SUMMARY:

Eliot defines the benefits of pulling a Rudy, aligning incentives, and adding value.

LESSONS LEARNED:

  • Working capital leverage, lead times, replenishment rates, & cash-flow cycle aren’t just B School buzzwords. They can destroy your startup. Learn what they mean.

  • Diligence isn’t about theoretical analysis. Pick up the phone and call potential customers. You’ll get candid feedback and maybe even a new customer.

  • Can I establish incentives that align your interests with mine to elicit candid feedback during diligence?

  • Eliot takes a networked approach to investing: find out who knows the industry? what are the necessary resources to successfully invest? What’s the upstream look like?

  • Finding mentors is essential. Don’t be afraid to pull the Rudy card- I’m young and don’t know anything; could you teach me?

  • Support your partners by defining roles and responsibilities. Ensure they have a consistent, challenging goals. Protect them from becoming distracted.

  • If I can’t find some way to make your business better before I write a check, I don’t invest.

  • The problems at a board level are caused by management not understanding you and vice versa and wasting time doing that dance when critical issues arise.

  • More sales without more profitability is not necessarily a good thing

  • Job of a VC: raise money, introduce you to people that can help you, and listen very acutely to what you need and try to get it for you before you even have to ask.

  • Companies are bought, not sold. If you’re building your company to sell it, you have fundamental issues. Why are you not making something people want and are willing to pay for and finding people to kick the cr*p out of it to make your product better.

About Eliot:

Eliot Durbin is Managing Director & co-founder of Penny Black, a New York based firm investing in young endeavors across a spectrum of sectors including consumer, mobile, enterprise, financial, healthcare, and media technology.

He’s an active partner of seed technology fund BOLDstart Ventures (with Ed Sim); and Eighteen Forty, a new media focused investment fund (with IM Global Films).

Eliot’s investments include Anchor Intelligence (sold to Comscore), Spinback (acquired by Buddy Media), Blaze.io (acquired by Akamai), DoodleDeals (sold to PlumDistrict), Rapportive, Klout, IndieGoGo, Yipit, Prescreen, and Enterproid. He’s also a director/advisor to Numberfire, Medpricer, Equipois, Bare Fruit, Sundia, DoubleBeam, & nonprofit YouInspire.org.

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