Learnings from the HBS Founder Trek 2023

Starting a company is hard, and connecting with the right venture capitalist (VC) is an opaque process. That’s why we started the inaugural Founder Trek for student founders at Harvard Business School (HBS) to facilitate meaningful interactions with leading VC funds. The program targeted passionate builders across various technology domains such as health tech, AI/ML, and SaaS, who are committed to working on their startups full-time or during the summer.

We wrote this article to share our learnings with founders (or anyone curious about founding a tech startup!). Let us know what we missed!

Background on the Trek:

The program welcomed 12 founders from HBS to create an intimate space for interaction with the attending VC funds. The Founder Trek team chose founders based on their passion and commitment towards their startups. The program hosted the following VCs for an open Q&A session:

1. Contrary: Jason Chen
2. a16z: Jeff Silverstein, Michelle Volz
3. Thrive: Belen Mella, Zach Dell
4. 8VC: Bela Becerra, Vivek Gopalan
5. BCV: Noah Breslow
6. Two Sigma Ventures: Dusan Perovic, Gabriella Garcia
7. Insight: Apoorva Goyal, Sunny Singh
8. BoxGroup: Claire Smilow
9. Founders Fund: Leigh Marie Braswell
10. Bessemer: Eric Kaplan, Alex Sukin

Apart from the Q&A session, the program hosted happy hours, meals, networking events, and a tech-themed comedy show that roasted the most cringe-worthy aspects of the startup world.

Okay … let’s get to the good stuff now ;) Here are my key takeaways from our conversations with investors. Big shoutout to Pratik, Peggy, Flora, and the investors for the feedback!

Stepping into the shoes of an investor

The program provided insight into the thought process of multistage funds that invest at the pre-seed or seed stage. Here are a couple soundbytes:

• For a multistage fund investing at the pre-seed or seed, it’s important to ask: “would you play the movie forward and still invest in it later?”
• I was personally floored that not all investments are about financial returns. Some large multi-stage funds with deep war chests invest in startups for the opportunity to source other startups.
• What’s the internal process of creating a new fund? New areas and theses often end up being founder driven (where founders see new opportunities and build new companies).

Relevant experience

VCs love to see relevant experience, especially in the go-to-market (GTM) strategy and execution. For example, if a founder is building in government tech, VCs prefer to see that the founder has experience selling to the government.

Target ownership

VCs invest operational resources in the company, so they want to have target ownership. However, multi-stage might have target ownership at one stage (e.g. Series A / B) but can be much more flexible at earlier stages.

Founders need to be strategic about bringing in angel investors

Ask yourself: “what are the angels being brought in for?” Angels are great for making introductions to customers, but they cannot always help with GTM at the earliest stage, especially if you don’t have a product to sell. Therefore, founders should consider momentum when thinking about bringing on angels. They are great when you need to launch, build a brand, and have an independent thought partner. Also they are often price insensitive.

Disclosing Fundraising Amount

Founders should also be mindful of their cap table and avoid disclosing the amount they are raising on their deck.

How do you frame a fundraise while pivoting?

X has worked out well, and through our work these last Y months, we see that the big opportunity is a 45 degree pivot. Then ask, “what work do I need to do in this direction” rather than asking for money, because it’s hard to fundraise when you’re actively changing the business model.

Competition

Some funds do not invest in companies that do the same thing. Therefore, if a fund takes a bet, it has a high bar and expects to have 6–7 months of engagement with a founder prior to investment. In a lighting-fast round, they require strong references. As a founder, it’s imperative to understand what specific problem you solve and where in the competitive landscape you want to play. Ask yourself: “how will our competitors respond to our wedge?”

Growth is gold

• After raising funds, momentum and speed matter for a startup. Founders need to show fast growth and execution. For software companies, it is suggested that founders should aim to increase their revenue by 3–4x every year.
• VELOCITY matters. As a founder, you want to make people feel like you have more time In a day than others
• However, companies at the growth stage can move slower but need to be more capital efficient (e.g. it’s unreasonable for a company with $400M in annual revenue to triple in one year).

Customers

ENTERPRISE

• How frequently should you engage with your 1st customer? You should check in every 2 weeks with decision maker and smothering the engineering team with support. If you can, meet the customer in person and spend the time getting to know them
• Not all customers are the same. Get early customers to test with but make sure they. are reflective for whom you actually want to sell to.
• Only get a few shots on goal with big enterprise customers
• During hyper-growth, build processes that are repeatable and scalable. For example, early on you might have a few salespeople, but eventually you want to create a repeatable hiring and training machine for your growing sales team

CONSUMERS

• The best consumer companies have unique distribution. If you use paid social media, be rigorous. If it’s not working then switch off the channel.
• Be creative about search terms. Think about how community engagement can be leveraged for more efficient and effective distribution.

Hiring Talent

• When hiring for entrepreneurial talent, look for an instance where they didn’t choose a credential and took a risk such as a service job or being an entrepreneur in college.
• Being able to hire amazing talent (especially the first 5 hires) is a very positive signal.

Miscellaneous Advice

• We’re often the youngest person in the room. How do you use your youth as a strength? Show that you can hire great people who are more experienced and older than you
• A note on optimism: If you always pitch your company with a glass full lens, you lose credibility from investors and employees. Therefore, think of viewing the glass as 2/3 to ¾ full.