Bertrand Schmitt

Welcome to Episode 47 of Tech DECIPHERED. This will be the first episode in a series of two episodes about Day zero as a founder. Basically, we will talk in Episode 47 about what is Day zero as a founder? We will talk about when is it a good time to start a business, how to validate? Your startup IDs. Of course, we’ll go around three key things: product, market, and team. That will be all for episode 47. You will hear more in our episode 48 about culture, about structure, legal, and about second-time funders. Nuno.

Nuno Gonçalves Pedro

First things first.

Bertrand Schmitt

First things first.

Nuno Gonçalves Pedro

First things first, what is day zero? Day zero is basically to us when you’re really starting your company. You have an idea, you may have done a little bit of market research. You’ve sought through a few things, but you’re about to go and embark on this journey of having a startup or a company of some sort.

Nuno Gonçalves Pedro

The first important thing is, what are you doing? What is it you’re going to do the company on? Is it a services company? Is it a product company? Is it something that you’ve done before? We’re going to start a little bit today in this episode talking about first-time founders. Later on, we’ll talk about the differences between second-time founders and first-time founders. Most of the episode today and then part of the episode next time will focus a lot on first time founders.

Nuno Gonçalves Pedro

But at least you have to have a notion of product or service. What is it that I’m supplying to the market? Second, what is the market? What market am I going to operate in? Third, what is the team? Normally, the team at day zero is you and potentially co-founders. It might be you by yourself, if you’re a single founder or a solopreneur, as we call it.

Nuno Gonçalves Pedro

What do you do first? The first things you need to do is to understand what markets are you going to act on, what products or services are you going to manifest in that market, and what’s the ongoing team into this problem, into this company? That’s your effective day zero start. If you don’t have these things and you’re like, “Oh, I just have an idea for a startup,” that’s cool, but it’s not something you can go and raise money on. It’s not something you can go and do anything on. You have to at least go to a stage where you have a plan, where you have a potential co-founding team, where you have a market that you’re going to operate on.

Bertrand Schmitt

By the way, not all businesses are venture-backable or not, and that might be something we come back to. I would say another point is also around, are you still working another job? Are you doing this part-time during your nights and weekends? Or have you resigned from your previous job and moved full-time on this idea? That’s always a big question.

Bertrand Schmitt

I would say a lot of people, you wonder if they are serious enough when they have been something for many, many months or years and they are still not full-time on it. They still have their previous job. Day zero for me often come when you have made that real-life decision to stop what you are doing and be really focused on this new venture. What’s your take? Do you need to have taken a career break?

Nuno Gonçalves Pedro

I understand what you mean by it. If you aren’t about to create a company itself, an entity will come back to structure later on. If you’re not really putting any resources at the table that are significant, that for me is the bar. Day zero, you have to put some resources at the table, some cash, your time allocation, about to create that entity or you are creating that entity. I’m not so strong about the full-time or not, but there has to be a significant part of your time focused on this.

Nuno Gonçalves Pedro

To your point, if you’re not just full-time, then if that’s been going for a while, if you’ve been not full-time for a long time, then there’s something wrong. Either you think you’re doing a venture backable business, but actually nobody’s giving you money, or you’re not fully in and you’re not all hands on the project and people don’t recognise that type of focus on the startup. There’s something then fundamentally wrong.

Nuno Gonçalves Pedro

In general, it would be good that people are full-time. In general, it’s good that at least the main founder of the firm says, “I am full-time. I am working on this full-time.” The other co-founders might not all be full-time, but at least one person, the CEO ideally, would be full-time. As I said, I’m not as specific on that for the day zero definition, but probably would be a good manifestation at least a couple of months in, that the person is full-time.

Bertrand Schmitt

I think because we all might have ideas, we all might try some stuff on the side, look into something. But I just feel that’s pre-day zero, and the day zero is more clear mark that something different is happening right now. I think even at this one person that is either full-time or spending an incredible amount of time is a clear necessity. Starting an entity is another one, and starting to have a clear idea about the product on the market.

Bertrand Schmitt

You might change over time, just to be clear. That is always true. You might decide to pivot three months, six months, 12 months to three years, four years after the fact, that happens. But having a clear starting point helps you clarify things and try to move toward this goal. I think another thing I like to see is a clear timetable. I think in the past, it has helped me when I started businesses to give myself clear timetable.

Bertrand Schmitt

I give myself six months, 12 months, 18 months to reach specific milestones so that I can reassess. I think it’s quite critical because you can get lost pretty easily in your ideas and exploring stuff and never-ending quest of digging some market or optimising a product and never launching it. I think having a clear timetable is a very important thing. Probably also starting to get visibility on, are you going to do this alone or are you bringing co-founders for the ride?

Nuno Gonçalves Pedro

What is it not? I think if you’re at the idea stage, very high level, you haven’t done much research in any specific market or product, if you don’t have at least this notion that you’re going to create an entity and that you’re going to create a growing concern, a company, then I don’t think it’s day zero. This could apply not only to first-time founders, but also to second or third-time founders.

Nuno Gonçalves Pedro

Some people, when they’re about to go on their second or third journey, they take some time to look at a bunch of things, talk to people, pick their brains, etc. They’re not the day zero of anything. They’ll only be at day zero the day they say, “I’m going to do this. Now I’m going to do this. I’ve decided this is the space I want to act in.” There still might be some pieces to flesh out, but that decision of, “This is now going to be my pursuit,” is for me, a core characteristic of the day zero.

Nuno Gonçalves Pedro

We see a lot of people that prepare pitch decks and they’re like, “Oh, I’m a first-time founder. I’ve prepared this pitch deck. This is an idea I have.” That’s also not day zero. It’s like, “Okay, do you have an entity you’re about to create? Do you have a clarity? Have you done proper research on the market sizing, or is this just a very high-level pitch deck with some bullet points that you put together because you so fancy?”

Nuno Gonçalves Pedro

To the final point I would say on what is it and what it’s not, not everything is venture-backable. Not everything is tech. Not everything is a company that necessarily scales and is product-led. You could have an idea for a restaurant or you could have an idea for a services company, which by the way, normally are not super mega venture-investable businesses, but the process is still the same. The process of defining what is my market, what is the product I’m going to offer to that market, or what is the service line that I’m going to offer to this market? What am I supplying for? What is the team that’s going to be involved in building this up? It’s exactly the same. It just happens to happen in a world that may not be a fundamentally tech-enabled product.

