Apprenticeship - Find someone who will give you your big break
Tige graduated from JMU, got married, and embarked on his first quest into "business" at a bank. In 1990 during the recession, Tige jumped onboard at a small regional bank which is now know as Riggs Bank. This led him to become an apprentice under the late locally renowned banker Joe Allbritton which started out as a 1 year stint but eventually became a 3-4 years transformative experience. "He put his arms around me and gave me my big break…and I owe everything to him!" Even though his apprenticeship began awkwardly and unnaturally, it soon blossomed into a lifelong friendship.
Early communication is key, good or bad news
Tige believes the most successful entrepreneurs are the ones who communicate early to investors - good or bad. He also adds that younger CEOs have a tendency to not communicate bad news, which is by far the worst thing one can do. Understanding the root cause of the problem "early" is critical for any startup, therefore it is almost expected to reach out to your investors or advisors for help. When the management team do not communicate their issues and investors find out about the bad news 6 months later, then bigger problems ensue. "You aren't expected to know everything, but you are expected to be honest." It's very important to be transparent with your investors and to be very honest with your team.
Live by your numbers, but don't die by your numbers
While successful companies live by their numbers, unsuccessful companies die by them. Most of the businesses Tige invested at the beginning were sold as completely different businesses in the end. He talks about his investment style as 'stage agnostic' where he would invest into a team of smart people who would pivot their business strategy and finds lines of businesses to generate billions in revenues. Tige explained that living by your numbers translates into focusing on what works. For example, if you are tracking four metrics and three continues to fail then one needs to quickly change course and not die by your original idea. So being flexible is very important in navigating through the startup grind trenches. Once you identify the half a dozen or so metrics that really reflect the drivers of your business, be responsible for them – both up to your investors and down to your team.
Use personal referrals to get to your target investors
Tige explains that he gets most of his investment referrals through points of interception (i.e. CEOs, portfolio company founders, other VCs) otherwise known as his "collective nexus". Simply put, getting intros to investors is like being setup on a date. VCs are more likely to entertain a startup investment if it came highly recommended through their personal network. Rarely does he invest on a startup from a cold call or email. Tige recanted Mark Suster's philosophy of getting in on meetings with him by doing your homework and "figuring it out". So make sure you get a personal referral who knows you and your target investor.
The beginnings of LivingSocial and its future
Tige talked about the beginning days of LivingSocial that was comprised of four guys from Revolution Health who wanted to use Facebook to acquire customers. He recounts how they pioneered social commerce by producing apps that amassed millions of users in a short period of time, then he went to further credit LivingSocial by them showing social proof when the young Tim O'Shaughnessey had filled a bar up instantaneously by pushing out an invitation for drinks on Facebook. "That is our business!" he exclaimed when he saw this happen before his eyes. At that time, Revolution had bet the whole company on them. Fast forward many years, LivingSocial is forced to be reckoned with its past successes and reinvent itself to be a relevant supplier of great deals especially when the marketplace for consumer opportunities changes on a month to month basis. He explains that merchants are always in need for better marketing and customer acquisition tool and LivingSocial continues to create a portfolio of demand generation products that helps businesses attract more customers. He states that from an investor's perspective, the barriers to entry may very well be low, but the barrier to scale is very high. LivingSocial has created and scaled up an enormous sales force that only a few competitors can achieve to eventually attain profitability long term.
For the SMB market, focus on incremental revenues
The days of small-medium businesses (SMB) being a lesser attractive market than large businesses are over since the advent of the cloud and Saas based startups have essentially democratized access to the same caliber of tools that the large corporations uses. The SMB market for institutional investors have been few and far between in the past due in part that there are very few companies that has figured out how to monetize and streamline processes in what is otherwise considered an extremely disparate market, but Tige sees it as a massive opportunity to disrupt since more than 50% of the country's GDP is services based. He says it is easier to find ways to generate incremental revenues with a low cycle time and to provide better efficiencies for SMB's sales team. Tige explains once you get the revenue flywheel turning, then to finance additional resources towards the sales force gets easier. SMBs always wants to find ways to sell more incrementally. For any startups looking to sell into the SMB market, if there is no good existing incumbent providing the service and no Saas based capabilities, then there's an opportunity to be made.
DC startup ecosystem
Just like in the heydays of AOL, companies like LivingSocial and Opower are great catalysts for bringing great talent into the area and they are helping to build the ecosystem by spawning new startups by former employees just as AOL did 15 years ago, moreover things are a little different this time around where now the area is able to retain transients that came for a job originally decides to stay in the area for good. Tige believes that DC still needs more engineers and still lacks a generation of entrepreneurs that previously made money in the tech sector locally. But he pushes on to say that it still is not an excuse to do the hard work and find angels who are willing to invest in your startup because there is a robust network of them in the area.
Tige concluded that if you aren't passionate about your startup, it's hard to be balanced. If you don't like what you are doing, it's hard to continue with a startup that's not making much money. But becoming a smart action oriented founders focused on a category where there is money will probably get his attention very quickly.
We like to thank nClud, a premiere DC design agency that work with startups, for sponsoring our venue.
[BLOGGER] Pitching Ted Leonsis, Meeting Tige Savage and Heeding Mark Suster