, if you take a look at Uber’s timeline of investments you’ll notice they start raising massive rounds via private equity around 2015 as they gear up for an IPO. Acquisition Sometimes called buyout financing, this type of funding may help acquire other businesses or sometimes, just parts of them. For instance, some groups may use acquisition financing to buy into a particular product or concept, rather than using it for buying the entire company. Pros and Cons of Venture Funding for Startups and Small Businesses Pros of Venture Funding Venture funding comes with a number of advantages. One of the beauties of venture capital is the fact that a founder has to invest no capital of their own so they can grow at a rapid rate. No Personal Capital One of the biggest advantages of raising venture capital is that you do not have to use any of your personal capital. You can grow your company and valuation while deploying others’ capital. However, this does come with high expectations and responsibility. Investor Support As VC funds continue to innovate, the support they provide startups has continued to evolve. VC funds will help founders with anything from determining go-to-market motions to mental health to hiring & fundraising. Extensive Network The startup & VC world is a tightknit community. Many VC funds and their partners have extensive networks of other funds, founders, potential hires, and customers. Enhanced Growth VC funds allow companies to deploy millions of dollars in capital and grow at a quicker rate than they would with alternative venture funding options. Cons of Venture Funding Of course, on the flip side there are some disadvantages. While venture capital offers the opportunity to grow rapidly, it also has some downsides when it comes to ownership. Increased Dilution Raising venture capital means you are selling equity in your company. Because of this, founders will own a smaller percentage of their company. Convoluted Decision-Making Because of their diminished ownership, founders can potentially lose their ability to make decisions solely based on their needs and have to take into consideration the needs of their investors and partners. Long-Winded Time Commitment Fundraising can be an incredibly time-consuming and difficult process for many startup founders. It can take away a founder’s time from focusing on building or selling a product. If you’ve determined that venture capital may not be the best option for you there are always alternatives. Over the last few years, there has been an explosion of funding options that are founder-friendly. Check out some population options here. The Process of Getting Funded by a Venture Capital Firm At Visible we like to compare a venture capital fundraise to a B2B sales funnel. You are adding potential investors to the top of your funnel, taking meetings and nurturing them in the middle, and closing them, and onboarding them to your cap table at the bottom. Below are 6 high-level steps. If you’re interested in a more in-depth look check out our Ultimate Guide to Fundraising. Step 1: Determine if VC is Right for Your Business The first step to getting funded by a venture capital firm is to understand if venture capital is right for your business. This means that you believe you can grow at a rapid clip and generate massive returns for a VC fund to return to their LPs. Before setting out to build a list of investors, we suggest picturing what your ideal investor looks like and building out a list from there. Over the course of a fundraise, we recommend building a list of 50+ investors. It is important to keep this in mind when building a list and founding routes for introductions. Learn more about why 50-100 investors in our post here. Step 2: Prepare Your Deck, Docs, and Metrics If you believe you have what it takes to raise venture capital you need to start putting the pieces in place to get started. Going into a fundraise, you should have docs (pitch deck, financials, cap table, etc.) and your core metrics ready to go. Learn more about preparing your pitch deck and other documents here. Step 3: Find Investors Once you have your documents in place it is time to start finding investors for your business. It is important to make sure that you find investors that are right for your business. The average VC + founder relationship is 8-10 years so it is important to make sure you are starting a relationship with the right funds and person. Learn more about the ideal investor persona here. Step 4: Pitch Investors and Take Meetings Once you start reaching out to investors (cold outreach or warm introductions) you’ll start sitting meetings and have the opportunities to pitch investors. Check out our guide for meeting with and pitching investors here. If you find an investor who is ready to fund your business, awesome! You’ll move on to the following steps. For a more in-depth look at the next steps, check out our blog post here. Step 5: Due Diligence After a pitch, if an investor decides they want to move forward with an investment they will begin due diligence. You can expect an investor to audit your financials, survey your employees and customers, and deeper study the market. Great VCs will offer a checklist to help set expectations during the due diligence process. Over the course of due diligence, you will likely need to share a data room. Learn more about how you can build a data room with Visible below: Related Resource: What Should be in a Startup’s Data Room? Step 6: The Term Sheet If you make it past due diligence, you will be presented with a term sheet. If the terms look good, you are set! Learn more about navigating your term sheet here. Origins of Venture Capital In one way or another, forms of venture capital have probably financed innovations since people latched onto the idea of bartering. For instance, a plucky inventor may have come up with a better idea for a grindstone but lacked the resources to create it on his own. Another villager may have liked the idea, so he exchanged stone and labor for part ownership in the new and better-milled grain producer. Still, for much of the history of venture capital, investors favored loans over equity. In the past, investors lacked ways to gain good information about all the details of a business. Also, until fairly recently, the concept of limited liability did not exist as it does now. Investors feared that they may offer money to a company in exchange for part ownership. In exchange, they might get unpleasantly surprised by massive debts that the original founders had already piled up. As part-owners, they would also face partial responsibility for these loans. The concept of limited liability helped relieve some of these concerns and encourage more equity funding. It took until after WWII for the United States to develop a true private equity system. An investment of $70,000 in DEC in 1957 gained credit as one of the early success stories after that initial funding grew to $35 million by the IPO in 1968. The Great Recession changed the nature of venture capitalists to some degree. Most lately, venture capital groups have focused more upon offering other value, besides just funding, to the small businesses or startups they want to help fund. As mentioned above, part of the deal may include business expertise, facilities, and other helpful assets beyond money. Thus, many venture capitalists look for startups or small businesses that they understand how to fix or help, beyond those that just need investments. Working for a Venture-Backed Company How is working for a venture-backed company different from working within an established corporation? As we noted in our guide to Startup Culture, working for a startup can offer employees many of the same benefits that investing in one provides venture capital providers. Of course, employees may not initially enjoy the large salaries and perks that a large and established corporation can provide. A few perks of working at a venture-backed company over a large corporation: Ownership — the ability to own projects and individual metrics that move the company forward. Collaboration — have the opportunity to work cross-functionally with other teams and individuals Growth — quickly advance and grow your skills as the company grows. Because the company is small, employees may need to wear multiple hats, and some employees enjoy the challenge and chance to explore various facets of their company. In lieu of the highest salaries or best retirement plan, some startups also offer flexible schedules and other soft benefits that might also appeal to some very good employees. Working for a venture-backed company offers some challenges over taking a job with an established firm; however, the right startup or small business can also promise great rewards. Find out if VC is right for your company with Visible Understanding how venture capital works is an important step to determining if venture capital is right for your business. If you believe venture capital is right for your business, let us help. Find investors using Visible Connect, our free investor database, to kick off your fundraise.