Bertrand Schmitt

Yeah. One of the big difference would be how much money you need to start the business and you need to keep investing from especially external sources to keep the business growing, that would be a big difference, obviously, between the service business as well as a product business. Now, of course, you can also have product businesses that are not VC-backable or yourself make a decision that you don’t want to keep looking for additional external financing during the journey of your business.

Bertrand Schmitt

Typically, one thing I’ve learnt is that it really depends on your market and industry. If it’s extremely fast-moving, if there is a lot of global competition, at some point, just being on your own might not be enough and you might need to accelerate through external backing or you will get left behind, basically.

Nuno Gonçalves Pedro

Moving maybe to, when is it a good time to start? Is it top of the market or bottom of the market? Is it in a good market that you should start a company or on a really poor market you should start a company?

Bertrand Schmitt

That’s always the question. I would say historically, it looks like that extremely, extremely good business have been started at bottom of market. There might be a lot of explanations for that. If you’re at bottom of market, you have to scrap by, you have to be efficient. You might also be forced into the opportunity of starting a business because you couldn’t find a job, you have been let go. It has happened to a lot of very good founders. In a way, that’s the most awful opportunities when you are forced to do something by yourself because you cannot find a job. That’s all the positive for starting in the bottom of market. Let’s remember, Microsoft, Apple were not started in very good markets time. Some of our big BMOs were not started at great times.

Nuno Gonçalves Pedro

Airbnb, I think the whole of BAT, Baidu, Alibaba, and Tencent also were not started at a particularly amazing time. Or they started around the end of the bubble, when they actually need to raise money. They were in the middle of a nuclear war-type thing or a nuclear situation for most investors. Yeah, it’s to your point, it’s the mother of all opportunities.

Nuno Gonçalves Pedro

But it’s very difficult to raise money as well during those times. It’s a little bit like a two-edged sword. If you’re raising on a high, it’s maybe easier for you to raise money. But then to your point, you won’t have to make very difficult strategic decisions because it will be easier for you to raise money. You won’t make the tough calls.

Bertrand Schmitt

But also in bad times, things cost less. It might be easier to get access to compute capacity. It might be easier to hire people cheaply or people you would never have been able to hire before. Supply chain might be easier. You might get some advertising on the cheap. It might come with less money, but you might need less money as well.

Bertrand Schmitt

On the top of the market, I believe it can be dangerous for sure because if you raise a lot, good for you. But if you spend a lot, there would be a payback time if it was not necessary to run the business. Is there a payback in term of dilution or an issue in terms of next financing where your valuation needs to increase significantly and it’s becoming suddenly hard to do, especially if you raise on the high and have to raise again 18 months, 2 years after, and suddenly the markets are not in the same situation? That’s probably the most difficult situation.

Bertrand Schmitt

That’s why I’m always trying to advise people to not push too hard on valuation, get some things at the market that’s reasonable. Even that would be difficult if you are on top of market in terms of valuations that you have to live for. But if you push for the highest valuation and sometimes you might get it, get lucky, it can be a very dangerous place.

Nuno Gonçalves Pedro

In terms of age, when should you start a company? There’s a lot of debate around that as well. Everyone says it seems like consumer companies should be started as young as you can. B2B companies should be started as old as you have the energy to go and do a startup. I’m not quite sure that’s fully true, although we do see a pattern that B2B companies seem to do better when founded by older founders. We’ve discussed some of this research in the past in one of the previous episodes. Sometimes, consumer seems to be done better by younger founders. Actually, sometimes actually even the first-time founders rather than a second-time founder doing that.

Nuno Gonçalves Pedro

That said, to be honest, I’m not sure. I feel when you’re younger in your career, you have less to lose, and so you can probably live on ramen a little bit more easily than if you have a family and you’ve been working for Google and getting paid a million dollars a year. It’s more difficult for you to make that transition to getting underpaid as a founder. But at the same time, sometimes the arc that you have professionally in the career that you’ve had from when you were young until that moment where you decide to finally do that startup, is actually what will allow you to be a better entrepreneur and allow you to do less mistakes even if you’re a first-time founder. I don’t have a very strong view. Maybe enterprise software is a place where older is maybe better. But again, there’s exceptions to everything we just talked about.

Bertrand Schmitt

Personally, I started my first B2B business before graduating from my engineering school in France, so I must have been around 21. It was not easy to start like this. I had to learn quite a bit on the go. I must say it was an amazing learning experience. It was not successful as a first startup, but it was a huge learning and gave me the taste and the love for entrepreneurship.

Bertrand Schmitt

Even if I might not work out, it might still be a huge valuable learning opportunity. But of course, if it doesn’t work, it has a cost. It’s only in your career. You are not getting paid much as a startup entrepreneur. You might actually put the little money you have in the business like I did. It might not be easy financially to be able to afford to do that. There are stuff you might be able to learn in some other business or so early on.

Bertrand Schmitt

I would tend to agree from the perspective that B2C, you might want to go early because you yourself might see trends nobody else is seeing because you are quite young. It’s a new trend affecting new younger generation.

Bertrand Schmitt

For a lot of B2C stuff, it’s often starting with younger people and then building its way up to older generations. I can certainly see some logic. In B2B, you can learn some ropes of businesses and then go on your own after a few years.

Nuno Gonçalves Pedro

Chamaeleon is my fourth company. I’ve done two VC firms and I’ve done two tech companies. The first tech company that I did was actually, think of it as a business process outsourcing play for IT in effect. It was a services company at its base. The idea was to at some point develop product. But I started that just out of college. But I’d been working for three years when I got out of college. I had been working for three years, got out of college, decided to this company.

Nuno Gonçalves Pedro

Honestly, a lot of lessons learnt there, I’ve mentioned it in other podcasts, so I probably won’t belate on it. But it was too early for me. I was still a bit obsessed about learning and learning rapidly. I had the feeling that although I was learning as a founder, I wasn’t learning in a very structured manner. I wasn’t learning with people that could mentor me in the right way. A couple of other realities around the company led us to close down the company. Actually, the company became profitable, which is a bit shocking. The company was profitable, and then we could have continued scaling it, but we decide to close it down.

Nuno Gonçalves Pedro

My second was Drive Capital, which is a VC firm and was a very non-scalable. VC is always rarely scalable. It takes a lot for you to scale a VC firm beyond 10 people, 20 people, etc, as an activity. But I feel that was a work of love. I started Strive around… I must have been 33 when I started Strive. I’d been working for a long time. As I said, I started working when I was very young.

Nuno Gonçalves Pedro

For me, it felt like I was easily halfway through my career. For others, it would feel like I was very early still in my career, but I knew a lot. There was a lot of things to learn. There was a little bit of this jump into the abyss that characterises being an entrepreneur that was particularly true about Strive. I don’t think it was as true about Dreamlink, which was my first company.

