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Last week, I was listening to a podcast from “Invest Like the Best,” where guest Miles Grimshaw discussed a concept I’ve encountered before, but never described in the same manner. The concept revolves around the in-market search for product-market fit. Historically, product-market fit has been discussed in contexts where new ideas and markets were explored. Entrepreneurs would develop a minimum viable product or minimum respectable product, then iterate and adapt it to the market based on customer feedback.

This notion of market search for product-market fit diverges slightly. The premise here is to launch a product to initiate dialogue with customers and use their feedback to potentially discover even better product ideas. It’s often challenging to engage potential customers without a tangible, functional product to present.

An instance of market search for product-market fit is Pardot. Initially, our product was a Google AdWords integrated landing page designed to generate leads to sell to companies. After building the MVP and generating several leads, discussions with prospective customers revealed a preference for a platform to generate and nurture their own leads. This revelation steered us from a lead generation system to a marketing automation platform, ultimately contributing to the business’s success.

Another example is Salesloft. The first product, “Job Change Alerts,” focused on tracking key contacts and prospects. It failed but led to the development of “Prospector,” a tool to gather contact information from the internet. Although more successful, “Prospector” did not fully meet the goals, prompting the creation of a third product: a comprehensive sales engagement and revenue workflow platform. This suite included a cadence engine and a range of tools designed to enhance sales team productivity, and it proved to be the ultimate success.

In both examples, an initial product was built, failed, leading to successful iterations. The original ideas didn’t pan out, but they paved the way for subsequent innovations, shaped by customer feedback and in-market adaption. Entrepreneurs should embrace customer feedback and be willing to adapt or pivot their products accordingly. Often times, launching an initial product to enter the market and build relationships with customers, while maintaining flexibility to pivot, is the path to product-market fit. The first product idea is almost always wrong.

Several months ago, Auren Hoffman wrote a blog post titled Dual Threat CEOs where full-time founder/CEOs are also investing in startups with institutional money. At the time, I didn’t think about it too much and put it aside as another interesting theory without knowing too many people to whom it actually applied. However, after reading it, I’ve been socializing the concepts and asking around as I meet successful entrepreneurs. Last week, in Chicago, I asked a number of the entrepreneurs I met there if they did any side investing, angel investing, had a fund, or had any sort of scout program they were involved in. I was really surprised by the results. The majority of the successful entrepreneurs I talked to last week had been investing money on the side, and they had been extremely successful doing so. Now, this could’ve been a moment in time as part of the zero-interest-rate phenomenon, or this could be a trend that has the opportunity to continue indefinitely.

One of the questions that came out of this is, should entrepreneurs run their own company as the founder CEO, who often raises institutional capital, and at the same time be investing in startups on the side, especially using other people’s money? Is this just another side hustle, or is this something that’s going to be really distracting? My answer when somebody asked if I believe entrepreneurs should do this is yes. And the reason I think entrepreneurs should do this if they want to – they shouldn’t do it if they don’t want to – is that when you’re a startup founder/CEO, one of your best uses of time is meeting with other entrepreneurs and other executives, visiting customers, recruiting talented people, and spending time in the industry. Invariably, that leads to finding interesting deals, finding interesting angel-and-beyond investment opportunities, finding interesting ways to help create value in the world.

There are just so few venture-backed founder/CEOs that most startup communities need their talented people performing both roles: performing the role of growing the venture-backed startup and performing the limited role, maybe 2 to 3% of their time, being an asset allocator for high-risk capital. Most up-and-coming startup regions don’t have enough capital; they don’t have enough people deploying capital. And so, if going through the founder/CEO route allows the community to develop that muscle around deploying risk capital and seeing more flowers bloom from the seeds planted, then so be it.

Dual threat CEOs aren’t going to be commonplace, but I do think they’re needed in the startup community. Entrepreneurs that are building businesses are going to find great investment opportunities in the normal course of action, and by being a dual threat CEO, they’re able to deploy capital in a way that is a win-win for both them, the startup community, and the funding providers.