In the opening episode of Season 2 of the Powderkeg podcast, Mike Preuss, our CEO, and David Hall of Rise of Rest discuss fundraising between the coasts and how startups can leverage stakeholder reporting to power their business. In this episode with David Hall and Mike Preuss, you’ll learn: Key similarities and differences between non-coastal tech hubs (9:17). An experienced investor’s high-level work and life advice for entrepreneurs (15:46). The benefits that thorough stakeholder reporting can provide for every startup (22:51). How to build a talented team and loyal customer base between the coasts (33:38). Proven strategies for nurturing healthy founder-investor relationships(37:33). How founders and investors should approach fundraising in non-coastal cities(49:16). Give it a listen below or using this link. Enjoy!

With Q3 coming to an end, it is easy to lose focus on your board and become tangled up closing deals, hitting numbers, and pushing product updates. While you’re likely weeks away from your quarterly board meeting, it is never too early to have a game plan in place. Preparing for your board meeting now will take some stress off your shoulders as you make the final push to finish the quarter strong. If planned appropriately, board meetings can be a powerful resource for both you and your investors to discuss important topics and keep your business on track for a strong fourth quarter and beyond. We’ve scoured our own notes, blog posts, and other resources to compile our favorite quotes, lessons, and tips for running a successful board meeting: Preparing for the Board Meeting You’ll find that almost every investor will point to preparation being the biggest factor in running a successful board meeting. Different investors will point to different materials, metrics, and discussion points to share in advance, but it ultimately boils down to sharing relevant data and information so your meeting can be a discussion as opposed to an “update session.” “The board deck should be sent out three or four days in advance and it should include all the important financial and operational results for the Board to consume in advance of the meeting. It should also tee up the big discussion items so that the Board can start to think about them in advance of the meeting. The Board does not need to go through a line by line review of the financial and operational results in the meeting.” – Fred Wilson, Union Square Ventures While sharing your board deck and financials in advance are important, make sure it is the correct and relevant information: “It’s really annoying to receive a monthly update or attend a board meeting and realize that the set of information and/or data isn’t relevant, accurate and mastered. No discussions should start before the entrepreneurs fixes this. It is just fruitless otherwise.” – Jean de la Brochechard, Kima Ventures Simply sending over your board packet will not be enough either. It is on you to follow-up with the board members and make sure they’ve reviewed the info and will be ready to discuss come your board meeting. Some investors suggest setting aside 1-on-1 meetings to get their advice on setting discussion points as well: “Soliciting your board member’s input on your agenda is important. But it is also really helpful to have these “one on ones” in advance of the meeting so you can update each board member on the things that they are concerned about. The board members will arrive at the meeting more prepared, they will be more comfortable, and they will also be able to help more.” – Fred Wilson, Union Square Ventures Related Resource: How to Create a Board Deck (with Template) Running the Board Meeting If you’ve properly prepared for your meeting, there should be minimal stress when it comes time to run it. It can be an incredibly valuable discussion for determining the next steps for your business and burying any issues that may be on your mind. There are endless “best practices” for running your meeting, but we have found the one below by Mark Suster to be one of the most practical: “With the limited time you have together as a group, I’d want the following ratio of time spent Provide information / context (15%) Discuss, debate and potentially reach decisions on the most important topics (70%) Deal with company admin: 409a valuations, approve stock options, vote on key measures (15%)” As a founder you’ll know the finer details of your business infinitely better than your board, so your best chances at getting the most from your board are leveraging their “helicopter view” and experience to help break down strategic decisions. “A board is not a pitch session, you don’t have to brag or sell or whatever you think will make your presentation look great. It must be an honest and clear view of the past, present and targeted future. If things are ugly, show the blood, if things are running smoothly, address strategic matters. Do not make an appearance, do not run a show, be a CEO.” – Jean de la Brochechard, Kima Ventures Your investors are already invested in your business and its success. Share what is not working well, why certain metrics might be lagging, and how they can help. Investors have likely seen other portfolio companies in the same position and can draw on personal experience to help you through “the struggle.” As John Vrionis of Unusual VC puts it; “We are all in the boat together and the only way we can help is if we know what is working and what isn’t. Intellectual honesty and transparency about the facts of our reality greatly improve our chances of success.” Following up and Gathering Feedback Once your meeting is completed the work is not done. Chances are you won’t come to conclusions for all of your issues and its important to stay on top of the discussion and keep the board engaged. There are likely other portfolio companies fighting for your investors time to hash out plans and details from their meeting too. Stay in front of your board by sending a quick recap and personalized emails to any individuals that you need help from. “People go to so many board meetings and are so busy these days that they seldom remember what was discussed / agreed. This is coupled with the fact that lawyers now routinely advise you not to put any of the substantive discussion points in the legal meeting minutes. So you should produce the set of notes that are unofficial but cover the real valuable stuff you talked about.” – Mark Suster, Upfront Ventures Following up with a quick email and recap is a good place to start. As Zach Shulman of Cayuga Ventures puts it; “The goal of the post-board meeting email is to make sure that everyone is on the same page. This is really helpful for the entire board team, including of course the CEO…The post-board meeting email should also appropriately address any issues surfaced in the final executive session as well. This is a way of reporting back to the CEO. Sometimes it is not appropriate to address all issues in this group email, particularly on points that are critical of the CEO and thus often handled one on one.” Different VCs will likely give you different feedback when it comes to structuring and running your board meeting. At the end of the day, a successful board meeting comes down to being transparent and sharing the proper information in advance. To help take a load off your shoulders, check out our board meeting packet template to keep your board in the loop before your Q3 meeting.