Nuno Gonçalves Pedro

In Strive, it was the fact that I was giving up a salary. I was a McKinsey partner before then. I was earning well, I was doing well. I have to leave that behind. I have to go earn very little money. I did do that choice. I did do that choice of moving from really well-paying, very stable, you have assistants, you have nice offices, and all of a sudden you’re starting everything from scratch.

Nuno Gonçalves Pedro

If I knew what I know today, I’m not sure I would have gone through that because it was a very painful process, but it changed my life. Now I wouldn’t want it any other way, so it changed my life. Posteriorly, it defined my life. I did start a tech company in between where I was non-exec. The company pivoted eventually, and I ended up stopping involved fully with the company. It went into a very different direction than the one I wanted to potentially take it on, so I stopped being involved. That one I won’t even count. It was almost like a side gig. It was like Peter Thiel in one of his 10th side gig-type thing.

Nuno Gonçalves Pedro

Then the last one is Chamaeleon, which is the evolution of Strive. It’s the next level of Strive. Again, it was a very thoughtful decision. It was like, “Am I really going to do this again?” A new VC firm, another fund. It was clear that this is what I needed to do, so there was no doubt in my mind.

Nuno Gonçalves Pedro

I learnt a lot from Strive. I learnt a lot on things that we should have done differently on how to create differentiation in the market and how to best serve entrepreneurs, how to fundraise better. Still learning a lot on the fundraising side, to be very honest with you, it’s a very difficult activity of a venture capitalist. But that, I think, it’s a little bit my, I call it hopefully my opus Dei or my magnum opus. Opus Dei, work of God, or my magnum opus, my best work of all time.

Nuno Gonçalves Pedro

Hopefully, it will be the case. We will see. But it’s certainly applying everything that I know from before. From the work I’ve done, from the startups I started before. It was a very distinct decision to the point where I’m now saying, “I’m not sure I’m employable anymore and I’m not sure I care.” We’ll see. Hopefully, I won’t have to care because that will be a good sign.

Bertrand Schmitt

That’s always the question. Once you start to be entrepreneur, your employability might be quite different whether you even want it in the first place. Me, on my last entrepreneurial experience as a founder building App Annie, now Data.ai in 2010, 13 years ago now, it was different.

Bertrand Schmitt

It was at a stage of my life where I had built up more experience, very relevant for my business, B2B SaaS. It was very early in SaaS, but I had this experience, in some experience in mobile as well in my industry. I had experience in the business model, in the industry, in companies that were also of smaller size, 50-300 people companies, which I think is very valuable.

Bertrand Schmitt

People who have experience in huge corporation, as you have experience, it’s not easy coming from a bigger corporate. It might not train you at all. It might train you in a lot of good, interesting stuff, but it might not train you at all in practicality of running a smaller business. So for me, actually, it was very good training ground. I felt spending time in smaller startups, successful startups.

Bertrand Schmitt

That’s something I would advise people who are serious about the founder journey, I think that working in fast-growing startups in a field of interest to you, that can bring a lot in terms of network, business practices, understanding of passion realities, learning how to deal with some segments of potential customers, learning some tricks of the business.

Bertrand Schmitt

I could see when I build a penny that I could leverage all of this. I believe that made a lot of difference with some other entrepreneurs and competitors who didn’t have similar experience, but wealth of experience in the space and were discovering bit by bit what it means to do B2B, what it means to do global scale, what it means to compete in mobile industry. I think that was very helpful.

Bertrand Schmitt

That’s also always a question. Do you stick to what you know in terms of industry? Do you focus on problems you clearly understand? I believe that it can have real value, actually, to do that. At the same time, of course, there are exceptions. If you take an Elon Musk starting a rocket company or car company, obviously, he didn’t have a significant experience there, but he had a deep interest and spent quite a lot of time digging this space before committing.

Nuno Gonçalves Pedro

Maybe to finalize this section, a lot of people think about employability and, “Well, if I do a startup, will I be more employable?” I found there’s very little pattern recognition. There’s people that do startups that end up in jobs that they would have never attained by just going through normal career progression, right? Because their company gets acquired or because they have a huge skill that they develop around a specific area, or they get acqui-hired or something else.

Nuno Gonçalves Pedro

At the same time, it might be that you become two of a generalist in scaling companies, etc, and then it will be difficult for you to join, for example, a large corporation. I personally wouldn’t think too much about employability. I think it’s more of a do you have the passion to pursue the company? That is the positive. Employability, that discussion would come later.

Nuno Gonçalves Pedro

But maybe in a nutshell just to end and put together this section. When is a good time to start a company? I guess any time. Any time is a good time to start a company. Is that the conclusion?

Bertrand Schmitt

There have been many examples of people starting very early, being extremely successful, starting very late, and being extremely successful. So in B2C, in B2B, I think that as long as you are able and willing, there is ability to start a business.

Nuno Gonçalves Pedro

Switching to our next section, which is around how to validate a startup idea. How do you think through your startup idea? You have this startup idea, you’ve maybe looked at the market a little bit, etc, but how do you actually validate it?

Bertrand Schmitt

I think that always a big question in a very simplistic manner as there has always been this debate about are you a painkiller or a vitamin? Typically, especially if you take typical investors, there is probably a preference for your business being a painkiller. Because a painkiller, you are solving something clear, acute that people are willing to buy and to buy immediately.

Bertrand Schmitt

If you have a headache, if it’s painful, you want it solved. If you are proposing a vitamin type of product, it’s a different story. Your market might be smaller, you need people who are thinking long term about something potential and being careful about how they plan the future. It might be a much longer tough for sales. There is no urgency.

Bertrand Schmitt

That’s a very typical question. Personally, I believe painkiller is a good approach because it’s a good focus, because again, there is clarity of urgency and there is clarity of need. Obviously, you want something that is once taken, you still need more. You want to be careful about one-off type of product. But I think there is some value to think with that framework in mind. It’s obviously a very simplified framework.

Bertrand Schmitt

I saw someone adding candy on top of the choice, so painkiller, vitamin or candy. Candy, obviously, would be more for fun, for entertainment type of product. Probably more typically what you could find in B2C type of environment. Of course, you have way more detailed frameworks to validate your ID.

Nuno Gonçalves Pedro

The problem with the painkiller, vitamin and now candy framework is most of the founders don’t know, or they get it fundamentally wrong. Because what happens very often is they do a market assessment and they look at the market. It might be actually even a market that they’re coming from. As we were just discussing that they would have subject matter expertise on, they said, “There’s clearly this problem. I believe this is the right solution for this problem,” but they don’t take into account a variety of things.