Last week, I was with a group of entrepreneurs in Chicago as part of the Endeavor organization. One of the topics that naturally came up was ChatGPT, and how we were using it inside our respective startups. After discussing the usual ways we use it, I shared my favorite use case: cleaning up longform text that was originally from me, but putting it through ChatGPT so that it corrects all the grammar, punctuation, and spelling, making it turnkey for publishing. In fact, it’s so powerful and fast that I recommend every entrepreneur do it.

Here’s how to do it. Start by going to your Mac and enabling voice-to-text through the fn shortcut key. To do this, begin with the Apple logo in the upper left, then System Settings, then Keyboard. Enable the fn key to start dictation. Scroll down on that settings screen, and you can turn on voice dictation. Now that you’ve enabled speech-to-text through a simple keyboard shortcut, the next step is to load up your favorite word processing application. In this example, I’m using the native Notes app on Mac and setting it to plain text.

With your word processing application open, it’s pretty straightforward. All you need to do is use the shortcut key to start the voice dictation, and then you can start talking. From a content perspective, my favorite way to create content is to reflect on conversations from the last week or two. These conversations with entrepreneurs are always insightful, and opportunities to learn something new. Quite often, it’s the best source of new information that I want to document and share as part of this blog.

Once you have your long form content through the voice dictation in your notes or word processor, the next step is to copy and paste it into ChatGPT and have it cleaned up for publishing. Now you can go ahead, copy and paste, and instruct ChatGPT with the prompt, “Turn the following content into a blog post.” It will quickly generate a blog post. The challenge we’ve seen with ChatGPT is that it can be verbose and tends to get wordy with adjectives. What I like to do is give it the following prompt: “Clean up the following blog post focusing on grammar, punctuation, and spelling without adding adjectives.“

By using this as the prompt for ChatGPT, followed by the content you copied and pasted from your voice dictation, ChatGPT will immediately respond with all the content cleaned up and ready to go, including paragraphs, punctuation, spelling, and grammar – everything turnkey. Now, once ChatGPT has returned its version of the article, I copy and paste it back into the original app, the Notes app or the word processor app. Then, I go through it and refine it to make it sound more like my voice wherever possible. 

The voice dictation plus ChatGPT polish entire process takes less than five minutes and is the fastest process possible to go from idea to content to polished content to ready to publish. This is one of my favorite use cases of ChatGPT, and I highly recommend it to all entrepreneurs as they build their content and brand.

Last week, I was catching up with an entrepreneur, and he shared that they were interested in finding a new independent board member. After a number of years of growth and expansion, they felt like there was an opportunity to take the business to the next level and needed help after raising some capital. So, on the independent board member front, the idea was to find somebody to help augment the business. Thinking through my experience being on a number of boards over the years, three archetypes came to mind.

The Coach

The first archetype is the coach. The coach is somebody who has been around the startup and entrepreneurial world and loves helping founders and leaders. The coach wants to be there as a sounding board, as a mentor, as somebody who’s been there and done that. Their primary benefit is to be that Consigliere. In town here, I know of two excellent independent board members who meet this archetype, and entrepreneurs rave about their experience.

The Industry Expert

The second archetype is the industry expert. The industry expert is somebody who has already led a similar company in the same or similar industry. They already know the ins and outs. They might’ve taken a company public, sold it to a PE firm, or worked for the same investors. But ultimately, they have done the same job in the same industry or one that’s very similar with a successful result. So, this is the industry expert who is using all of their accumulated knowledge to share and help grow the business ultimately to achieve a similar, or better, outcome.

The Functional Area Expert

The third archetype is the subject matter expert. This is somebody who’s a proven executive at sales, marketing, product development, M&A, etc. This person is world-class at doing one of the functions in a business, and ideally, it’s the function that the startup needs the most help with. So, if the startup is struggling at scaling their sales and marketing in a way that’s more repeatable and more geographically based, this independent board member might be a world-class head of sales. If the startup is struggling with their product development, building a scalable product, their release schedule, and their whole development cycle, this person might be a world-class CTO who doesn’t want to be a CTO anymore and would rather be involved at the board level in a more part-time role. Functional area experts bring extensive, specialized experience to the company.

So, these are the three most common types of independent board members that I see: the coach, Consigliere, there to mentor and help the entrepreneur generally in the board and the company; the industry expert that knows the market that the startup is in inside and out and is there because they’ve been there and done that and they can help accelerate the mission; and the third type of independent board member is the functional area expert, somebody who’s world-class in a certain area and wants to help the startup develop their own expertise and skills in that same area.