You just raised a round. You have the check in hand. Hiring and product updates are moving along. Now what? While bringing on a new set of investors is exciting for your business, there are critical steps to “onboarding” new investors to ensure all parties are getting the most of the new partnership. Ideally, you selected your new investors strategically and did your own due diligence through the fundraising process. As Faisal Hoque puts it, “Funding can actually kill your venture, especially when there is a major disconnect between you and your investor”. Even if you’ve chosen the right funders, it is vital to your investor relations to establish a communication strategy, build a data distribution system, and set expectations and goals. Develop a roadmap & expectations Hopefully, expectations and goals were set during the fundraising process from both sides of the table. Your expectation will likely evolve over time as your relationships and your company continue to grow. However, it is still vital to lay out any expectations, by both parties, once the check is signed. Bringing on a new VC means bringing on a new business partner. It is essential to have a clearly communicated set of goals that your investors are bought in on. Having stakeholders with different ambitions and expectations can lead to underutilizing their time, network, and experience. Clement Vouillon of Point Nine Capital offers a good starting point in the questions below: “There is no right or wrong here, but by thinking about what you need, it will be easier for you and your investors to get aligned: Do you need a “hands-on” type of relationship? Or you want to keep it very light? Are you aware of “weaknesses” in your founding team that could be filled by your investors knowledge (education) or network (hiring) Do you need industry specific knowledge or specific value add that your investors offer?” Define Metrics For an early stage company, you will most likely need to set what metrics you are tracking and distributing. The most important thing here is sharing your metrics/data on a recurring basis and allowing your investors to “connect the dots.” What metrics you are tracking will depend on your business, market, vertical, etc. If you’re looking for a place to start, we suggest the “16 Startup Metrics” from a16z and “How to Steal the Right Growth Metrics for Your Startup.” “Ultimately, though, good metrics aren’t about raising money from VCs — they’re about running the business in a way where founders know how and why certain things are working (or not) … and can address or adjust accordingly.” – the team at a16z Data Distribution and Communication Organization is key when it comes to managing your investor relations. After you raise your round, one of the first questions you should ask is, “how am I going to communicate and interact with my investors?”. While building a rapport is ultimately dictated by the stakeholders involved, we generally find the following structure to be most popular and work for many founders and VCs: Board Meetings Chances are, this will be the main line of communication you have with your investors and board members. There are countless resources, templates, and guidelines for running a board meeting but we suggest checking out “How to Make Board Meetings Suck Less” if you’re looking for a place to start. Monthly Updates “The most effective CEOs that I’ve observed send regular, short, board update emails every few weeks or monthly just to give the board a sense of what is going on. Of course it’s not required and many don’t do it. But I find that the more informed your board is and the more you’re staying on their radar screen the more effective they’ll be for you.” – Mark Suster While the internet is flooded with content and resources for “investor reports” many founders still don’t do it. To make the most of your new investors and board members, turn your monthly updates into a habit and slowly tailor the format, content, and frequency to the likings of all parties. Check out this example of a monthly report to get the ball rolling. Conference Calls These are best used to supplement a monthly email or update. Instead of exchanging emails back and forth, quickly jump on a call to go over financials, product updates, roadmap, etc. Be sure to set a clear agenda so you don’t lose control over your meeting. One-on-one Calls/Meetings All of your investors will bring a different set of skills and resources to the table. If you have a specific asks for hiring, intros, strategy, etc. don’t be afraid to tap into your investor’s network and hop on a one-on-one call. An engaged investor can be key to taking your business to the next level. By developing a cadence with your investors you can easily tap into their network to help with hiring, fundraising, and closing deals. Want to start your investor relations off on the right foot? Sign-up for a free Visible trial here to make the most of your new partnership. Search for your next investor with Visible Connect:

Investors are more than a source of capital. They have experience, advice, and networks you can leverage. It’s normal to feel intimidated by the people who just handed over a check, but it is vital for both parties that you tap into their knowledge to build a strong business. As soon as you take on capital, you are expected to work toward generating returns for your investors. On the flip side, an engaged investor can add value to your business in order to help generate those returns. That said, you are likely not their only investment, so you need to show them you value their time by only asking important, specific questions. When asked about the most important section of his investor updates, R.J. Talyor, Founder & CEO of Pattern89, said “In the Visible Update template I use, there’s a specific section named ‘Where I need help,’ where I list the 2-3 places that Quantifi needs new thought/idea/feedback on what we might do next. I always get responses from this section—introductions to potential customers, books/resources I should consider, or a quick phone call to talk through the area I’ve outlined.” So what’s appropriate to ask your investors? And how do you do it? You’ll find most asks go back to their experience and network. How to Ask Investors to Help With Closing Deals At its core, building a VC-backed business is about generating revenue. The biggest value add for a business? Closing more deals. Your investors are in the “deal-making” business and likely have a knack for closing deals. Use your investors professional networks to make an intro, set a meeting, or bring in the necessary backup to close a large deal. If you see your investor has a specific connection you’re looking for, don’t beat around the bush. Ask the investor for the exact intro you’re looking for and tell them how they can be of most value. Don’t make the mistake of asking for help on a deal once it’s too late. As Paul Arnold from Switch Ventures, puts it, “A surprising number of founders only want to update investors once they’ve closed deals. They worry that they’ll look bad or weak or behind if they share leads that don’t convert. This is a bad approach. Your investors have the experience to know that not all leads will end in a deal”. How to Ask Investors to Help With Hiring Attracting talent is one of—if not the—most important resources businesses compete for on a daily basis. Using your investor network is a great place to start when searching for a new role. While they are often best suited to help fill senior positions, be sure to ask your investors for help when recruiting for any open position. Be sure to specific as possible about the role, as well as items like the experience level required, and target compensation,to make it low-maintenance for your investors. If you have a larger firm backing you, theres a chance they have an internal talent pool from which to pull qualified candidates. How to Ask Investors to Help with Fundraising Investors know other investors. Even if your investors are not interested in committing follow-on capital, they may be able to introduce you to other investors they know. Just as you should with making hiring and deal ask be sure to be as specific as possible, even giving your investors the name of the firm and partner you’d like to meet when possible. If you’re struggling to find specific investors, it is okay to ask if they know anyone in their network that might be a good fit. Whether asking for help to close deals, hire, or fundraise, your best bet when going to investors for help is to communicate clearly and often. Speaking up only when you need help isn’t likely to get you the results you’re looking for. Remember to reverse the relationship, too—help promote an event, send deal flow, and help other companies in your investors’ portfolios. Lastly, don’t forget to publicly thank your investors when they go above and beyond. Leveraging your investors is low-hanging fruit for moving the needle. Don’t leave your investors in the dark; send regular updates so you can make the most of your partnership.

