How First Round Capital missed out on Twitter's first round. | Hacker News Reader

How First Round Capital missed out on Twitter's first round.

redeye.firstround.com

12 pointsrandall15 comments

The key to any early stage investing is betting on the team involved. I agree valuation really matters, but getting in with a great team is more important than the perfect valuation.

As a counterpoint: http://pmarca-archive.posterous.com/the-pmarca-guide-to-star...

TL;DR Market is more important than team.

Of course, trying to estimate the market of something totally new (or sorta new) like Twitter is hard. What market does it enter/disrupt? Social networking? Blogging?

Edit: Example is Odeo. Just about the same team as Twitter... Crappy market as it turns out.

You can imagine Twitter in the early days saying along the lines of "Twitter relies on SMS almost more so than the Internet, and there are over 3 Billion SMS users in the world."

Yaw-- defining what a market is is kind of tricky. Was Twitter in the SMS business? My rule of thumb is asking "What business/service/behavior do they displace? Whose revenue will suffer if they succeed?"

I tackled that exact question in a post about my experience on the Odeo team at the start of Twitter. My conclusion was that the phrasing was wrong. What matters most for a product? Market. What matters most for a company? Team.

Odeo the product failed because there was no market for it. Odeo the company produced a great win with Twitter because it had the right team to do something like that.

A little more depth here, Real Lessons from Twitter (section #2): http://www.stubbleblog.com/index.php/2009/06/the-real-lesson...

That is an epic-good blog post. Thank you!

"A good team, that listens to its customers, is going to find a good market and put together a good product for that market."

This is true. But, Andreeson is looking as an investor-- he invest once a team has settled on a market--- when it's oftentimes too late to change directions so radically. Ev did the sensible thing when Twitter was looking promising-- he effectively put Odeo on the shelf and started a fresh company with a fresh cap table.

A lot of founders don't have that option (after they've taken money) and are forced to pivot within their market. So a good team can be constrained by investment/inertia.

You're right. It's nuanced.

I guess it depends what you consider "early stage" investing. At WV, we concentrate on the super early stage and I can tell you that at the crazy early stage very few people/teams have their story, message, product, or market together. In our world, you only bet on people. As a matter of fact, I often don't even care what the product or story is as I will bet on people that I know will get it right sooner or later.

I'm not an expert yet, but I believe what really matters is a great market first, then a decent team second. From an investor point of view, you can always fix the team with money, you can't fix the market.

In 20 years of doing this, I have always found that good teams are worth almost anything you can pay. There are very few truly good teams.

It's nice (and rare) to see VCs being humble.

Actually, there may be something of a trend towards transparency forming.

http://paulgraham.com/airbnb.html --- http://www.bvp.com/Portfolio/AntiPortfolio.aspx

3 out of thousands does not make a trend... Plus these are old.

Lots of us are humble... and a lot of us are jackasses. It is like any other industry.

I've found the ratio to be much higher in VC than other professions. I can email CEOs cold and they usually respond... VCs with warm intros are 50-50...

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