Nuno Gonçalves Pedro

They don’t take into account whether it’s the path of least resistance for user flows. They don’t take into account actual competition in the market. They grossly overestimate the size of the market, which is very common. All entrepreneurs normally overestimate the size of the market they’re going in. They basically don’t assess the forces of the market that they’re going in properly enough. Because of that, they might end up with a vitamin, although they thought they had a painkiller. It’s a nice to have. It’s not really something I absolutely need.

Nuno Gonçalves Pedro

My experience tells me this happens actually a lot. If you’re doing a company and you’re a first-time entrepreneur, and if you think you’ve nailed that, if you think you’ve nailed the market and the product assessment, go back to seeing it again because you probably haven’t. The odds that you will have nailed it in design mode are almost zero.

Nuno Gonçalves Pedro

How do you nail it? Well, you nail it by, shockingly enough, talking to potential users. This is true of both consumer and B2B. You go and talk to potential users, you go and talk to potential customers. I’m differentiating users from customers because users are people that use your software. A customer is someone who pays for your software. They’re not necessarily the same. You understand that also in B2B.

Nuno Gonçalves Pedro

It might be your customer is the head of IT of a company, whereas your users, it might be is DevOps team, but the guy might actually not use your product. So figure that out. Figure out the different angles around what are the user flows that have attached to them that are not being addressed by products today? What would be potential solutions that you think you can come up with that would be actually distinctive in that market?

Nuno Gonçalves Pedro

Finally, how could that create a trajectory towards product market fit? We’re still in design mode, to be clear. You haven’t engaged with anyone beyond just figuring out market and assessment, etc, we’re not in development yet. But you should figure this out before you go into that development cycle because you do need to design the product, the service, the experience, and you have to start there.

Nuno Gonçalves Pedro

A lot of user feedback, a lot of conversations. In B2B, it’s particularly important because those are more likely going to be your pilot test cases. They’re going to likely be your first customers or your customers that will define how the product will evolve in the first place.

Bertrand Schmitt

Talking to users, potential customers is super helpful. I think sometimes there is value to just jump in the market as long as you can build some minimum viable product. As a result, you can get even more clear feedback because a lot of people have trouble to give you feedback if they cannot touch or try the product, be it physical or digital and sometimes slides or roadmap, or just doesn’t cut it.

Bertrand Schmitt

So there might be value in that to jump straight in with some hopefully good ideas. Of course, you can talk around, but doing the more detailed advanced user understanding once you have something and iterate pretty quickly. But you have to be ready for that, that’s for sure. I think speed all around is a big criteria when you are a startup. How do you organize yourself to move fast?

Nuno Gonçalves Pedro

Creating that speed early on, creating that speed to do the assessments, but also not cutting corners dramatically without actually figuring out. It’s all 80-20. To be very clear, this is not a McKinsey project. You’re not going to try and figure out a market size to the Nth degree. You’re not trying to figure out a waterfall way of deploying a project. You are going to be very agile still as you’re developing stuff.

Nuno Gonçalves Pedro

It’s 80-20. It’s about getting that 80% right with 20% of your effort. That’s basically it. That said, I’ve seen very shoddy work on assessment around competitive intelligence, which you can do very early on; market sizing, which you can also do very early on; understanding if it’s a good or bad market, the dynamics around the market. We’ve already mentioned that before, you can’t win in a market that’s crap. You just can’t.

Nuno Gonçalves Pedro

You can be the best entrepreneur ever, but you can’t. So having that assessment pretty well done early on is very, very, very important. The opposite is also true. If you’re riding on a market that has tremendous amount of momentum where there are some positive dynamics around competition, that’s a plus, right? Then you have a great, great tailwind.

Nuno Gonçalves Pedro

It’s not just a market that’s cool. I think people sometimes get confused on this. Even, to be honest, Venture Capitalists get confused on this sometimes. It’s not like, “Oh, it’s GenAI. It’s cool. Everyone’s doing GenAI.” It’s like, yeah, everyone’s doing GenAI.” That’s the key part of that sentence. Or at least everyone’s saying they’re doing GenAI

Nuno Gonçalves Pedro

If that’s the case, maybe that market is a little bit too occupied or you have to figure out what’s your lane in that market, what is going to be distinctive in that market. But really framing that, framing why is it a tailwind or not is quite important.

Bertrand Schmitt

I think people don’t understand enough how important is surfing on a big trend, big underlying trend that’s gathering momentum and growing up and having a positive impact. Ideally, you sit before others, before everyone comes. So that you are there early. Ideally, you do that not too early either, because if you are 10 years early, that’s very painful road in the wilderness. But I’m a big believer of trying to track these big underlying trends in your industry and try to surf on them. The bigger, the better.

Bertrand Schmitt

We have seen some very big trends happening. In the past, we saw the move to PCs, the move to the web, the move to mobile, the move to SaaS, to cloud computing. Now we see a move to AI. So there are some very big underlying trends that if you are smart enough to position yourself enough, you can benefit tremendously for it. Because suddenly, even in a tight economy, you might have pocket of investments just because companies believe, “Yeah, I have to be positioned on AI. I have to have something there.”

Bertrand Schmitt

So money will still be there while it might not be there for other products. I think it’s critical, at the same time, again, you want to be there early enough that you are not just there when everyone else is there. But if you are too early and we can pick VR, for instance, we had a recent episode on VR, if you are there too early like VR in 2010, that’s not fun. It can be very painful, except if you are Oculus. Beyond that, nobody has really profited from being there in the 2010s in VR, while at the same time you could see on the other side a SaaS moving full speed, mobile moving full speed.

Bertrand Schmitt

You want to be very careful. Personally, I have experienced mobile before the iPhone. Before the iPhone, if you were Carrier, that’s great. If you were Nokia or BlackBerry, that was great. If you were anything else trying to focus on content, on gaming, on mobile web, that was a nightmare. Nothing was happening. Data plants were simply too expensive. There was no app stores. You had to deal with thousands of carriers across the globe to have a chance to distribute your product, and they would take the lion’s share of the revenues.

Bertrand Schmitt

It was a horrible, horrible times. I can tell you you will not feel a lot of tailwinds in your back if you were in mobile. Again, not being a Nokia, BlackBerry, or Carrier in the early 2000s. But then what a difference when the iPhone came about. Suddenly everyone started to care. There was an ability to distribute apps easily, cheaply in a central way. Data plants were suddenly cheaper.