Entrepreneurs would do well to identify the type of independent board member they’re looking for and consider one that’s either a coach, an industry expert, or a functional area expert. Identifying that type of person at the outset will make the process of recruiting the independent board member that much more efficient and productive.

While the frequency and urgency of the “how does your company do in-office vs remote?” conversation has diminished, it remains a popular topic of interest among entrepreneurs. Entrepreneurs are enthusiastic about sharing ideas and learning from one another, and this has kept the future of work debate top-of-mind. Even after years of experimentation, many entrepreneurs remain eager to explore new ideas.

Most software entrepreneurs I know have fully embraced remote work environments, allowing their teams to operate from various locations and convene in person regularly—typically, once a quarter for departmental gatherings and a couple of times per year for company-wide meetings. In contrast, many traditional business entrepreneurs I know have opted for a hybrid approach, requiring employees to be in the office 2-3 days a week while maintaining a workforce that is predominantly geographically centered around physical offices.

Last week, I read an interesting variation in a Wall Street Journal article titled “This Company Created a Return-to-Office Plan That Employees Actually Like.” J.M. Smucker, the company renowned for its eponymous jam, employs over 1,000 individuals primarily based at their headquarters in Ohio. After navigating the challenges posed by Covid-19, including work-from-home and in-office work arrangements, they realized that they could attract superior talent without the constraints of geographic specificity. However, they still valued face-to-face interactions. The solution they devised allowed employees to reside wherever they pleased but mandated in-office attendance on Tuesdays through Thursdays every alternate week, totaling six days per month, with exceptions of three days in July and December—all scheduled a year in advance.

With this schedule in place, all critical activities such as strategy sessions, training sessions, and other in-person work took place exclusively at the headquarters. This approach ensured that everyone knew well in advance when and where they were expected to be, enhancing the success of both crucial meetings and spontaneous water cooler conversations.

Naturally, there were specific rules and regulations associated with this arrangement. The most significant requirement was that employees were responsible for covering their own travel and lodging expenses. In essence, individuals had the freedom to live anywhere they desired, but the cost of travel was not subsidized by the company. This eliminated any debates about proximity to the office, as the financial burden for commuting was shifted to the employees themselves.

For entrepreneurs who firmly believe in the value of frequent face-to-face interactions and aspire to attract talent from all over, this innovative in-office plan, allowing employees to reside anywhere, merits consideration.

Within the startup community, there’s an essential aspect that warrants greater attention – embracing and celebrating failures. In recent weeks, two local entrepreneurs have openly shared their journeys, shedding light on the challenges they faced while building their startups.

The first one comes from Adam Steinberg, co-founder of Fetch Truck in the truck rental space. He candidly chronicles the evolution of their business model over the years. Despite raising VC money and tirelessly pursuing different strategies, their journey ended without building a sustainable business. They made the tough call to cease operations, acknowledging that there was no viable path ahead.

From Adam’s post: Without a clear and immediate path for fixing these challenges and restarting growth, we made the disappointing conclusion that the prudent course of action is to wind down the business. We ran out of time.

In the second example, Shep Ogden, co-founder of Offbeat Media Group (OMG) in the social media and virtual influencer space, reflects on an equally impactful experience. Shep recounts the thrill of onboarding big brands, hiring a team, and growing fast. However, shifts in the clients’ own business models led to a significant revenue drop for OMG. Unfortunately, this downturn necessitated major layoffs.

From Shep’s post: We made the tough decision to restructure while the company had a chance to move forward. This was the only way we could guarantee our employees a severance on their way out. After everything the business had gone through, we really wanted that for our team. 

Both these local instances illustrate how hard it is to be an entrepreneur. Even after raising millions of dollars and signing a number of customers, the chance of failure still persists. The call for celebrating these failures does not stem from a desire for more failures; rather, it is rooted in developing a startup community with more attempts. More attempts equate to more entrepreneurs willing to take risks and endeavor to build something from nothing. If we don’t have more failures, we’re trying hard enough.

While failure is not the objective, we celebrate the courage to take risks. Failure is an inherent part of the entrepreneurial journey. By acknowledging and learning from it, we set the stage for the next round of entrepreneurs to enter the arena.

