Getting in Front People. There's the Beef

Getting Meaty

The Wharton Game

This week in class we did something quite interesting. We shifted focus away from our own ventures to do a bit of role playing. It turned out to be a pretty fun exercise! I was picked to be a founder of the company In The Game. All of the companies were a bit silly, and I thought it would be frustrating to pitch mine, but it turned out we were all more or less in the boat. The game started and it felt like a switch was flipped. People put on their hats and went for it. I immediately connected with Scott, who was an executive on the hunt for a company. Just what I needed. He was quite aggressive, pushing me on numbers which I had to make up on the spot. It was actually intense, but I got the hang of just making things up. Sometimes I had to take a stab at things and just hope they made sense. He wanted on the team but he wanted to be equal status in shares, essentially bumping himself up to co-founder. This was tough to swallow, but I had an underhanded mission: to not be the CEO (that's what I was told about my role). I read that as meaning I wanted the control out of my hands and to maximize my return. Scott was a bulldog and seemed eager to get out and attack the VCs, so he'd get better deals from investors than I would--that means I'd give up more shares up front for an employee to save shares from going to VCs later. It was a definite gamble, but I agreed and had his full buy-in and let him loose. In the end it worked--we ended up with two $500k investments, giving up a total of 8%. That means I gave up 40% of the company for $1m and got a CEO on a $60k salary. I would have liked more, but we spent too much time trying to get big amounts instead of cobbling together smaller investments.

Of course, this simulation isn't very much like reality. I do think, however, there's a lot of value in what we did. First, it's very revealing about personality and mindsets. For example, I got a bit steamrolled by Scott, and the negotiation felt very real. But then I turned it to my advantage. What does that say about my style? Sometimes in negotiations, I do have a tendency to be pushed too much, and that's something I have to be on the lookout for. Luckily, when I'm making these agreements in real life, I won't be forced to make decision in the moment--or at least it's unlikely. Overall, after the game, I'm excited to get out there and really do this in real life!

Scaling Up

Kognio at this point admittedly doesn't have the most specific strategy for securing financing outside crossing our fingers for Y Combinator. We find out tomorrow(!) if we get an interview with them, and we can decide funding from there. They'll give us $120k in seed funding and then put us on track to pitch in front of a large amount of investors on Demo Day. We've also applied to Stanford's StartX, which doesn't provide funding but does connect us to investors. We plan on spending the entire summer hunched over together working on the product no matter what happens, which means that the majority of our costs will be just costs to support us living. We think we can bootstrap this reasonably well. In the interim, depending on the progress of our product, we'll probably reach out to angel investors (if YC doesn't work, of course). Obviously the longer we wait at this point, the more proof of concept we'll have and so the more leverage we'll have in negotiations for financing. I can't put a specific number for what control we want to retain after Seed/first round, but I know that we want a balance of king/rich. It's idealistic, but we believe in the idea and its value at scale, but we want to shepherd it to a sustainable point.

Demographics!

I've quite literally just finished surveying a bunch of potential users. It was really fun! I baked cookies and made t-shirts for my cofounder and me. It feels real. And that was almost as important as actually getting in front of people and talking to them. We gave them a pretty hefty survey to fill out in exchange for a freshly baked cookie. I've got a stack of about 50 surveys to wade through and then we'll be able to decide what our next steps are. The main aim of the survey was to understand how people do internet research and where their pain points were (and how much pain it actually caused). Secondarily, talking with people as they filled in their surveys was quite helpful for developing further surveys. We had too many questions and were too vague on a few points, particularly the meaning of "internet research". We had debated about these things beforehand, but it was good to get some data behind our uninformed opinions! That's just generally true. At this point I'm staring at this stack and wondering we'll be tweaking market assumptions. This survey doesn't lend itself to changes in that sense, because our money is planning on coming from advertisers. I think we're a bit away from tackling those assumptions.

Anyway, here's a picture from today's activities!