A post by Brock Benefiel. Brock is a Digital Marketing Consultant, Tech Writer, and Author of the upcoming book Flyover Startups. Recent high-profile tech controversies have put ethics under the microscope. What role do investors play in a company’s values and how do you fill your boardroom with people on your side? As a founder, you own the values of your business. You may not own all the shares of the company but the ethics and guidelines that govern your startup will always be your responsibility. You’ve got to protect what you’ve created so it’s necessary to do what you can to assert your control. This can cause some real headaches if you’re forced to grapple ethical dilemmas with difficult investors. Founders may find themselves with financial backers that are eager to buy-in to a company for its products or services but later seem easy to dismiss your values. That’s a problem. A founder serves as the ultimate arbiter between the needs of the customers, employees, executive team and the board. The moral framework they construct for guiding their business is often a valuable structure for producing the best possible company to serve everyone’s needs. On the hand, if they are tempted to make unreasonable short-term ethical concessions for a quick surge that sacrifice a long-term vision for growth, everyone is vulnerable to lose in the end. There is real pressure on founders to be unethical “Startups are desperate,” Sean Ellis, CEO of collaboration software startup GrowthHackers, told Fortune. “[Mature] companies aren’t going to die if they don’t figure out how to accelerate growth. Most startups will die, and when you’re desperate, you’ll do stupid things.” There’s no shortage of news (see Theranos, Zenefits, Hampton Creek) of young companies fudging numbers, falsifying product details and generally doing stupid things. Reputations have been wrecked, businesses cratered and the opportunity to accomplish great change have been squandered by these shortsighted snafus. But any venture requires even honest tech founders to be irrationally ambitious. Getting investors to dole out money now requires convincing them to buy into a future founders can never be sure will ever exist. Then those checks cash and the pressure to show growth quickly and turn that vision into something tangible soon intensifies. But real, sustainable growth is hard and cutting corners can be easy and attractive – especially when the stakes are high. If you’re a founder that lacks a rigid moral framework for how you conduct business, you’re likely to choose the initial path of least resistance that gets your startup moving quickly. It’s also the course that can later lead you to hitting the wall and going down in flames. Venture capital dollars don’t optimize for ethics either VCs face pressure too. They need at least one massive hit out of their profile and have less time for your business and if you’re unlikely to earn it for them. Founders often expect their investors to also serve as mentors. But if your backers are picking up a pen, it’s to write a check not draft your company’s value statement. This quote from Fred Destin nails the limits of venture capital as a moral authority for your startup: “Venture capital as a funding product is not immoral as much as it is amoral — it rushes in to leverage any opportunity that arises,” Destin wrote recently in Medium. “The individual themselves are mostly (in my experience) of high integrity and have a clear moral compass, but I don’t think many venture partnerships stop to think : “why are we funding this team and can we embrace the mission of this company.” Let’s face it: the focus of VCs is fetching a 10x return on their investment. Anything else is a bonus for founders. Set expectations early But investors should be asking the “why” questions of your business. It’s remarkably short-sighted to sign a term-sheet and shell funds into a company without a clear understanding of what the company values. You can’t control what they choose to ignore. But you do command their attention in pitch meetings and you can emphasize from the jump how your ethics will guide your business. “You need to be upfront about your values,” Brad Burnham of Union Square Ventures said about founders. “You need to implement your values in your system.” State it explicitly and explain to investors exactly what they are signing on to beyond the term sheet. Then, if problems arise later, you’ve already set the precedent and make the investors choose to be the problem. The burden will be on them to explain to you and the rest of the board why they’ve done it. You offer a lot upfront – so ask a lot upfront Pitching investors is a trust exercise all of its own. You’re almost always sharing proprietary information in an investment deck and almost never securing a NDA to prevent potential VC vultures from flying away with your secrets. If you’re willing to easily hand over precious data points and secret product information, you’ve earned the right to demand investors take your code of ethics seriously. Investors have expectations of you too Younger CEOs and first-time founders are especially vulnerable to an extra bit of skittishness to appear disruptive or cause unnecessary board drama. You’re entering a boardroom with investors that have likely worked with multiple founders and you might even outnumbered by VCs in the room. Address concerns that may not immediately impact growth in front of a group focused on earning a return can be awkward. But it’s good and fair to establish early that you have expectations of your investors, especially when they’ll certainly have expectations of you. Ask investors for their code of ethics Same as founders, good VCs consider the culture they want to create within their firm and consider how it guides their decision to invest. Some have even argued for a kind of Hippocratic Oath for VCs to take. An investor who hasn’t already spent time weighing moral decisions and etching out an ethical framework for acceptable and unacceptable practices will be surprised when challenged by founders down the road. Same as founders, it’ll be hard to expect a move toward the moral decision over the quick growth compromise. Ask your investors upfront for their guidelines. In absence of something written, ask them direct questions about why they pick the startups they do and what they value. They might not be prepared to deliver long, well-considered answers. But even that can reveal a lot. So you’ve vetted investors well and delivered your point-of-view upfront, but yet problems still arise. What do you do? Keep the board behind you VCs are human too and when the pressure is on, can be vulnerable to advocate for unethical shortcuts. You’ll have to address it with the individual causing the problem immediately – part of good investor communication is telling VCs when they are wrong. If you reach an impasse with the troublesome investor, you’ve got a problem that needs to be solved with the entire board involved. If you feel your company is about to behave unethically, it’s time to rally the other investors (and the votes) behind you and pressure the problematic VC to back down. Do it out in the open in board meetings or do it behind closed doors. Honestly, it doesn’t matter if you’re airing the issues out in front of everyone or pressing VCs for loyalty pledges in one-on-ones. Investors are there to have your back and if they don’t back you on these conflicts, they are skirting their duty. Implicit pressure can be unethical An investor might act unethically by asking you to engage in a task or behavior that you deem unethical. But your board can also be guilty of implicit abuse of your code of conduct. You can’t acquire new customers, boost revenue growth or makeover your product offering at the expense of your company guidelines. You don’t want to deploy shady tactics to show artificial sales spikes or to fudge timelines of when enterprise features will be implemented just to win now. However, if you don’t have a group of investors that respects the limitations of your current growth or brings sound solutions to the table that empower you to step beyond your boundaries, you have a group of people who unnecessarily pressuring the person in charge. That might not be as sinister as suggesting immoral actions, but it can lead a founder down the wrong path all the same. You don’t want these people as your advisors. So, to return to the question asked up top, do you need investors to match your values? Yes – at least as it relates to the core tenants of your business. It’s not that complicated. Keep it clear early what you value and why it matters. And if it gets complicated, keep it simple with your current investors (at least the ones that will get it) to ensure everyone stays on the same page.

QuickBooks Report Template In the words of Tomasz Tunguz, Partner at Redpoint Ventures, “Financial statements are the Rosetta Stone for a business. They are the most succinct way of communicating how a business operates to management teams and boards, who weigh the trade-offs of different investments”. Distributing your financials to your team, investors, and board is vital to staying on top of your operations and uncovers insights for bringing a new product or service to market. Using our Quickbooks data source, we put together an Update template that will allow you to easily visualize and distribute your key financial and operational data. Currently, our Quickbooks integration allows you to pull in the following metrics: Cash Customers Employees Expenses Months Runway Net Change in Cash Net Income Payables Receivables Revenue Check Out the Template Here >>> When sending a financial and operational Update it is important to make sure the information is understandable, relevant, reliable, and comparable. Many team members, investors, etc. are likely not concerned about granular data points but rather that they are moving in the right direction and are efficient as possible. Instead of overwhelming stakeholders with spreadsheets and complicated metrics, we’ve often found that it is most useful to send over a few charts with a quick narrative around what is working/not working/etc. For those looking to take it to the next level, it can be useful to include benchmarks and trends in the industry to show how certain metrics and financials are comparing to the industry as whole. The template is broken down into 3 major components; Operational Overview, Expense Overview, and Other Notes. Keep in mind the financials you are tracking and sharing may change depending on the stage of your company; revenue is obviously not as important for a pre-revenue, early stage company. For our example, this includes revenue, cash position, and a high-level look at company expenses.