Bertrand Schmitt

I think since both of the coin in that industry, in the mobile industry, I can tell you that being there early can be very painful. At the same time, being already there when stuff start to accelerate was like magic because suddenly everything become easy, at least early on. I mean easy in the sense of things can accelerate pretty quickly if you have the right offer.

Nuno Gonçalves Pedro

I agree with everything that you just said. I would just add that this assessment of market is actually generally complex. Market definition is something that people spend quite a bit of time on. Really, I’m a big believer that you have to do the top-down exercise of market definition, but also the bottom-up exercise of user flows, what users are being served, how does it work. From there, because it’s a very bottom-up exercise, figure out if actually the market definition is still correct, because it might not be.

Nuno Gonçalves Pedro

It might be that you realize as you’re looking at the user flow that it might actually not be the market that you think it’s in. For example, if it’s B2B, the purchaser of your system is not exactly who you thought it would be, and the user might not be who you thought you would be either. I’ll give you an example of the consumerized enterprise space.

Nuno Gonçalves Pedro

For a long time, everyone’s like, “Oh, this thing about giving people the ability to… For example, scan receipts and send to do expense reports, etc, is stupid, right? Because you’re selling this as a consumer thing.” Actually, no, it’s brilliant because if you use it and you use it in your company, at some point, you go back to your head of IT or whoever is on your corporation and say, “Well, I’m using the system. Can you guys just buy this for the entire company instead of me paying this and then expensing it to the company?”

Nuno Gonçalves Pedro

From a sales perspective, it’s also much easier because if it’s a lead gen, I can go to you and say, “Well, Mr. Head of IT, you’re saying we need to go through a trial? No, we don’t. We’ve been in production with your company for six months. We have 10 users on your company that they’re paying out of pocket for this service.” That’s how companies now like Expensify and a lot of other playbooks that we’re seeing today around consumerized enterprise, Superhuman, Expensify. That’s how the playbook was created.

Nuno Gonçalves Pedro

Partially, was by accident. It wasn’t someone that sat down and had a brilliant idea. Later on, they figured out the brilliant idea. But initially, it was this notion, they started realizing these people are bringing these services onto the company in live production. So the easier we make it for them to integrate with the existing systems in their company out of the box, the better for us. That’s how some of these guys have done so well.

Bertrand Schmitt

Yes, absolutely. Maybe to talk about mission statement, vision statement, I think that’s always a useful exercise. Some people do it right from the start, some wait a bit more. To clarify, so what is a mission statement? A mission statement is trying to describe, typically in a single sentence, the purpose of your company’s existence. It’s talking about your business intention.

Bertrand Schmitt

It’s hopefully quite clear cut for vendors, customers, investors. Where a vision statement will be more about what is your long-term view of the world and how you fit into that, what you hope to impact… How you hope to impact the world. I think there is some volume to start to think carefully early on about this because that let to talk and sell and explain what you are going on to others.

Bertrand Schmitt

I like that duality between mission and vision because the mission is more practical, more short-term typically, and the vision typically would be more long-term and share some perspective about your true long-term goal.

Nuno Gonçalves Pedro

Exactly. These things need to be adapted in time. It’s very rare that you have a very amazing, clear vision day one, and somehow that doesn’t change. It’s also very clear that you might define the mission of your company day one and it doesn’t change. I think things change. I’ve seen very few examples where they don’t. But have a little bit of the… Rather than going to distinction, the strategy is distinction on what is mission, vision, strategic objectives, and all that nomenclature, I would say have a clear big picture is what I would call.

Nuno Gonçalves Pedro

What is the big picture? If this goes wildly successful, what are you trying to build? This is very important, not just because of pitching and trying to get people to give you their money, be it VCs or Angels or whatever, but it’s very important because it allows you to calibrate what the core objectives are and the core values of what you’re going to develop. We’ll talk about values in our next episode, but it will allow you to figure out how does that evolve. How do I make this team evolve? What value system do I want to create?

Nuno Gonçalves Pedro

What culture do I want to create in the end for this? If you don’t have that final post, this is what I would like to get to, it will be very difficult because you’re just doing a lot of stuff at the same time very tactically. You can’t see the end picture or you don’t have a vision on the end picture, it will be very difficult to achieve it. I do think it’s important to have these discussions early on.

Nuno Gonçalves Pedro

The broader, big discussions on what does this become, what options would we have if it scales really well, but also if it doesn’t scale? If it doesn’t scale, what would we think we can do? I don’t think you should have these discussions all the time. It’s like in some ways then you’re never really executing, you’re always thinking. But you should do it on a regular basis.

Nuno Gonçalves Pedro

Maybe it’s every six months, maybe it’s every year, maybe it’s when something really worked poorly, launch of a product or launch of an app or something, and that triggers that discussion. But you should have those discussions on a regular basis.

Bertrand Schmitt

Totally makes sense. Maybe we can focus on three key things. When you have a business, you want to be clear about your product, your market, your team. Three key area focus early on. Let’s talk about modes, distinctiveness, what’s your take on this? My perspective is that I always try to think about, what can you build that is unique and that is not easily copied by others?

Nuno Gonçalves Pedro

Can you come up with this on day zero? It’s tricky in many cases. It might be just engaging in it, just actually starting to develop a product, going through an MVP, you start having some inklings of what might be very different from what exists in the market out there. That said, having that always in the top of your head or top of your mind is essential. If you can’t articulate what is unique about your company or your products or your services, it will be very, very difficult for anyone to understand it. Investors in your company, potential customers or users of your company.

Nuno Gonçalves Pedro

If you can’t articulate it yourself, how will others perceive it? For me, that’s pretty much why moat matters so much. It’s not just we venture capital. It’s like, “Oh, if you don’t have a moat, we don’t invest because then it doesn’t make sense. If you don’t have any sources of this things and why would we invest?” It’s more than that. It’s this notion internally of the founder, CEO of the company that you understand clearly what you’re developing that is very unique in the market. Now, this is not uniqueness for the sake of uniqueness.

Nuno Gonçalves Pedro

This is very, very important because moats come under very different forms. This is not unique for the sake of uniqueness. A moat could come as far-fetched as user experience could be a moat. The user experience is so clean that people just prefer your product to anyone else in the market.

Nuno Gonçalves Pedro

It might be technologically it’s not better. It might be the product itself is actually not better at the core of U2 utility. But just because of user experience, it might win. It might be that people really want to work with you because your customer support and customer success, if you’re in the B2B space, is amazing. It’s top-notch for the space you’re in.