Ever since I was in high school I’ve been fascinated by fast-growing businesses and the annual Inc. 5000 list of the fastest growing private companies in the United States. By digging in the list every year, you get to see the hottest industries, geographies, and trends. Every hope-to-be entrepreneur should spend a couple hours on the list.

And, of course, I like to look at the Atlanta tech companies on the list. Here the ones in the top 1000 for the 2023 Inc. 5000:

#70 Fusus
https://www.fusus.com/, 103 employees
Provider of an open intelligence ecosystem that integrates and enhances public safety and investigations assets.

#136 PrizePicks
http://prizepicks.com/, 276 employees
Daily fantasy sports.

#164 Neighborly Software
http://neighborlysoftware.com/, 81 employees
Software for community development.

#189 Flock Safety
http://flocksafety.com/, 645 employees
Operating system helping neighborhoods, businesses and law enforcement eliminate crime, protect privacy and mitigate bias.

#259 Stord
http://stord.com/, 398 employees
Supply chain and fulfilment solutions for direct-to-consumer and omnichannel brands.

#276 Mile Auto
http://mileauto.com/, 22 employees
A B2B2C pay-per-mile insurance provider that provides lower mileage drivers with insurance based miles driven.

#316 OncoLens
http://oncolens.com/, 38 employees
A clinical decision support company connecting data and care teams for better cancer treatment plans.

#329 Codoxo
http://codoxo.com/, 65 employees
Company providing AI-driven solutions and services to health care payers, agencies and pharmacy benefit managers.

#334 BetterBot
http://betterbot.com/, 49 employees
Company offering an automated platform to support the multifamily real estate industry.

#414 DUJUD
http://dujud.com/, 11 employees
Serving the semiconductor industry with proprietary 3D printing technologies that enable microfabricating.

#510 PadSplit
http://padsplit.com/, 117 employees
Creator of a co-living market platform enabling workers to live in the communities they serve.

#610 Voxie
http://voxie.com/, 29 employees
An AI-powered conversational texting platform for consumer brands to connect with and engage their customers.

#697 Bitcoin Depot
http://bitcoindepot.com/, 159 employees
Bitcoin ATM network throughout the United States.

#738 Polygon.io
http://polygon.io/, 36 employees
Developer of a real-time financial data platform that displays stocks, forex and cryptocurrency data, enabling clients to build APIs efficiently.

#846 Florence Healthcare
http://florencehc.com/, 283 employees
Advancing medical cures by connecting biopharma companies and clinical research sites through automated and integrated workflows on its own platform.

Congrats to all the Inc. 5000 winners and the 200+ Atlanta companies on the list. Well done!

One area that is generating some discussion, though not nearly enough, revolves around annual startup liquidity programs. As an owner of equity in a startup, its value is minimal or non-existent for the majority of the time. However, there are occasions when it becomes valuable – even life-changing. Nonetheless, converting startup equity into cash is consistently challenging.

But it doesn’t need to remain this way.

In the past month, I received an invitation to participate in a tender offer for a startup I am involved with, facilitated by Carta. As the leading cap table management software, Carta also provides a platform for secondary auctions. Although I decided against selling any equity, I found the process to be efficient and straightforward. Despite overseeing cap tables for tens of thousands of startups, Carta’s site indicates that they have only executed 200 secondary offerings. Evidently, the market hasn’t fully embraced this concept, whether due to disinterest or perceiving the process as complex and burdensome. I am inclined to believe the latter, especially for companies of scale (generating a minimum of $10M in revenue with a last round valuation over $100M).

An enterprising entrepreneur needs to build a SaaS system that empowers companies to run annual startup liquidity programs outside the context of cap table management.

My recollection of this idea was rekindled last week during a conversation with a non-tech entrepreneur. He co-owns a traditional private business operating at a significant scale. For decades, they have conducted an annual liquidity process at the year’s end. Over time, they have cultivated a list of pre-approved potential buyers. Every October, shareholders are approached to gauge interest in selling their shares. Interested shareholders are furnished with historical share prices from previous years and are asked to specify a target sale price. In November, interested and vetted buyers are informed about the available share quantities and are invited to give their desired purchase amount and price. Finally, come December, a structured process is run whereby potential sellers, in the order of their submission, are presented with an offer price and granted a week to decide on the sale. If the offered price equals or surpasses their specified price, declining to sell comes with a five-year restriction on selling the equity – a penalty for bypassing the process. Of note, there are no associated commissions or transaction fees for this buying and selling process. The company provides this service free of charge to its shareholders.