The Race to a Trillion Dollar Market Cap Between the unofficial race to the first one trillion dollar company and the recent acquisition of GitHub we decided it would be an interesting time to look at Microsoft’s most recent shareholder letter. Recently passing Google’s market cap for the first time in 3 years their acquisitions and focus on “the cloud” (doesn’t hurt to purchase the company behind the largest repository of open source software) have proved to be a large factor in their push to $1T. All of the charts, images, quotes, and emphasis below were added by us. Note: there may be removed sections of portions of the letter below. You can find the original 2017 Microsoft Shareholder Letter here. PROGRESS AND OUR RESULTS We delivered $90.0 billion in revenue and $22.3 billion in operating income this past fiscal year. Adjusting for Windows 10 revenue deferrals and restructuring expenses, revenue was $96.7 billion with $29.3 billion in operating income. According to Morgan Stanley analyst, Microsoft will need to grow their revenue by 46% to $136B and net income to $46B to reach the trillion dollar threshold by 2020. We continued to invest in innovation and expand our market opportunities, while maintaining our commitment to shareholder return, which included total cash return of $22.3 billion this year. Our commercial cloud annualized revenue run rate ended the year exceeding $18.9 billion, up more than 56 percent year-over-year. Our cloud growth puts us squarely on track to reach the goal we set a little over two years ago of $20 billion in commercial cloud annualized revenue run rate in fiscal 2018. “With Public Cloud adoption expected to grow from 21% of workloads today to 44% in the next three years, Microsoft looks poised to maintain a dominant position in a public cloud market we expect to more than double in size to (more than) $250 billion dollars.” – Morgan Stanley Analyst Microsoft is doubling down on their cloud efforts and are expecting for strong growth with corporate usage for Office 365 and Azure. The strength of our results across our reporting segments reflects our accelerating innovation as well as increased customer usage and engagement across our businesses More than 100 million people use Office 365 commercial. More than 27 million consumers use Office 365 Home & Personal across devices. More than 53 million members are active on Xbox Live. More than 500 million LinkedIn members use the LinkedIn network. Windows 10 is active on more than 500 million devices around the world. Dynamics 365 customers grew more than 40 percent year-over-year. Azure compute usage more than doubled year-over-year. As of June 14, 2018 the market cap for each company is… Microsoft – $783B Apple – $946B Amazon – $832 Google – $806B LOOKING FORWARD: OUR EXPANSIVE OPPORTUNITY A new technology paradigm As you can begin to see in the examples above, a new technology paradigm is emerging, one with an intelligent cloud and an intelligent edge. Microsoft will lead this new era. There are three characteristics that define this shift. The first is that the experience layer is becoming multidevice and multisense, where a person’s experience with technology will span a multitude of devices and become increasingly more natural and multisensory with voice, ink, gestures and gaze interactions. Second, artificial intelligence (AI) will be pervasive across devices, apps and infrastructure to drive insights and act on your behalf. Third, computing will be more distributed than ever before with compute power at the edge, whether it’s the connected car, the connected factory floor or any connected device. As developers write new applications for this paradigm, they need new mechanisms to manage the complexity of distributed, event-driven computing. Microsoft made a big splash with their recent $7.5B acquisition of GitHub. The acquisition stays in line with Satya Nadella’s focus on the cloud and open source projects. GitHub has already had a large presence in enterprise sales with GitHub enterprise and will be able to tap into Microsoft’s massive enterprise customer base. With the continued growth of public cloud usage Microsoft is looking to grow their strong position in the space. With this new paradigm comes new opportunity. Every customer is looking for both innovative technology to drive new growth and a strategic partner that can help them build their own digital capability. Customers are looking to change how they use digital technology and to reimagine how they empower their employees, engage customers, optimize their operations, and change the very core of their products and services. They are building their own digital systems of intelligence to drive growth. Microsoft is uniquely positioned to capitalize on this opportunity with the combination of our technology, partner ecosystem and culture of growth mindset. As we look ahead to fiscal 2018 and beyond, we will focus on bringing our technology and products together into experiences and solutions that deliver new value for our customers. Going forward, we will focus our innovation and investments in areas where we see the greatest opportunity for growth. The modern workplace The workplace itself is transforming — from changing employee expectations, a widening skills gap, more diverse and globally distributed teams, to an increasingly complex threat environment. The productivity experiences and tools we deliver will unlock the creator in all of us and enable seamless teamwork not just in the workplace, but also at school and at home across all the devices people use — from the phone to the laptop to mixed-reality headsets to the whiteboard. The Microsoft Graph, which provides the underlying data model of the user’s experience, and the LinkedIn network, will make it possible for every professional in any business or functional role to be much more productive in getting things done. Enter Office 365, Windows 10, and LinkedIn. Office 365 currently has 100 million users and is expected to double to 200 million by 2020 on top of LinkedIns already 500m users. Applications and infrastructure Cloud computing is foundational to enabling digital transformation for any organization. Beyond being a trusted, global, hyper-scale cloud, what makes Azure unique is our hybrid consistency, developer productivity and SaaS application integration. Our hybrid infrastructure consistency spans identity, data, compute, management and security, helping to support the real-world needs and evolving regulatory requirements of commercial customers and enterprise-focused SaaS ISVs. Azure Stack is an extension of Azure that enables developers to build and deploy applications the same way whether they run on the intelligent cloud or the intelligent edge. With Visual Studio and Azure Services, we provide the toolchain and application platform for modern DevOps that helps organizations with their agility and productivity — and enable them to use the best of the Windows ecosystem and the best of the Linux ecosystem together. Azure enables SaaS ISV developers to reach 100 million plus enterprise users through the integration of Azure Active Directory and Office 365, and by embedding Power BI, Power Apps and Flow as part of their applications, enables customers to have consistent identity, developer extensibility and security across their application portfolio spanning their own custom applications and SaaS applications. Microsoft has doubled down on their cloud investment and are going after Amazon and Google’s cloud services as the market continues to grow. While AWS still has a commanding percentage of the enterprise cloud market Azure has been rapidly chipping away at Amazon’s lead. Azure went from 34% to 45% of the market while AWS still grew from 57% to 64%. The data above comes from a survey by TechRepublic of 1000 technical professionals. Gaming The $100 billion plus gaming industry is experiencing massive growth and transformation, and we have an expansive opportunity as we think about gaming end-to-end — from the way games are created and distributed to how they are played and viewed. We will build on our strong foundation of connected gaming assets across PC, console, mobile and work to grow and engage the 53 million strong Xbox Live member network more deeply and frequently — from great game experiences to streaming to social to mixed reality. We will be the company for gamers to play the games they want, with the people they want, on the devices they want. I’m excited about our opportunity to accelerate our growth opportunity, innovate boldly and earn new fans. Microsoft has been on an acquisition spree in the gaming market. On June 10, Microsoft announced the acquisition of 4 game studios as they continue to innovate and grow their gaming business. Microsoft’s continued investment in Xbox, AI, and live streaming video games have the opportunity to be a large part of their Azure Cloud business.

