It’s one thing to be a startup founder with a great idea. It’s another thing entirely to know how to carry a conversation on cap tables, liquidation preferences, and building out a company’s org chart.
Normally this would mean someone who is building something off-the-grid, i.e. without internet, but this is the tech industry so that’s obviously not the case.
Instead, as Joanne Wilson of Gotham Gal Ventures first described in a blog post, the off-the-grid entrepreneur is someone “not familiar with the verbiage that gets tossed around in the start-up world”:
“The entrepreneurs who walk into your office with a company that is gaining traction and gets their audience (business to business or even business to consumer) and gets the void they have filled but doesn’t really understand where to go to raise capital. Doesn’t really get what a cap table entails, doesn’t really understand how to build out a work org chart, doesn’t really have the greatest grasp of their financials, doesn’t really get all the nuances in a legal document, doesn’t fully understand what kind of equity they should give away. Enough said. Red flags? Perhaps or perhaps not.”
As Wilson goes on to point out, she’s afraid that in today’s funding environment many investors will pass on these sorts of deals because the company will require more help navigating the venture world than others. If investors are over-extended, then they may not have the time to give the assistance an off-the-grid founder needs to catch up to speed — and more importantly, to be able to raise that next funding round.
“The environment in Silicon Valley is far different from the other hubs such as NYC, Berlin, Chicago and others. You need to speak the language and it is scary for an investor if you don’t,” Wilson states.
Thankfully, the knowledge gap between those inside Silicon Valley and those outside is shrinking. There are books (like Brad Feld’s “Venture Deals” that Wilson recommends), and incubators like Y Combinator have started fellowships so non-Bay Area types can still learn how to build a business and their network.
And if Wilson does meet an “off-the-grid” entrepreneur, she says she’ll make sure there’s another engaged investor in the round if she can’t be that person herself.