The boom of startups all over the world has brought with it crowds of startups investors that are always on the lookout for the next “big” thing—big enough to make them millions in the process.
There are plenty of competitions, accelerator programs and other events that are all about helping startups find their angel of an investor whose going to help them reach the heights of startup success.
I guess every startup investor has their own mantra of what works and what doesn’t. Dave McClure recently took to Twitter to express his thoughts on what startup investors should and shouldn’t do.
If you’ve never heard of the name Dave McClure, you should know that he’s a founder of 500 Startups—a venture capital firm and startup incubator in Silicon Valley. Dave McClure has been part and parcel of the fabric of Silicon Valley for over 25 years.
Here are his 10 tweets of wisdom that you should pay attention to.
1. Stay away from business plan competitions.
Dave McClure believes that judging and rating an idea or a startup based on a business plan is an outdated practice. This will be a common theme among most of the tweets of wisdom and the underlying philosophy behind not doing so is that “expenses are certain but revenue is never certain.”
2. Asking for 3-5 year revenue projections is unrealistic.
Lies—I’ve always assumed that.
3. Stop guessing, start building.
The idea of building a minimum viable product to gauge customer demand is one that should be done more often. It should also be the way startup investors measure the actual potential and viability of a startup idea. Surely, customers don’t lie. Or do they?
4. Follow Tweets of Wisdom 1 & 2 or else…
Get yourself a table with the hypocrites of today.
5. Use the right metrics to select winning startups.
Early customer growth adoption charts along with product prototypes are reliable data to predict how a product will eventually turn out. At the end of the day, that’s one of most important things for startups around—how receptive are customers towards your product?
6. Times have changed, get a move on.
Get with the current programme, folks.
7. Don’t fall for the theatrics.
Dave McClure used the term ‘screenwriters’ to reflect that presentations of business plans and revenue projections are just all part of a play and the business plan itself is just a meaningless script.
8. Business plans hinder startups from getting actual work done.
Three of the previous tweets of wisdom highlight the importance of judging startups based on how well their actual product functions and moving away from piles of documentation that doesn’t really achieve much. Basically, “less talking, more doing” is the way to go.
9. Summary: Prove your product.
This is the leaner way of both building a business and getting things done.
10. Where is the money going?
To gain the confidence of startup investors, instead of plucking revenue figures from the sky and putting up a show, startup founders should be honest and direct—explain to the investors what their hard earned money is for and how will it be used to improve the product.
You can read the full list of his tweets to startup investors on his Twitter account here.