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NFL and Startup Fundraising

NFL is a highly competitive game in which player’s physical prowess combined with coach’s strategic acumen in selecting plays are necessary to win competitive games. In the game, offensive team is given four plays to advance ten yards. If they advance then they get a new set of four plays. Otherwise they turn over the ball to opponents also known as turning over ball on downs. The offense keeps playing series of plays until they score or turn over ball on downs to opponent. In one offensive series coach select plays based on opponents strategy and outcome of earlier plays.

There are many similarities between offensive series in the game and a startup’s fund raising activities. In football, offensive series continues until you score a point whereas during fund raising founders continue negotiations with investors until they raise money. The opponent takes over the ball if you can’t score or advance 10 yards in football; in startup world investors pass opportunity to invest if you don’t convince them to believe in your vision. Success in football depends upon physical power and strategic analysis whereas fundraising success depends upon domain expertise as well as negotiation skills.

There is one twist though. In a startup world if you score against an investor and convince them to invest in your startup then during next fundraising cycle they will switch positions and be on your side . This is one of the primary reasons why founders are advised to be cautious regarding their source of funding.

Once founders find suitable investors they need to be able to negotiate with investors to reach an outcome that is a win-win situation for everyone involved. It is a daunting task for founders because many times they are raising funds for the first time whereas investors on the other side invests in startups everyday. It is important for founders to know skills, motivations, and expectations of everyone involved to have a fair shot at successfully raising funds.

While negotiating VC deal one thing to remember is Founders are rookies and Investors are already inducted in Hall of Fame.

There are many similarities between NFL positions and players involved in a typical fundraising efforts. Let’s start with Quarterback.

Founder = Quarterback

Quarterback is leader of offense in NFL. His success or failure has significant impact on team’s ability to win. In a startup, founding CEO is the quarterback.

There are 5 skills a Quarterback and a Founder needs to succeed.

Leadership: A Quarterback must earn his team’s respect. He must be able to unambiguously communicate play during huddle. Founding CEO must be able to unambiguously communicate startups vision to everyone. A founding CEO must have earned his team’s trust and respect. A Quarterback and a Founder, both should be able to confidently lead during crunch time.

Intelligence: A Quarterback needs to have a basic understanding of defense. He should be able to read and understand defense at the beginning of each play. A founder must have very good understanding of domain in which his startup operates. He must have pretty good grasp of what competitive landscape surrounding the startup.

Decision Making: In NFL, a Quarterback has few seconds to make the play. In these few seconds he should be able to scan entire field, choose his receiving target, establish feets in a position suitable for a throw and accurately throw the ball. In startup journey, the Founder makes decisions at every step. These decisions have profound impact on the startup’s future.

Inability to make quick decision is guaranteed to doom a Quarterback as well as a Founder.

Footwork: Great footwork is the foundation of power and accuracy in a Quarterback’s throws. A founding CEO’s industry network builds foundation on which his startup thrives.

Ability To Throw: A Quarterback must be able to throw. A founder must be able to execute.

Founders, who is your wide receiver ?

In NFL, Wide Receivers provide opportunities to gain big yards quickly. Wide Receivers are quick, fast and their quarterback’s indispensable partners. In NFL, team thrives when its Wide Receivers repeatedly find open spaces where its quarterback can throw ball accurately.

A fundraising startup could find open space from competitors because of exceptional technological expertise or unparalleled industry knowledge. Sometimes, a startup knows something about changing consumer behavior landscape or technology trend that others don’t get it. Technology, market or consumer insights are a startup founder’s Wide Receivers during fundraising efforts.

There are four skills that differentiate a receiver from a great receiver.

Strength is very important for a receiver. Strength helps when two players are fighting for position. Technical expertise helps when investors are concerned about technological advantages. Industry knowledge helps when investors are concerned about startup’s growth prospects.

Great focus on football and ability to ignore distractions from defense is vital for Wide Receiver to make a play. A great focus on insights that give startup unfair advantage is vital to get investor ready to invest in the startup.

A Wide Receiver needs soft hands to catch the ball. A startup’s ability to build viable business based on their unique insight is what defines a fundable startup in investors mind.

Finally, a good Wide Receiver is able to find open spaces where defenders could not reach immediately. Today, startup world is full of copycats. If a startup’s insights help the startup find some open space from nearest competition then the startup becomes an attractive option to invest money for investors.

Why Do Founders Need A Strong Running Back?

In NFL, Running Back breaks tackles and zip past defenders to gain yards. A startup’s ability to execute is a fundraising founder’s Running Back. This execution ability should be supported by traction data to break investors’ dilemma and receive funding. If a startup is operating in mature market or intending to disrupt an industry or facing strong, established innovators then the startup’s success depends on its ability to execute.

Obviously, Running Back needs power to break through tackles. There are three other qualities that define a great Running Back.

