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Recently, I was talking with an entrepreneur about his company. They just launched a new initiative and he shared with me a few of the details. Then, he said something that stuck with me: money and energy are separate considerations. Meaning, most entrepreneurs, at least initially, focus more on a lack of money as the inhibiting resource. Then, as the business grows, energy becomes even more of a consideration as the company has more money and staff is more specialized.

Here are a few thoughts on money and energy as separate considerations:

• Startups have an ebb and flow where it’s clear that sometimes team members have extra energy and sometimes they are burnt out
• Startups flush with cash realize that balancing energy is tougher because it’s less quantifiable and more based on the human element
• Most projects require both money and energy, and leaders would do well to think through the energy component as much, if not more, than the money component

When planning, ask the hard questions about the costs, as we all do, and then spend time thinking through the current energy of the team. When energy is applied to a new project some other project always has its energy reduced.

What else? What are some more thoughts on money and energy being separate considerations?

Back in 2001, while an undergraduate in college, I spent a good bit of time meeting with angel investors in an effort to raise money for my startup. Not knowing much, I wrote an extensive 30-page business plan outlining every aspect of the business (I even made the mistake of paying a lawyer, yes a lawyer, to give me feedback on the plan — ouch!). At one of the meetings, the angel investor offered up a line that has stayed with me ever since: most angel investors have deep pockets and short arms.

Of course, the joke is that even though angel investors are wealthy (deep pockets), investing is a hobby for them and they don’t write that many checks (short arms). Here are a few thoughts on angel investors with deep pockets and short arms:

• When pitching angels, ask how many tech startup investments they’ve made in the last 24 months (it’s good to know if someone is truly active as many angel investors aren’t actually active angel investors)
• Find out what size check they typically write as well as their areas of interest
• Ask how they typically add value, if at all, for startups they invest in
• Inquire as to their decision making process and what, if any, red flags they see with your potential deal

While most investors — angel, VC, and other — have a combination of profit-motive and fear of missing out, angels, more so than other groups, are driven by the desire to help entrepreneurs and to be a part of something interesting. Regardless, deep pockets and short arms still holds true today, just like it did almost 15 years ago.

What else? What are some more thoughts on the saying that angel investors have deep pockets and short arms?

I remember it clearly: we were less than a year into Pardot and a venture capitalist reached out to us asking to talk. Excitedly, we set up a time for the call and waited anxiously for the date. Finally, the day arrived and we talked for 45 minutes only to realize that it wasn’t a good use of our time: the associate’s firm requires potential investments to have at least $5 million in annual recurring revenue whereas we had less than a million.

Here are a few thoughts on calls from VC associates:

• Associates cast a wide net and engage with as many entrepreneurs as possible, regardless of whether or not they’re a good fit yet
• While associates source deals for the partners, most of the firm’s investments come from referrals and existing partner relationships — not from associates cold calling
• Know that associates aren’t the decision makers at the firm and that they spend a huge amount of time cold emailing and cold calling startups (not too different from a sales rep)
• Before taking a call from an associate, ask a number of qualifying questions, and only take the call if raising money is on the horizon (remember that the best time to raise money is when you don’t need it)
• If getting ready to raise money, associates can be a good testing ground and opportunity to practice the pitch
• Make an ask at the end of the call to be introduced to three portfolio companies that might be potential customers

In the end, most entrepreneurs shouldn’t engage with associates unless they’re going to raise money in the near-term and they’ve pre-qualified the firm to ensure it’s a good fit. Too often, entrepreneurs get excited when a VC associate reaches out and it’s not actually a good use of time.

What else? What are some more thoughts on entrepreneurs and calls from VC associates?

First Round Review has a great new post up titled What the Seed Funding Boom Means for Raising a Series A. The general idea is that the number of seed funding rounds is up 4x, but the number of Series A financings hasn’t increased, meaning a significant number of startups that were expecting to raise another round failed.

Here a few notes from the post:

• Just because it’s easy for some founders to raise a seed round doesn’t mean it’ll be easy to raise subsequent rounds
• Seed rounds are often raised based on the strength of the team and idea whereas Series A rounds are based on startup traction, and many startups don’t have strong enough metrics to warrant institutional funding
• One idea for seed-stage startups is to raise a larger seed round and/or make it last longer so as to provide more time to show results
• When raising a Series A, consider starting with a lower desired amount of funding, and, if there’s more demand than expected, raise the amount (it’s easier to go up than it is to go down after talking to investors)
• Metrics matter and entrepreneurs need to have a strong handle on the key drivers for their business (too often entrepreneurs wing it, especially when the startup is so young)

For entrepreneurs that have raised a seed round, What the Seed Funding Boom Means for Raising a Series A is a must-read.

What else? What are some more thoughts for entrepreneurs that have raised a seed round and are looking to raise a Series A?