While startup liquidity typically revolves around financing rounds at the request of new or existing institutional shareholders, it need not be confined to this limited occurrence. With some effort and a system, I am confident that many more startups at scale would implement an annual liquidity program.

The absence of liquidity is a major issue for startup shareholders. Yet, for the private companies that have reached scale, this problem should not persist. Startups should consider an annual liquidity program and improve the industry.

In the past couple of weeks, three different friends have reached out for assistance in evaluating a potential private tech investment. In each case, these individuals are not tech investors, nor are they investing alongside an expert. Typically, these opportunities emerge through connections like a friend of a friend within a civic group or a social club. Being a cool tech startup idea, it’s easy to get excited and want to write a check.

My recommendation:  invest alongside an expert that has done similar deals in the past. 

In instances where no experienced investor is simultaneously committing under the same terms, work to find one. Much like the Lemon Law, there tends to be an information asymmetry in selection. This implies that when professional investors have opted out of an opportunity, it increases the chance it’ll get to a non-professional investor. This particular investment could potentially be the one-in-a-thousand home run or, conversely, it might be a dud. Part of the fun lies in dreaming about the possibilities.

When the next angel deal or private tech investment opportunity arises, find an expert and get them to invest alongside.

Last week, I was talking with a successful tech entrepreneur regarding ideas to expand the local tech investor community. This encompasses both angel investors and limited partners interested in investing in local venture capital funds. It’s a topic I’ve been contemplating and discussing with ecosystem leaders for over 15 years. There’s no easy answer.

The crux of the issue lies in the fact that the majority of wealthy individuals in the community accumulated their money through ventures outside of tech startups. Consequently, tech startups are often perceived as unconventional and risky financial investments – a perception that is not entirely unfounded. After all, it’s rare to encounter an industry that assesses valuations based on revenue multiples rather than profits. Moreover, the illiquid nature of tech investments means that a considerable amount of time (usually 10-12 years) elapses before any financial return, in stark contrast to real estate or stock market investments.

So, what are some potential ideas to address this challenge? Here are a few suggestions:

1. Casual, Monthly Angel Investor Group: Organize a simple and informal angel investor gathering on a monthly basis, where a local service provider can sponsor food, and entrepreneurs can pitch their startup ideas. The goal is to create a regular event that brings current and aspiring angels together (similar to the concept of Angel Lounge).

2. Formal, Monthly Angel Investor Group: Establish a more structured angel investor group where local angels commit to an annual investment amount, pay dues, set up committees, and follow a more organized approach. Typically, such groups involve more active participation and consist of a larger membership (like ATA).

3. University-Connected Alumni Angel Investors: Develop a network of angel investors who exclusively invest in startups affiliated with universities, including students, faculty, and alumni. Host regular events and pitch sessions, particularly during homecoming and alumni weekends (see Duke Angel Network).

4. Mix and Mingle Across Angel Investors: Bring together various angel groups a couple of times per year for networking and mutual learning. This could involve casual angels, serious angels, university-affiliated angels, and others.

5. Occasional Events for Local Venture Fund Limited Partners: Organize panel discussions with 2-3 local venture funds to educate potential limited partners about the role and focus of each fund. This aims to offer education and access to potential local limited partners.

6. Invite Potential Investors to Local Venture Fund Annual Meetings: Encourage potential limited partners to attend annual meetings hosted by venture funds. These meetings often include partner perspectives on the market, guest speakers, portfolio entrepreneur presentations, and networking opportunities – an ideal platform for deeper engagement with the fund.

Growing the local tech investor community by attracting more angel investors and limited partners to local venture funds is a challenging and never-ending process. The most effective approach involves fostering successful startups that lead to lucrative exits, thereby generating local wealth. However, the next best thing is steadily expanding the local tech investor community with a multi-decade horizon. The best time to start is now.