Nuno Gonçalves Pedro

When we talk about moat, we’re not always talking about product and technology moats, which are the classic moats that people would identify. A product moat, being that your product is clearly distinctive and the utility that it supplies to its users, clearly distinctive, clearly different from anything that’s out there. It just provides a different type of utility or a much better utility. Or a technology moat where there’s pieces of your technology stack that is so significantly different from anything that exists out there that, by itself, it constitutes, again, a source of distinctiveness.

Nuno Gonçalves Pedro

Again, most people think about moats as product or technology moats, but actually, there’s all sorts of moats. There’s UX, there’s customer service, customer support. There might be client moats. There might be clients that they were never going to switch because their process to adopt, for example, a new system is so complex that their ability to just switch out of that company is very, very low. That’s a moat.

Nuno Gonçalves Pedro

Again, think through that. Be clear on what is unique about what’s happening with your company as you’re building it. Because anyone that wants to give you money that is half-smart will ask you at some point, “What’s unique about you guys? Why do your clients buy you or pay for your service? Why do your users use you?”

Nuno Gonçalves Pedro

If you don’t have that answer, chances are you’re not going to get a good answer from the other side either. Because you’re navigating without having any clarity on where you’re heading to.

Bertrand Schmitt

It’s not easy because sometimes you might trick yourself or you may be having differentiation when you don’t really have. Ultimately, it would be proof in the pudding on how you keep users and how users don’t leave your product or service. I think, obviously, a big source of moat is user virality. If you can make a product that is very viral, that’s a big difference.

Bertrand Schmitt

Another one, to keep on laying some examples, some companies are very good at dealing with government. Basically, they know how to sell to governments. It’s a very specific type of buyer. There is an opportunity there, because typically, startups are not great at selling to governments.

Bertrand Schmitt

If you have a focus on that, like few tech companies have been doing, I think some of them managed to be very successful, because the competition might not have been so strong as you could think. Even some companies might have been lazy working with government.

Bertrand Schmitt

A great example could be SpaceX, obviously, in terms of being very good at dealing with very few customers on NASA at first, and then growing from there, and being there at a pivotal time when NASA was ready to work with startups.

Nuno Gonçalves Pedro

The pivotal piece here that is often mistaken is we’ve been talking about these elements of moat. It’s new language, but we’ve been talking about it for a long time. If you go back to Porter and his work on strategy and the Forces, he talks about competitive advantage.

Nuno Gonçalves Pedro

Competitive advantage is a moat. It’s the same thing because competitive advantage assumes sustainability. It’s in the definition of Porter’s competitive advantage that it’s sustainable for a period of time, or until such dramatic market conditions, et cetera, et cetera, would change, or until some of the forces would dramatically change, like regulation, market, et cetera.

Nuno Gonçalves Pedro

Again, you’re looking for a competitive advantage. If you do not have it, you cannot compete. It’s the proof, literally, in the pudding, as I said. When people ask you moat and you’re wondering what you mean by that, it’s like, if you don’t understand it, then how are you competing? How do you compete if you don’t have a competitive advantage?

Nuno Gonçalves Pedro

We know a lot of companies that shouldn’t be competing and don’t have competitive advantages and all that. Cool. But still, it should be pretty central to the leitmotif of your company, what defines your company. If you don’t think too much about it, then chances are you’re going in the wrong direction.

Bertrand Schmitt

Other proof will be early because you will know if you are winning or not winning in the marketplace. Are you getting new clients? Are you fighting to get a deal? Do you get the deal all the time or some of the time? Why are you losing the deal?

Bertrand Schmitt

On the medium term, once you have clients, you will see, are clients staying? Are they spending more money with you? On the contrary, are they leaving? You can start understanding it early, and you have to keep trying to learn from it because what might get you the first deal might not get you the second deal, so you have to be very careful.

Bertrand Schmitt

Obviously, when you are dealing with consumers, it might be a bit different on understanding exactly what you miss, but you have different ways to understand why customers are buying or not buying your product.

Nuno Gonçalves Pedro

Exactly. We talked about moat and what are the sources of the instinctiveness. As Bertrand mentioned, we normally look at product, market, and team. The reason why we look at product, market, and team is likely that the sources of moat and distinctiveness or competitive advantage will be coming from there.

Nuno Gonçalves Pedro

We’ve also talked about this in the past. Sometimes when we discuss product, there’s an underlying technology that gets linked to it, when we talk products like product and tech. At the end of the day, market, we’ve already talked quite a bit about around market definition and what market constitutes. Is this a tailwind market or a headwind market? Doing competition analysis, all of that stuff, we’ve talked quite a bit about.

Nuno Gonçalves Pedro

On the product side, we’ve also talked quite a bit about, it might be that you’re a services company. If that’s the case, all the same principles apply, the principles of how do you provide distinctive services. If you’re a consulting firm, what’s unique about your service proposition?

Nuno Gonçalves Pedro

Last but not the least is team. Team is also a little bit like a product. You’re also selling yourselves. It’s always fascinating to me when I see a founder that comes and pitches to me, even in very early stages of a company and underpitches. What I mean by underpitches is they have an amazing experience and they’re selling very, very superficially that experience.

Nuno Gonçalves Pedro

You need to be very good at selling yourself. You need to be very good at selling yourself. Because actually, if you’re raising, let’s say, money from friends and family because you need that money to get to the next level, whatever, it’s very likely you won’t have a full launch product. It’s very likely that we can’t observe that. It’s also very likely that the market definition is still emerging. You’re in a market, but it’s still emerging.

Nuno Gonçalves Pedro

But the one thing for sure is you exist and you’re the founder and CEO of this company. If you do not know how to sell yourself, chances are you’ll have a lot of difficulty selling your company, and selling the product in your company to your customers, and selling yourself when you go to fundraise when you need to raise a lot more money, and selling yourself to any stakeholders that you interact in the business. That matters dramatically. That ability for you to pitch yourself, to actually say, “This is what’s unique about me and what makes me be particularly well-positioned to do this company.”

Nuno Gonçalves Pedro

If you can’t answer that question really, really well, you have a problem. If someone says, you’re going to do a company that’s going to address deep learning in this specific industry, let’s say, oil and gas, and you can’t articulate why you and your team are better equipped than most out there in the market, as the least common denominator, then you’re not going to get the money. Not at scale, for sure.

Nuno Gonçalves Pedro

Because why would I give you that money? Why are you the right person to do this? Obviously, with traction and as you move along the company and as you go to the next level, there might be things that show up and that might make that more interesting. You might need not to pitch yourself as much as you would at the beginning.

Nuno Gonçalves Pedro

But at the beginning, you need to be very, very articulate. What’s your superpower? It can also, as I mentioned before, be a moat, be a source of distinctiveness, the one-out-of-one person that knows that space. That’s a pretty significant, distinctive aspect about you.

