🧰 Venture Tools #003

Signals - RAF Fighter Pilots and Uber Engineers

💡Insight - Signals

At the outbreak of World War II the RAF needed to make rapid decisions on who to train as fighter pilots. They asked people two simple questions: 1. Have you ever owned a motorbike? 2. Do you own one now? The ideal responses were 1. Yes and 2. No. The recruiters were optimising for candidates who were brave enough to ride a motorbike and smart enough to abandon the habit.

In the early days of Uber there was huge pressure to hire the best engineers rapidly. So Travis and the team came up with a way to shortcut the hiring process. For every engineer that successfully completed their hiring process, they would ask ‘Who are the best 2 engineers that you have ever worked with?’ Uber would then proceed to send those 2 engineers unconditional job offers. No interviews, no tests, just show-up and you’re hired.

In both cases it was imperative for decisions to be made quickly and with a relative paucity of information. When humans lack the necessary information to make decisions, we rely on ‘signals’ or heuristics.

In the funding process investors rely heavily on signals to decide who proceeds to the next phase of the process and even to make investment decisions. Given the funding process is still relatively opaque (particularly for first-time founders), there is still confusion as to what investors are looking for. This leads founders to giving the wrong signals.

Classic examples of this include early stage founders asking to sign an NDA before sharing a basic deck or using an investment bank to raise your seed.

The best investors have a deluge of deal flow. However impressive your startup is, if you’re sending the wrong signals you will struggle to rise above the noise.

Alex Macdonald @alexfmac

Fundraising is still opaque. First-time founders rarely have a good understanding of what investors want to see. Here's are some common things founders do which they think are positive signals for investors, but are actually negative ⬇️

---

🛠️ Tools

1. Investor database with contact information for 2k+ VCs by Madison Campbell

2. First-time founders: here’s how to select the best fundraising strategy for your startup by Lolita Taub

3. Base Templates - Pitch Deck, Financial Model and Fundraising Process Templates from Max Fleitmann

4. The Deals That Change Your Life - by Rick Zullo

5. Venture Capital 2.0 — the revolution of Machine Learning & Data-Driven VC - by João Nunes

6. How To Hire Your First Engineer by Harj Taggar

7. Compensation at Startups by the team at Homebrew

8. 10 Questions top founders nail down before their pitch - by Jason Chen

9. The 2005 YouTube investment memo you weren’t meant to see by Sequoia partner Roelof Botha

10. A Beginner’s Dictionary of Venture Capital by Mattermark

    ---

🧑‍🚀 Jobs

I’m currently hiring for a Senior Product Designer and Front End Engineer for my new company sequel. More information on the roles here.

---

Thank you for reading. Feedback and suggestions for next week’s edition is welcome. Have an awesome week 🤌