Marvin Liao: 13 Lessons on How to Raise Money in Silicon Valley

Marvin Liao: “Congratulating someone for fundraising, is like congratulating a chef for getting ingredients together to start cooking.”

$84.2 billion is the amount of venture investment in 2017. And it's the highest through the last five years! So every startup wants to get the investment and so we share 13 principles Marvin revealed during iForum 2018 in Kyiv this spring yo help your startup get the money!

1. Return on Investment

If you're working on a market that is less $1 billion, no VC would be interested in investing into your startup, cause we only focus on the markets that are very big.

2. Know the Competition

San Francisco is the most competitive market. And one of the most important things I care a lot when I talk to startups: “Who is your competition? I want to understand who are your competitors”. And let me tell you, if you say you don't have the competition, it's a bad answer for two reasons:  

• Every company has a competition in some form. And even if it's true and you have no competitors, it means the market is really small and thus not interesting.
• There is competition and you're an idiot and didn't do your homework! Every business has competition and this is one of the things you should have a good answer for.

3. Differentiation

Every business now, whatever you look at, there's lots of competition. The big question for me as an investor is “Why is your business better than anybody else?”. How are you different and substantially better? And when I say better, it's not like having Google as the main competitor and you're like 5% better. It's a crappy answer. I don't care. I'm looking for a product that is a 100% better than Google.

4. Product to Market Fit

It typically takes from two to four years before a company starts making money. That is what the product to market fit really is.

Really understand your metrics and how close are you to the product to market fit and based on that it will be easier to persuade the VCs and fundraise.

5. Growth and Traction

It's numbers. It's metrics. How well are you doing with your business, how many customers you have, or if it's a software or mobile app, how many users you have. You need to understand the metrics better than the investor.

I might not like you, or I might not like your product, but I can't argue there's traction in growth. And that's a critical thing for startups these days. Basically, growth in traction is a metric that shows that a business is working.

6. The Magic Number

Based on my experience, and that's what I tell every foreign startup when they come to my program (and that's around 350 companies today):

“If you have 40% of your customer base in the US, then you can fundraise. If you have zero customers in the US, then you can not fundraise.”

That is the magic number I've figured out myself, that a minimum of 40% of customer based is in the US. If you do not have that, don't bother trying!

7. The Team

Investors care a lot about the balanced team. In Ukraine I never worry about the Hacker part of a team. Here, the tech talent is amazing. Frankly speaking, the design talent is getting better there. What I've seen with other startups is that it's really hard to be a single founder. It's always better to have someone strong within the technical side, within the sales side, and a UI/UX guru.

This is what allows growing your business much faster.

8. Who You Are

Are you a missionary or are you a mercenary? As an investor, I've always been looking for mercenaries, people who raise money. Any VC cares about it.

At the end of the day, I always want to invest in the missionaries. Of course, I wanna make money, a lot of money. I mean hundreds of millions of dollars.

If your goal is starting a company and then sell it to Google, don't talk to VC. For two reasons:

• You're being dishonest.
• You're better at bootstrapping your business. It's always a good way to keep the money you've invested.

And a tricky question I always ask as a VC: “What's your exit strategy?”. And there's no good answer here.

You shouldn't have an exit strategy as a missionary!

9. Storytelling

You need to know your numbers, but at the end of the day, storytelling is the superpower. Just like the presentation skills. Human beings are naturally wired to getting information this way, and that's the main reason storytelling actually works. How you present and how you pitch is extremely important.

For example, why everyone loves Pixar movies? It's simply because they have great stories.

Pixar spends only 20% of time on drawing. Meanwhile, they spend 80% of time on characters, on the plot line, and on the story line. That's why they're so awesome.

Read a lot of fiction, take acting classes, develop your storytelling skills in every way possible.

10. The Big Thinking

Where do you see the world is going to be? How will your company shape that? It's extremely important!

Most my VC friends want to make money. But ultimately, we all want to change the world. Hopefully, for the better. And quite often it's the vision that makes me invest in some company because we all want to make the world a better place. No one wants to produce the world that you don't want to be a part of.

11. Learn to Network and Build Relationships

Startup founders usually walk up to me and start pitching right away! I usually have up to 20 people just after the talk. Guess how many I've actually invested in? Let's say I have around 50-60 conferences a year. How many of them get the investment? The number is zero!

Learn to build relationship. Learn to think long-term. Learn not to be transactional. Don't sell and pitch right away. It doesn't work!

12. Get the Introduction

I always take meetings with people who've been introduced to me by someone I know and trust. It's like an introduction etiquette in Silicon Valley. It's a great way to filter. Because it's impossible to take all the meetings with people reaching out to me via cold emails and calls. A lot of people complain about that, but it works.

Just think about it: I have around 60k Linkedin connections, around 5k Facebook friends, pretty active on Twitter. And if you can not find a way to get the introduction to me, how the hell are you going to get the introductions to customers? Just think about that. If you can not find the way to get an introduction for the investor, you're probably going to become a crappy founder.

13. Treat Fundraising Like Enterprise Sales

An interesting thing I've found out is that most people who raise investment are actually good at sales.

To Sum Up

Fundraising is not success! Congratulating someone for fundraising is like congratulating a chef for getting ingredients together to start cooking. That is exact same thing. It is nothing. And it does not mean that you are successful. The real success is building a freaking awesome business. And fundraising is just an ingredient over there.

Good luck!