Balance and Agility: In NFL, a Running Back often bounces around from one tackle to another, like a pin ball. He needs excellent balance to stay on its feet to gain yards. A founder bounces from one investor query to another during fundraising. He needs balanced, thoughtfully developed execution plan with encouraging traction data to break through investors’ resistance to invest.

Lower Center Of Gravity: This helps Running Back break tackles and stay on his feet. Lower area of contact makes tackle difficult for defenders. Similarly, lower consumption of resources, a lean startup characteristic, helps startup out execute established rivals.

Mentality: During a game, Running Back takes numerous punishing hits. Each tackle by a defender takes its tall. A Running Back without mental toughness is not able to survive in this game, no matter how gifted his physical abilities are. During fundraising, founders receive numerous rejections. Each rejection by an investor takes its tall. A startup founder without mental toughness and conviction in his venture is not able to last long in fundraising endeavor.

Attorney Is Offensive Coordinator

In NFL, quarterback leads the offense on field. Offensive coordinator stands on the sideline (or sits upstairs in a booth) and analyzes defensive strategies employed by opponent. Offensive coordinator understands his team’s strengths. He has pretty good grasp of his quarterback’s abilities and limits.

Startup’s Attorney is founder’s offensive coordinator during fundraising efforts. He understands term sheets presented by investors. He should have pretty good understanding of startup’s potential and startup’s strengths as well as weaknesses. He should be able to advise founder how to approach and respond to investors.

In football, offensive coordinator never takes a snap in a game. A founder should never let his attorney negotiate terms and conditions directly with investors.

What kind of advantages competitive moat provides ?

In NFL, Offensive Linemen protect Quarterback. They create a wall against massive, powerful, agile Defensive Linemen. They establish a pocket around Quarterback which gives him breathing room to develop and execute play. If Offensive Line is weak then defense will steam roll Quarterback. However, Offensive Line can only hold off defensive pressure for few seconds. That’s reality. Eventually defense will find a gap and tackle the Quarterback if he is still holding the ball.

Entrepreneurs understand importance of having competitive advantage. However, many times it is considered part of defensive strategies to outlast competitors. In fact, for a young startup raising early stage money, competitive moat is its Offensive Line. If investors can find a crack in your competitive moat in a blink then they are unlikely to invest. At the same time, given enough time, investors are experienced enough to find cracks in any competitive advantage young startup may have. As Satya Patel said, CEO needs to make potential investors believe in their vision while your competitive advantage is holding up. Be quick.

Your co-founder is your Tight End

A versatile Tight End is a valuable asset for any Quarterback in NFL. Typical Tight End is strong enough to break tackles, has soft hands to catch spirals and has power and speed to gain yards in field crowded by defense.

A co-founder with complimentary skill set is extremely valuable to founding CEO during fund raising. He/She can help resolve investors’ doubts and help sell startup’s vision. He has strong conviction in your vision.

A terrific Tight End opens play book and stretches defense. A terrific co-founder provides reasons to invest in your startup.

What position do Venture Associates play in NFL?

In NFL, Defensive Linemen form first line of defense. They are massive, strong and quick. They zip past Offensive Linemen to catch quarterback and disrupt play. During football game, if offense is not able to move ball past Defensive Linemen then team will not gain yards. If they do not gain enough yards in three downs then usually team will turn over ball on attempts to opponent.

During fundraising, VC associates are first line of defense for the investors. These associates typically have strong analytical backgrounds. They are responsive and stay up to date on new developments in industry. They quickly go through startup’s pitch deck and find holes that can sink the startup. If a startup is not able to take their pitch past associates and reach investing partners then they are unlikely to raise money from the investor.

Who plays Linebacker in this game ?

Linebackers are anchors of defense in NFL. They are fast, they are strong. They cross hurdles, find ball career and bring him down.

Venture firm partners who are seasoned operators play the role of Linebackers during fund raising series. They know how to execute. They are industry veterans. They are not afraid of competition. They cross hurdles and hit their targets in competitive market.

As a founding CEO, you will face scrutiny of these partners if your startup operates in a mature market where your ability to execute will have big impact on your startup’s future. They will test how far your Running Back can take you.

If your Running Back wins open field tackle presented by Linebacker then your chance of raising money from investor increases dramatically.

Who plays Corner Back ?

In NFL, Corner Backs keep up with speedy Wide Receivers. They check receives at line of scrimmage and have speed to follow receivers at each and every step. Great Corner Backs are not fooled buy route fakes used by receivers to find open space.

A startup raising fund faces Corner Back in the form of a Venture firm partner who is technology guru or a domain expert. If your pitch is based on weak technical foundation then this partner will intercept it easily. He will catch up on new technology development quickly. These VC partners are not overwhelmed by speed and direction of developments in technology or market or business environment.They will not be fooled by buzzwords. And finally, if you win them, you are essentially guaranteed to get money from their firm.

— @dpatel2

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