Bertrand Schmitt

I would say it’s ABS always be selling. I think when you run a business, you need to attract not just money, investors, not just customers, but employees, partners, work with others. It’s a constant. You have to sell who you are because initially, as a founder, you are identified with a company. What is your business doing? You end up having to keep selling it.

Bertrand Schmitt

If you are not doing it in a good way else, you don’t want to do too much where it’s not necessary. You have to adapt to your audience, obviously. But you have to be able to do it and to do it well and to do it constantly, and I would say relentlessly. It’s definitely a big part of the game if you want to do anything.

Nuno Gonçalves Pedro

A good segue of that is, who do you need to have on board early on? You need to have on board people that are core constituents of your team that you can afford. That you can afford is very important. That you can afford. Because they’re willing to go there for mostly stock, a little bit of pay, or you have enough cash that you’ve raised for them to come on board, that can constitute the kernel of what’s going to be that moat or that set of moats for your company.

Nuno Gonçalves Pedro

If it’s really deeply around technology that your moat will subside, then with all due respect, you can’t just outsource your entire technology team. That doesn’t quite work. Because obviously, you could own it and have invention rights, but if it’s not your engineering team, then it’s some other engineering team doing it.

Nuno Gonçalves Pedro

If, for example, a core characteristic of your moat is the fact that you have very deep subject matter expertise and you do not have it as a founder and CEO, you need to hire for that or bring in a potential co-founder that, again, gets that gap taken care of. Very, very important.

Nuno Gonçalves Pedro

It’s not to say that you need to have everyone in-house. You don’t have the resources to have everyone in-house. You need to pick and choose. You need to pick and choose what is core to your kernel as a company and what is not core.

Nuno Gonçalves Pedro

If that means, for example, you’re doing a mobile app and actually you think you can outsource easily a lot of, for example, the frontend, because what’s distinctive about your mobile app is really the backend, no problem. No problem whatsoever. You can outsource your frontend. At some point, you’ll probably need to bring it in-house when you have the resources to do it. No problem.

Nuno Gonçalves Pedro

What doesn’t work, and I’ve seen some companies in the last six months, is two or three people, core people, they get handsomely paid because they’ve raised a little bit of money, they get paid or handsomely paid, and then everything is outsourced to some guys in the middle of nowhere somewhere. No problem with some guys somewhere in the middle of nowhere, but the quality of what they produce might not be necessarily amazing. If the quality

Nuno Gonçalves Pedro

of what they produce is amazing, then the guys that are out there somewhere might, at some point, decide to do a product that will compete with yours, even though you probably have invention rights and all that stuff. Not unheard of. Again, pick your battles on outsourcing versus what you need to have in-house.

Bertrand Schmitt

It’s a key point. I agree with you. I’ve seen so many founders outsourcing the key part of their business, not running it tight, and ultimately, it goes nowhere, because they are not able to deliver a product, or they are not able to deliver great product, at least what could be defined as great early on, or they don’t iterate fast enough. You need to be very careful about that early part of the game.

Bertrand Schmitt

If you decide to be in technology, and guess what? You need to have technologist, you need to have people who understand technology, who live on brand technology, and you need that early on versus too late in the game. For sure, there are some function you cannot have early on simply because the people you would need, you need them for a week, you need them for a very part-time.

Bertrand Schmitt

You have to find a balance, not everything is full-time. Usually, it means that early on, you might also over-index on generalist, people you can touch different things. You don’t want to start just with a deep database expert, and you have very little need just for that early on. You need people who can touch a bit of everything. That would be probably your initial approach.

Bertrand Schmitt

The first 10, 20 people, people who can do a lot of different things, backend, but even frontend as well. You might want marketer who can do different things from some planning to execution to emails to social networks. Are they the best at everything they do? Probably not, but at least they can do a bit of everything and have the right attitude and mentality and focus on stuff that work better. Once you discover stuff that work better, you can invest more in that direction.

Bertrand Schmitt

I think it’s a game of finding the right generalist usually early on, and then moving on to specialist experts the more you grow the business and the more you professionalise even more the business. But that outsourcing is a key part of the game—what do you outsource, what you don’t outsource, what you build in-house.

Bertrand Schmitt

When you need more money in order to get financing, that would be obviously a big question. People will try to understand, how is it done? Do I trust these guys when they say they are deep tech companies, but actually everything was outsourced? That’s not coming to an [inaudible 00:52:02].

Nuno Gonçalves Pedro

I will reframe. I think we’re probably agreeing. I don’t think it’s generalists-generalists. We’re talking about people that have broader set of skills within a specific domain. That’s why we saw full stack engineers. Everyone wants to do full stack engineers because a full stack engineer, by definition, can do frontend, backend, and a bunch of other things.

Nuno Gonçalves Pedro

We’re not saying generalists then, as in the guy can do engineering and can do sales. We’re talking about broader set of skills within a domain.

Bertrand Schmitt

Within a function, yeah.

Nuno Gonçalves Pedro

Within a function. Just to make that clarification there. I would just say one minor point. There are functions that normally come later in the history of companies. I always get a little bit startled when I see, for example, people hiring HR very early, sometimes there might be good reasons for it, but I always get a bit startled. I’m like, “That’s surprising. Why are you hiring HR people so early?”

Nuno Gonçalves Pedro

First 10 employees, you have an HR person or a recruitment person. No problem with HR people. I think they’re amazing. They create a ton of value, but it seems very early.

Nuno Gonçalves Pedro

The same with marketing in some areas of SaaS. You have marketing. At some point, you might have more marketing in sales. I also don’t understand that. Unless your product-led growth motion is clean and really works well at scale, it surprises me a bit as well.

Nuno Gonçalves Pedro

I think there are some functions that you’ll see surprises. People will be like, “Why do you have this?” Again, if there’s an elephant in the room that you perceive that people that are talking to you, et cetera, perceive that there’s something strange about, explain why that person is the right person for that.

Nuno Gonçalves Pedro

It might be what Bertrand was just saying that person is a little bit broader in terms of their skill sets and therefore fits that stage of the company a lot better.

Bertrand Schmitt

Maybe just to add to your point, that’s always something that surprised me early on, let’s say, less than 50 people, you see some companies who present themselves as tech companies, but they have way, way more sales and marketing people than engineers, for instance. Like, what? Seriously? Below 50 people, and you have way more in sales and marketing than people developing the product? I think it’s typically a mistake.

