What I Look for In Tech Startups
blog.capitalandgrowth.org
blog.capitalandgrowth.org
Chris: I’d say opportunity is the most important. I often meet talented entrepreneurs who put an incredible amount of time and effort into solving problems that ultimately lack real market opportunity.
It’s a waste of their talents. I’d roll back on the team that’s doing something unproductive because it’s an awesome team. I will bet on an exceptional team if they’re doing something productive. By that hierarchy, the opportunity is first, people the second.
I've heard this from quite a few VCs. The difference between a good and great engineer is 10x. The difference between a good and bad market is 100x.
What I took from it: if a team can't come up with an idea themselves and rally round it, there's something wrong with the team.
It needn't be a very good idea. e.g. the reddit guys were excited about a delivery service idea (pet food? muffins? IDR). pg said no, and suggested the reddit/HN idea. But note that they had come up with an idea and rallied around it on their own. (Who knows, perhaps they would have made it work anyway?)
Maybe it's a touch of mad passion/enthusiasm/optimism - not entirely rational - that is a key ingredient of an entrepreneurial team. Indicated by inventing and rallying round "some idea".
0. https://www.tillett.info/2015/12/18/execution-is-just-the-mu...
More importantly, while some ideas have the potential to be billion dollar ideas, most don't. The ideas that have a reasonable chance of being billion dollar ideas are very rare, much rarer than teams that have the same potential.
That should mean, within an order of magnitude, there are thousands of billion dollar ideas/potential businesses.
Are there more than a thousand teams capable of executing on a billion dollar idea? Is this the wrong way to evaluate the space of ideas?
Yes there are far more than a few thousand good teams out there in the whole world.
Targeting the markets and customers of existing billion dollar companies is often a good idea, but you need to have something new to succeed.
All are billion dollar companies founded in the last several years, and none have new business models, as far as I know. They may have small tweaks, but no two companies are identical - I think it's fair to say most of these companies simply copied a business model and executed very well.
You can probably quibble with some of those, but not all.
Vox media started out as a sports blog in 2005.
I don't think there were any billion dollar fantasy sport companies back in 2012 when Draftkings started.
Oscar and Wish I am not sure as they are impossible to search for.
I am not sure which billion dollar company The Honest Company copied.
Sure you can grow into a billion dollar company by copying the model of an existing large company, but I don't know of any startups that have grown to a billion dollar by starting out just copying an existing billion dollar company's model without bring something new to the table.
Oscar has done nothing but lose masses of money propped up by investors, but we might actually have one. They don't appear to be doing anything different to the other insurance company, although the other insurance companies do make shiploads of money which I guess is a point of difference.
He does backtrack on this later.
The key lesson for me was to always invest in exceptional founders — you can always find the money to make subsequent investments in their companies. Money is more abundant than opportunities. I really kick myself for not having written Jeff a check when I met him. He’s a fantastic entrepreneur and I knew it – I blew it.
That's a great way to put it and encapsulates a general frustration I've had.
I would say a good and a great engineer is at best 10x, but a good and a bad market could be 100x to 1000x or more.
That is why they invest in entrepreneur, not solely because of their current idea, market fit or opportunities. If it does not fit, you buy into this person will eventually find one.
Sometimes the market is 1000x more important than anything else, e.g. craigslist, just a listing of stuff with no design that become successful because no one else was doing it.
Sometimes the founders are everything when a lot of players are already in the market, e.g. Google vs. Yahoo. Google had to invent a completely new kind of algorithm to win the market.
I've seen this playout in the indie-gaming bubble bust. so many highly competent engineers producing countless games, the vast majority of which will never see an audience. Quite sad actually, such a large waste of talent.
There was a link posted here some months ago where an investor gave a frank account of how hard it is to invest, and how frequently he made terrible decisions and got burned, how time consuming it was, and so on. I think he actually said "don't become an investor if you want to make money, do it because you want to help people". Shame I can't find it now.
He had the chicken peck at the piano, and everytime it hit the correct key, someone would give it pellet. By this method, the chicken could memorize how to play a simple melody. But, one day, the chicken introduced a random foot kick along with a correct key peck. The pellet still needed to be given to the chicken to reinforce the melody. Ever since then, the chicken kept pecking at the keys with a foot kick.
Then why is he talking about what he looks for in Tech Startups? It doesn't seem that he's looking for Tech Startups at all. Plenty of other kinds of startups than tech startups.
It would rarely (in my experience) even encompass hardware. Certainly nothing requiring novel basic technology (science based startups).
I don’t know why terminology is used like this. Essentially it’s like saying mail order catalogs are technology companies because they take advantage of advances in printing, telecommunications etc.
I guess it’s because the process of building websites is still messy, and somewhat easy to get wrong.
Very few of the companies we call "tech startups" are actually producing tech as an output. More like they are solving technical challenges to increase efficiency or create market niches in traditional industries.
The examples cited in the article are mostly websites. And I think (given the title of the article) he would describe himself as a tech investor.
In any case, what investors say isn’t as important as what they do. In my experience they often say they are interested in Biotech, Science based startups, or hardware. The reality is they rarely invest, and when they do, they invest in very conversative plays (aside from the occasional misguided Theranos type play).
The reality is in general tech to then means “some kind of website where I understand the engagement metrics” most of the time.
There were many ridesharing startups before Uber, but the reason why Uber became the market leader is that they were one of the first to leverage the iPhone.
(For some reason though, each company has to have its own implementation of that same CRUD.)
I think it's for talent retention / hiring reasons. They want to give engineers something to tinker with and build up their own frameworks and libraries.
It's what makes working on CRUD after CRUD at least little bit more exciting. Otherwise engineers would be bored to death and would leave to different companies.
Personally, I am bored to death with more and more iterations of the very same. It makes enjoying the job harder (and it also makes finding an interesting job harder too).
Well, they're different CRUDs, no?
Hacker News and Facebook both boil down to a database hooked up to a web-based front-end, but the glue in the middle isn't going to be the same.
Edit: you've unfortunately posted a lot of unsubstantive comments to Hacker News. Would you please just not do that? We're hoping for either civil, substantive comments, or no comments.