The Life of a Start-Up: "Nauseous Optimism"

I'm not sure why I like this part of the start-up experience: raising rounds of capital is tiring and generally considered an emotional rollercoaster. But I like talking to people about what we're building and the vision, and there is something rather fun in the whole endeavor.

In the past few months I've spoken to dozens of the most successful venture capital firms in the Bay Area and beyond. They have invested capital in start-ups that today are household names. Outside of the "Investment Community" no one has heard of these people, perhaps, but their ability to "get" someone's vision has made a host of web services available to you today -- from Facebook to eBay, Foursquare to Mint. These guys have seen it all, and sit on boards of a remarkable range of companies any of which you would think have changed the world (or, at least, a big part of it...). Entrepreneurs are central, obviously, but someone had to look at a piece of paper or a dodgy website in a particularly crude state, and make a real bet of millions of dollars. Sure they bet on a lot of dogs. Mostly. But they bet on winners too.

The process is standard: All of them give you an hour or so to make your case, and then they make a quick decision as to whether this is worth their time to think about it any longer. It's not science. It's not even art. It's more like falling in love. It's chemical. Maybe something like business-pheromones? So far all of the partners I've met have given me some instantaneous feedback. They are a smart and experienced crowd, so you'd think their insights are crucial, but you frequently get mutually exclusive kinds of advice -- like "whatever you do, turn RIGHT" and "If I can leave you with one thought, in all my years of experience, just don't go RIGHT." Hmmm.... the fact is, they're not giving me instructions, they're giving me IDEAS, and I tend to look at their feedback as "clues" to the right solution. Anyway, if you talk to enough of them, you'll realize that while giving you well-meaning advice, you still have to do what you think is best. Meetings get progressively better, of course, because you learn as you go - what trips them up? What wasn't clear enough that you can get better at explaining? By the fourth meeting your business hasn't changed, but your ability to articulate it has.

But invariably, like dating, you will often find the right fit. A handful of them will totally get your vision. They'll like it. It will resonate with them. You can sit there with them gazing off into the fuzzy darkness, both seeing the sunrise that will come tomorrow. With this group you move to the next step. Digging deeper.

This goes on until the terms of a deal start getting discussed. At any stage of the process a VC could drop out. So even as your optimism grows and the project is totally on track, there is this nagging knowledge that "it isn't over until it's over." And the closer you get to closing the deal, the more excited everyone becomes and the more terrible it would be if the deal fell apart.

Every single one of my friends who have been through this process relish to tell me stories of projects that in their darkest moments -- about to run out of cash, about to file for bankrupcy, with all the VCs deals starting to get bleak -- inexplicably turning around in the 11th hour and closing with remarkable success. They also tell me stories of projects where everything was going perfectly -- money lined up, investors excited, the project in full steam toward certain victory -- when something turned on a dime and the deal went south -- the term "train wreck" is tossed around, with projects at full velocity hitting a wall and just imploding.

And until a start-up is actually generating more income than it burns (and this is itself a moving target because even as you make money, there is pressure and/or motivation to spend FASTER to grow more quickly) a company is almost always looking for new capital. In short, even once you raise money, you're still looking ahead to raising more money. It doesn't really end, at least not in these early days. It ends when you're solidly profitable, when you go public, or when some bigger company acquires you. And so you get used to this.

So here you are on a train moving faster and faster, the excitement of approaching the goal, and the accelerating fear that some tackle is going to hit you from your blindside.

"Hey Michael! How's the start-up going these days?"
"Oh, I'm nauseously optimistic!"
The daily life of a start-up.