Howard Schultz recently announced that he will be stepping down as executive chairman of Starbucks; exactly 26 years after their initial public offering. In 26 years as a public company, Howard helped transform Starbucks from a small coffee chain into a global brand with over 27,000 locations. In our newest investor letter, we can take a look at the 1992 Starbucks Shareholder Letter; their first as a publicly traded company. With no mentions of mobile ordering, international expansion, or Unicorn Frappuccinos it is remarkable to see the growth that Starbucks experienced with Howard Schultz at the helm. Expanding from 154 to 27,000+ locations two things have stayed true throughout; Starbuck’s commitment to their people and their coffee. All of the charts, images, quotes, and emphasis below were added by us. You can find the original 1992 Starbucks Shareholder Letter here. The 1992 Starbucks Shareholder Letter TO OUR SHAREHOLDERS: Every successful business has its competitive advantage. At Starbucks we have two: Our coffee and our people. Since our inception in 1971, Starbucks has been based on an unrelenting (some would say fanatical) devotion to providing its customers with the best possible cup of coffee. In Howard’s last shareholder letter (2016) this still rings true. Starbucks has continued to double down on enhancing the lives of their “partners” and the communities where they live and work. One indicator of this passionate commitment is the question we ask ourselves whenever we assess our efforts: are they as good as the coffee? Our retail stores are intended to be environments worthy of housing the finest coffees which nature and skilled human labor can provide. Dedication to quality, in the cup, is what Starbucks is all about. At the time of their IPO Starbucks was doing ~100,000 transactions at their retail stores a week. As of 2016? 85M+ transactions a week across their retail stores. In addition to their focus on people, Starbucks has scaled their transactions while staying true to their focus on quality coffee. Below is an excerpt from Howard’s letter to partners announcing his departure: “Sourcing and roasting the highest quality arabica coffee will always be our heritage. Never stop reaffirming Starbucks leadership position in all things coffee. I can think of no better expression of this than our Reserve stores.” A look inside the experimental Starbucks Reserve in Chicago. Many of the specifics that make our company seem unique to others are, to our way of thinking, simply natural, even inevitable, consequences of this core attitude and aspiration. Quality coffees are grown, roasted, brewed, by quality people, and the welfare of the people, the planet and product are inextricably linked. Our “employees” are called partners, and this is literally true, since every individual is offered stock options. We seek to seamlessly interweave variables that ensure quality for the customer with literal ownership in the company. We want to be the employer of choice in each market in which we do business. In order to achieve this goal we pay fairly, provide benefits to all whether part-time or full-time, and encourage individuality and open communication. Our environmental commitment begins with recycling and conserving wherever possible. We donate coffee locally in every market, providing homeless shelters and hospices better coffee for free than many of our competitors offer at full price. We are also entering our second year as the West Coast’s largest corporate donor to CARE, the international aid and development organization. Starbucks, together with its customers, funds CARE programs in the coffee producing countries of Indonesia, Kenya and Guatemala, with an emphasis on disease prevention and increased literacy for children. This year has been an exceptionally rewarding one. We achieved sales of $93,078,000 which were up 61.5% from 1991. We opened 53 new stores, including ones in our newest markets of San Diego, San Francisco and Denver. To no surprise, Starbucks has not been able to sustain their growth rate after raising $25M+ from their IPO but have continued to grow store locations at a steady rate. In 2017 more brick-and-mortar stores closed since the start of the “Great Recession” (2007), yet Starbucks added 2,250 net new store locations over the course of the year. The commitment to their people, coffee, and culture has continued to resonate with customers around the world. Also, we earned $4,104,000 after tax which represented a 70.4% increases versus a year ago. Lastly, Starbucks’ entrance into the world of publicly-owned companies this June was profoundly significant, both within the company and for the specialty coffee industry as a whole. It is an affirmation of our leadership position, but it is first and foremost a powerful demonstration of what can result from the joining together of great people and great coffee. Howard Schultz chairman, president, and chief executive officer

Just a few days away from the 16th anniversary of the Netflix IPO we decided to take a look at the initial investor letter and market sentiment from May 2002. Merely a DVD rental subscription at the time Reed Hastings briefly mentions online streaming and fails to mention creating original content. At the time a “niche business“, Netflix has transformed into a media giant and one of the more intriguing technology companies of our era. Fast forward to 2018 and the only way I know how to watch a DVD is in a friend’s 2003 Honda Odyssey. Or better yet, I can just pull up the Netflix app on my phone and start streaming Stranger Things, Narcos, or one of their other original productions. All of the charts, images, quotes, and emphasis below were added by us. You can find the original 2002 letter from Netflix CEO, Reed Hastings, using this link. The 2002 Netflix IPO Letter to Investors I’m pleased to report to you that 2002 was a truly remarkable year for Netflix. In this, our first year as a public company, we met or exceeded all of the financial and operational goals we had set for ourselves 12 months earlier. During a time of continuing uncertainty in the technology and financial markets, we were one of only eight technology companies to successfully complete an initial public offering in 2002. And in each of our three subsequent reporting periods as a public company, we outperformed investor expectations for key financial metrics, including revenues, expenses, EBITDA, and free cash flow. In this climate, the strength of our business model has been resoundingly validated by consumers who, in ever increasing numbers, have found significant enjoyment and value in our online movie rental service. In this letter, I will explain to you how this model works, why it is working so well, and why we believe it will ultimately change the way people experience and enjoy watching movies at home. First, I’d like to share with you a few highlights from our past year. THE PERFORMANCE OF THE YEAR. During 2002, we experienced the kind of rapid growth that many technology companies promised just a few short years ago but few delivered. In 2002, we doubled our revenue to $152.8 million, from $75.9 million in 2001. We ended the year with approximately 857,000 total subscribers (more than 1 million as of this writing), up 88 percent over the previous year. With positive free cash flow of $15.8 million for 2002 and $104 million of cash and short term investments, we have, and intend to maintain, an extremely strong balance sheet. Clearly, we are pleased with the results of the past 12 months. In addition to our strong financial performance, our accomplishments also included surpassing, in our first major metropolitan target market of San Francisco, our nationwide goal of 5 percent household penetration. Since 2002, Netflix has thwarted their expectations of 5% household penetration. As of January 2018, Netflix has made its way into 50%+ of U.S. households with broadband access. We remain opportunistic in looking for ways to improve our service and our operations. In 2002, we invested in 12 new distribution centers around the U.S., increasing the number of our subscribers who receive their DVDs with next-day service through the U.S. mail. Our marketing initiatives to acquire new subscribers through various channels including banner advertising, direct merchandising, and word-of-mouth remain highly successful. We will continue to evaluate the cost-effectiveness of new channels such as broadcast television as the number of DVD households continues to grow. Remarkably, Netflix still operates 17 distribution centers. A low from their 50+ they had in 2016. Netflix has continued to own marketing. Transitioning from banner ads and direct merchandising to impressive product (e.g. original content, personalized content, etc.), multi-channel, and email marketing. BUSINESS BASICS. Investors are right to ask why a company, regardless of how well it may be doing at present, believes its success will endure. At Netflix, we are encouraged by a number of market trends that indicate strong demand for our service in both the immediate and long-term future. For starters, consumers are becoming