Bertrand Schmitt

I’ve seen very few exceptions. Usually, it ends up being a product that are barely products that are barely differentiated. I would say maybe even service companies that are hiding as product companies, but ultimately, you keep opening more to see what’s going on inside and you discover a bunch of professional services people, for instance. That’s a clear sign there is product issues. It’s very tough to go back.

Bertrand Schmitt

I’ve seen some companies being smart about trying to use professional services to understand more their clients, to understand more what to automate. But typically, it’s a culture very hard to change. If you are really a product company, you want to be very careful from the get-go to keep putting your resource to improve the product directly itself versus setting people to hide the issues or correct the issues all the time.

Nuno Gonçalves Pedro

Exactly. Maybe this leads us to our last topic, which is funding. I don’t know if this needs to be funded. There needs to be money to pay for resources. You need to use cloud infrastructure. You need money for that.

Nuno Gonçalves Pedro

One of the typical conversations is around self-financing, bootstrapping versus VC financing or third-party financing. My advice is very simple. It’s whatever money you can raise with the least possible strings attached.

Nuno Gonçalves Pedro

If you need capital to proceed, you should raise it. If someone is willing to give you that money with the least possible amount of strings attached, you should take it. Post the simplistic approach to something that’s actually naturally complex.

Nuno Gonçalves Pedro

Bootstrapping can work really well. I think bootstrapping works really well until you have a very clear view of what product you want to develop, et cetera. To be honest, the cost of development these days is so low that it might even lead you through an early version of the MVP.

Nuno Gonçalves Pedro

Given the bull days that we had in the last 10 years, we’ve seen a lot of founders now coming to the market like, “Oh, I want to go and do this company unless I can find funding to get to MVP.” I’m like, “Why?” If you can put in 25K and it gets you through MVP, which in some cases, it might, 25k might get you through an MVP, why wouldn’t you do it yourself? Why wouldn’t you derisk that part to investors and therefore also get less diluted once you start getting funding from investors?

Nuno Gonçalves Pedro

There’s definitely a lot of discussion around, when should I go and raise, how much money should I raise, et cetera. If you can raise a bunch of money with a really nice valuation that’s very non-dilutive to everyone involved in the company, the founders, in particular, when you start, go ahead. That’s great. As we’ve discussed also before, you’re now carrying a larger valuation than you’re worth. You also have to be careful about that.

Nuno Gonçalves Pedro

But right-sizing rounds is difficult. You can do the bottom-up exercise of, “This is the cost I’m going to incur,” all of that that gives you already a view of what’s the minimum you should absolutely raise at a certain point in time. But very, very honestly, this is all deeply connected to where you want to get in terms of your go-to-market.

Nuno Gonçalves Pedro

It’s like, “Where do I want to get with my product, therefore, where would I want to get with my product in the market, which is the go-to-market?” Where does 500K take you? Where does 250K take you? Where does $500 million take you if you’re raising a huge series, whatever, EFG, or whatever?

Nuno Gonçalves Pedro

Again, having that clarity on what does that cash give you, how does it support your budget, for me, it’s pretty structural planning. It’s pretty structural strategic planning. I know it’s difficult when you’re starting a company to figure out what your top line is going to look like, no clue, but you should have a very clear view on what your bottom line looks like, in particular, your expense line looks like, and what do you need from it, the ability to deliver. That would be my advice to founders at this stage.

Nuno Gonçalves Pedro

Really spend the time doing even some detailed budgeting on your expenses and what you need the money for. Take into account plan Bs and plan Cs and think a little bit through plan A of creating top line and where should you create revenue and how, but just nail that cost moat, first and foremost.

Bertrand Schmitt

What I’ve seen as a clear tale that there is something wrong is to raise a shitload of money, millions of dollars when you don’t even have a product, you just have a business plan. I think it’s bad practice. I’m not sure I’ve seen any success stories on that moat. Maybe you have seen, I don’t know.

Bertrand Schmitt

But I think that’s something to be quite careful. Sometimes it might work, but I’ve rarely seen that. I think it’s quite critical to make sure that you build step-by-step your valuation, the amount you raised. There is not such a big disconnect between the two.

Bertrand Schmitt

There have been many known stories of companies, where because the founder was very famous, he got 10, 20, 30 million all at once. No product, no nothing actually. Ultimately, all the money was wasted. I feel it’s pretty sad when you work like this.

Bertrand Schmitt

Sometimes there might be pressure, “Oh, this is a very hot entrepreneur, very hot industry.” But I think it’s wrong for everyone involved, honestly. I don’t see what’s worse than putting those tons of millions into something that doesn’t deliver anything.

Nuno Gonçalves Pedro

Rightsize it, but rightsize it for the moment of time that you’re in. Rightsizing two or three years back would have set probably 18 months runway. Rightsizing it for now might be 24-30 months runway.

Nuno Gonçalves Pedro

If you can raise that much amount of money, then you should. But I agreed with you, absolutely, you shouldn’t over-raise. In some cases, sometimes it happens where companies do a hard pivot, but it’s a hard pivot to nothing very clear. It’s like, “I am pivoting away from my business.” “What’s your next business?” “I don’t know.” I’m like, “If you don’t know, how about you send us the money back until you do know?”

Bertrand Schmitt

I agree with that. I think that I would be quite shocked to hear that. I think if there is a clear plan and if the founder and the team are very strongly believer in it, I think they should probably have the opportunity to do that change. At the same time, you could argue potentially. It could be the time to say, “Hey, by the way, we are going to do that. I’m ready to send back the money if investors are not believing enough into the new plan.” That would be a clean approach.

Bertrand Schmitt

But I would say at day zero, your financing would be typically from your own money, friends and family money. Yes, you want to bring enough money on the table, so you have a good chance to achieve some milestones. That’s always the question. You have to be realistic about your milestones and add some buffer so that you know what could be next.

Bertrand Schmitt

Obviously, friends and family, you might want to be careful about how you are dealing with them. I’m a big believer to try also to use standardised agreements. If you take the Y-combinator agreement, for instance, that helps everyone not to abuse the party in some ways but leverage some existing market-standard contracts.

Nuno Gonçalves Pedro

We love the MVCA template for Series A. We use it actually starting on Series C, which sometimes pisses off our founders early on. But then they realise the value of that. Because once they’ve done it with MVCA, Series A docs, any other round that comes after either is within that or a custom thing, so you know if it’s out. I fully agree with that.

Nuno Gonçalves Pedro

This concludes our Episode 47, our first of two episodes on Day Zero as a Founder, What Should I Do?

Bertrand Schmitt

Thank you, Nuno.

Nuno Gonçalves Pedro

Thank you, Bertrand.