On Friday I spoke at a “Business Bootcamp” in Corvallis, Oregon. The event was fabulous (big thanks to John Sechrest) and I was pretty impressed to see that kind of passion for startups in Corvallis.

I wanted to follow up with that community with a few thoughts (that might be interesting to a broader audience, so I’ll post it here).

Thought #1: The Valley is a Unique Animal

After the Y Combinator experience, we dove into fundraising in the Valley as well as Seattle (where we ended up settling). It didn’t take long to give focus our efforts largely on Silicon Valley. Don’t get me wrong– there are some great Seattle investors. But there just aren’t many of them, and as Paul Graham points out, investors outside of the Valley just aren’t very bold. At the Business Bootcamp, a local angel investor spoke for a bit after I did about what he looks for in a company and he seemed even less “Valley-like” than Seattle investors. The big differences that stuck out to me were:

• A strong emphasis on patents/IP (in 20+ meetings with VCs and angels before we were funded, not a single one asked us for our thoughts on this).
• A strong emphasis on written business plans and financial forecasting (we never were asked for anything beyond an executive summary and never were asked for any financial projections except by a single angel group in Seattle).
• A desire for a big equity stake. The Corvallis angel had a an equity floor that was a third more than the premium “household name” angels in the Valley. Presumably, this is because the Corvallis angels aren’t too plentiful and have a captive audience.
• A desire for a more fully formed team. He wanted a 4-7 person team before he invested.

For the record, I don’t think ANY of this is bad. I just think it’s SAFE. I imagine a methodology likes this results in far fewer failures, but also results in fewer hits and disqualifies all sorts of non-traditional teams. I think many of the startup home-runs in the last decade or two would’ve been shown the door rather quickly in Corvallis. Boldness might not be a virtue from an investor’s perspective (the landscape is littered with the financial corpses of bold early stage investors, I’m sure), but it certainly is from an entrepreneur’s perspective.

Thought #2: Audience Questions

The third presenter gave a fabulous presentation called “Do you have what it takes to be a Startup CEO?”. It was chock full of info and I certainly learned a lot. Unfortunately, there were two questions from the audience that I felt weren’t answered very well, so I’m going to take a shot at ‘em.

“I’m hearing that we need a team of 5-7 people, paying customers, provision patent applications, and mess of other things before we can even begin to ask for money. That seems inherently contradictory with the idea of angel investment.”

It does, doesn’t it? Smart angels seek to mitigate/minimize risk and most angels are pretty smart. There’s nothing more wonderful than a startup with 5-7 great team members, growing revenue numbers, a pile of great patent apps, etc. Unfortunately, angels who are looking for this kind of company are really “later stage” angel investors. Unless you, as an entrepreneur, have a million bucks to get to that point, you have two options. One, find a bolder seed-stage investor (in Corvallis or move the the Valley where bolder investors are more plentiful). Two, get some freakin’ traction. Seriously, dial back your idea to the most basic offering you can manage that people will use/buy and build it with a co-founder or two (in your off-hours if you have to). If you can launch SOMETHING that people really love (and if the TAM is big enough), investors will listen. You’ve reduced two of the main risks that they are worried about; That you are a screw-up who can’t launch a product and that what you build ends up not being particularly interesting to your target audience. The better your traction and the steeper your growth curve (in terms of usage or dollars), the easier fundraising is.

If you don’t have a gold-plated team (read: previously made an investor lots of money), a pre-existing relationship with an investor, or TRACTION, I seriously advise not trying to raise money from anyone but friends and family. Given that most entrepreneurs aren’t gold-plated (I sure as hell wasn’t) and building relationships with investors is a hard to do from scratch, your only option is launching and building traction.

“I’m a college student here. What advice would you give to an aspiring entrepreneur with a notebook full of ideas?”

The speaker quite literally responded with a long answer that amounted to, “Not everyone is CEO material. You should consider that you likely aren’t CEO material.” Really? Is that what we want to tell aspiring entrepreneurs?

The right answer (IMO) is this.

First, pick the idea that you’re going to attack. I’d say, focus on tractability with a strong bias to the ideas you are most passionate about as well as the ideas that have some built in marketing (SEO or viral– relying on word-of-mouth and salespeople is difficult and expensive).

Second, figure out what you’re good at that a startup needs. Hopefully, you can code things, design things, or sell things because the vast majority of the first months of a startup is comprised of that kind of work and precious little else.

Third, read everything here: http://ycombinator.com/lib.html

Fourth, save money or borrow a few bucks from family/friends so you can work on it full-time for 3 months. If you can’t do that, do it half-assed (it can be done!).

And finally, don’t listen to people who tell you that you might not be CEO/startup material until you’ve taken a stab at it. The world is full of unlikely CEOs from Steve Jobs to Bill Gates to Mark Zuckerberg. Roll the dice and dive in– when you’re on your deathbed, I’m betting you won’t be saying, “Gosh, I wish I could go back and take fewer risks.”