increasingly comfortable with the Internet. The widespread adoption of broadband technologies means a smoother web experience for more people across the U.S. In particular, people are coming to appreciate the more personalized recommendations that are enabled by software (compared to, for example, recommendations from video store clerks who may know nothing about their customers’ movie tastes) as well as the ease and security with which purchases may now be made online. Netflix has stayed true to this idea and continues to dominate competitors in algorithmic based content curation (more below). Second, as hardware improves and costs come down, the growth of DVD as the medium of choice for at-home movie entertainment is accelerating. We expect that household penetration of DVD, already the fastest-growing consumer electronics product in history, will climb from its approximately 40 million TV households currently to over 100 million in the next three years. As DVD ownership has become more mainstream, so has our subscriber base. In 1998 the demographic profile of our initial target subscriber was a classic early adopter: predominantly affluent, technologically-savvy, and male. Today, women make up more than half of our subscribers, while the household income of members joining today is roughly half that of subscribers who joined two years ago. MERCHANDISING MAGIC. The result of these trends is a market that we currently dominate with a highly visible brand presence. It is also a market that we believe will continue to mature, along with our Company. To ensure that we take advantage of this momentum, we are continually developing our understanding of how people browse and select movies. The key to our phenomenal consumer acceptance and business success is the sophisticated software that powers our website. Here, our subscribers are able to browse through 14,500 film titles—virtually every movie available on DVD, including both the latest and most popular TV series as well as hard-to-find documentaries—and place the ones they want to receive on a rental list that they continually replenish with new choices. In the past year we have significantly improved our ability to merchandise our titles to match the tastes of our subscribers. Beyond the richness of our inventory and the robustness of our distribution software lies what we believe is the true strength of the Netflix model: a proprietary system for personalizing movie recommendations for each subscriber via a remarkably powerful and innovative rating system. Instead of using someone else’s tastes to guide a subscriber’s choices, Netflix builds a profile of each person’s movie likes and dislikes to truly personalize a DVD recommendation. Evolution of the Netflix personalization approach “We want our recommendations to be accurate in that they are relevant to the tastes of our members, but they also need to be diverse so that we can address the spectrum of a member’s interests versus only focusing on one. We want to be able to highlight the depth in the catalog we have in those interests and also the breadth we have across other areas to help our members explore and even find new interests. We want our recommendations to be fresh and responsive to the actions a member takes, such as watching a show, adding to their list, or rating; but we also want some stability so that people are familiar with their homepage and can easily find videos they’ve been recommended in the recent past.” – From a 2015 Netflix Technology Blog Post The result is more often than not the movie-lover’s discovery of a personal “gem”: a movie that a subscriber has perhaps never even heard of and which may turn out to be a genuine favorite. This kind of match expands the audience for both acclaimed and lesser-known films—award winners that made their debut on DVD through Netflix and have gone on to find broad distribution, as well as smaller, low-profile movies from independent filmmakers and distributors. Subscribers rented fully 97 percent of the movie titles we carried in the fourth quarter of 2002. To help achieve such remarkably broad inventory utilization, we’ve added new areas on our website, such as the Critic’s Pick page and the Netflix Top 100 page, that make it easier for subscribers to discover interesting content. For customers who know what they want to watch, we’ve made the search function more intuitive, with better ranking of search results and more obvious results listings. And we’ve made it easier for subscribers to answer their questions and resolve problems online, which has reduced our service costs. LOOKING AHEAD. Our vision is to change the way people access and view the movies they love. To accomplish that, on a large scale, we have set a long-term goal to acquire 5 million subscribers in the U.S., or 5 percent of U.S. TV households over the next four to seven years. By then, we expect to generate $1 billion in revenue and $100 to $200 million in free cash flow. In the shorter term, a year from now, I expect to be able to report to you that we ended the year 2003 with 25 operational U.S. distribution hubs, initiated international expansion into Canada, and generated total revenue of more than $235 million. We are fortunate to have in place an extremely strong management team that has both the experience and the vision to propel the Company forward in what we believe will be a dynamic new market. As we continue to roll out and improve our service, we are optimistic that we have the potential for even greater gains ahead. The coming year promises to be an exciting one for Netflix, and we hope that you’ll be with us to enjoy the show. On behalf of the management team and dedicated staff at Netflix, I would like to thank you for your continued support over the past year, and I look forward to your continued participation as a member of the Netflix family. Sincerely, Reed Hastings – Chief Executive Officer, President, and Co-Founder

It’s no secret that startups are hard. Over the course of building a company it is inevitable that some quarters/months/years will not go as planned. The period of doubt that follows a down month can be a major setback for a startup. Paul Graham calls it “the trough of sorrow“. Ben Horowitz calls it “the struggle“. The good news; just about every founder has been in the same position and there are steps that can be taken to recover from a down period and carry on. Take a Step Back While it is easy to panic and make drastic changes after a down period it is vital that you take a step back and evaluate the issue. Jason Lemkin suggests starting by asking if it was a “hard miss” or a “soft miss”. A soft miss can still grow the business but you may have missed a stretch goal (e.g. Revenue grew by 25%, goal was 35%). A hard miss “is a sign something is amiss” (e.g. adding $500k in Q1 but only adding $200k in Q2). Lemkin suggests making small changes after a soft miss; rally the team, make small improvements, etc. Acknowledge you’ve missed your goal but ultimately you are still growing the business. When sharing the miss with your investors, be sure to be delicate when sharing the info. While it may have felt like a miss internally growing the business X% is still impressive. Get In Front of The Issue A “hard miss” sucks but it is not the end of the world. Get analytical, get into the weeds, identify the issue and come up with a plan to move forward. You have employees, customers, investors, etc. leaning on you so it is important to keep an even keel and create a plan everyone can rally behind to keep the company moving in the right direction. Most importantly, reach out for help if there are issues you can’t handle yourself. Don’t be afraid to share the details with your investors. The worst thing you can do is hide and fail to keep your key stakeholders in the mix. From your investors perspective, it is expected that you will have down periods and are there to help you through “the struggle”. Focus and Execute You’ve discovered the issue, you’ve got a game plan, everyone is aware and ready to move forward. Now what? The past quarter is in the books and it is time to focus on what lies ahead. As Ben Horowitz puts it you need to “focus on the road ahead“; “When they teach you how to drive a racecar, they tell you to focus on the road when you go around a turn. They tell you that because if you focus on the wall, then you will drive straight into the wall. If you focus on how you might fail, then you will fail. Even if you only have one bullet left in the gun and you have to hit the target, focus on the target. You might not hit it, but you definitely won’t hit if you focus on other things.” Stayed focused on bouncing back and make it a point for your key stakeholders. If revenue is down, chances are you are closer to your zero cash date and need to make sure this is accounted for. It is likely that you will need to re-forecast your cash and financial projections for the year as well. Share the new projections and make everyone aware of where the business stands after your miss. Over communicate if you have to. Make sure you do everything in your power to avoid back-to-back misses.

Business Storytelling Looking for a New Year’s Resolution? Keep reading! Storytelling in business has become a clear competitive advantage over the past decade. Customers, investors and talent have more choices than ever and are armed with more information than ever. Companies that can effectively tell their story will create emotional engagement with their stakeholders, cut through the noise and ultimately drive growth. In relation to fundraising, storytelling is a crucial component of driving interest and ultimately term sheets. This is especially true in the early stages as checks are written more on vision than traction. There are a lot of great resources for storytelling in relation to fundraising so check back for Part II next week for storytelling specifics. Today I wanted to focus on one often overlooked part of fundraising & storytelling and that is “connecting the dots”. Simply put, how do you create a cadence with potential investors and consistently drip information so that when you are fundraising trust is established and momentum can be created. As with my things in life, what you invest in is what you’ll get out. Fundraising is no different. Investing in stakeholder relationships early on and putting in the effort will pay dividends down the line. While fundraising is legally a “transaction” it is far from one to actually get there. (Sidenote: fundraising is a funny thing isn’t it? Investors tell you are fundraising 24/7/365 but they also tell you to tell investors you are not fundraising.) Seasoned investors won’t invest on their first interaction. They invest in lines & trends. They want as many data points as possible before make a decision. Afterall trends tell a story. Mark Suster penned this perfectly over 7 years ago in, “Invest in Lines, Not Dots”. “Most importantly tell them what you plan to achieve by the next time you see them. Hopefully by then you’ve made good progress. You’ll be able to give them an update on key hires, pilot customers, key tech innovations — whatever. Keep these interactions low-key and short. Quick coffees, whatever. Swing by their offices to make it easy for them to say yes and promise not to take up more than 30 minutes for the update (and stick to it).” Your interactions with stakeholders might look like this before you are officially fundraising: Each one of these dots represents an interaction and the chance to further tell your story. Over time you’ll build the trend and establish a rapport. You’ll be surprised how your entire fundraising process will change for the better. This doesn’t relate to just fundraising. It can be applied to key hires, potential acquirers and other key partners. Want to put your marketing hat on? Utilize Visible Updates + Lists to drip updates to potential investors in between your in-person interactions. Sign up here! Want to maximize your round competition and decrease decision marking time? Make sure to check out Part II. Up & To the right, Mike & The Visible Team

Digital Currency Group Monthly Update Template With the price of Bitcoin surging and digital currencies taking center stage on major news networks many companies in the space are having difficulties separating their growth with industry growth. Our friends at Digital Currency Group are one of leaders in the digital currency/blockchain space. Their portfolio of companies has accounted for an impressive 70% of industry funding to date. As the industry continues to grow the team at DCG put together an investor update template for their portfolio companies to use. With the appeal of blockchain/digital currencies at an all time high the template is aimed to allow founders to separate their success from that of the entire industry. At DCG, as investors and company builders, our skill is our ability to recognize patterns. Without clear data and insight, it’s very difficult for us to guide and support our companies. More importantly, the old adage, “top of mind, tip of tongue” certainly holds true. The more companies share with us, the more we are able to support them, and the more we can tell everyone in our network about the great things they’re building. – Meltem Demirors in “The Next Round: How to Build Growth Stories with Data” The DCG Template below is broken into 7 sections that give investors the information needed to help companies as much as possible. In addition to the 7 sections DCG offers 3 key points for sharing information with investors and stakeholders: Keep it simple and short – bullet points are easy to read Be extremely specific Include charts where you can Check out the DCG Template Here >>>

Techstars Investor Update Template In the “Minimum Viable Investor Update”, Jens Lapinski, Managing Director of Techstars METRO, lays out 3 items that he finds most useful in his portfolio company updates: Cash flow / P&L top line summary Major changes / developments Problems the CEO is struggling with and wants help on We created a Visible Update template based on the Techstars Investor Update so you can get necessary information to your investors in a quick and professionalize manor. Check Out the Template Here >>>

A Weekly Email Template for Marketing Leaders Marketing is one of the most measurable aspects of a business. With vast data points, it is important to hone in on what truly matters and rally your team behind those key metrics. This week, we have put together an Update template intended for marketers to “report up”. Whether that be a marketing representative to manager or manager to executive, our Marketing template is intended to be standardized across the team to keep everyone moving in the same direction. Key Metrics Keep in mind the metrics in the template are suggestions and can be tailored to your organization’s needs. Some of our favorite marketing metrics include Customer Lifetime Value, Customer Acquisition Cost (check out this video to use formulas to create CAC in Visible), and these 5 metrics for “reporting up”. TL;DR A quick recap of any major milestones, concerns, and figures from the last period. Always a good idea to piggyback off of any product updates, metrics, projects, concerns discussed at previous meetings/updates. Now Content and Campaigns Include a brief section of any campaigns, content, and emails published from the past week. The goal here is to keep everyone in the loop and ultimately lead to conversations and improvements. Funnel Review A funnel is a quick way for all parties to quickly digest your marketing conversions and inbound marketing efforts. The metrics used in a funnel can be customized to any business as well. Make note of any interesting leads or trends that have noticed over the previous period. Customer Stories Reflect on the past period and share any relevant quotes from customers; good and bad. What is going well? What is not working? Feedback to certain emails? etc.