Hacker News Reader

Comment by shoto_io | Hacker News Reader

This is just anecdata: but I’d say yes. I had a number of friends trying to get VC money for things which haven’t been done before: either you gotta be someone already in VC space, eg a successful founder or you have to pitch an idea that’s been validated already somewhere for example.

VCs are quite risk averse in my opinion, at least at the seed stage.

View on HN

I had the same experience. A VC explicitly told me that he doesn’t fund any startup that is trying to create a new market, because he doesn’t know if that market actually exist and if it does he doesn’t know if it is profitable. Instead funding a startup that plays in an already existing market, as long as the startup does thing “better or in a unique way” is a much safer play.

We angels love to exploit what VCs won't touch with a ten-foot pole ;-)

If you are a founder—any industry—hit me up and hopefully I'll fund you! Email m@zorinaq.com

I don't care if I don't know an industry. I look mostly for qualities and unique characteristics in the founders themselves.

What do you look for in a founder and how is it fundamentally different to a VC? Any examples of investments you made. Some angels became eventually super successful and then set up their own VCs. Would that be part of your plan later on?

Email sent.

Dude you asked for it :)

"X, but with blockchain" seems to be be the new "X, but on the internet" for getting VC funding.

Is this a recent change or something that's not visible to people outside? I'm asking while seemingly recalling some bizarre VC investments (say, MoviePass) from the past decade or so.

A few bizzare investments doesn't give good insight into what the majority of investments look like.

You need to a background check on the founders. If they had already exited successfully, then anything gets funded.

Yes and no :)

Avoiding category-creation risk is true of most investors most of the times

For VCs, it's understandable given investors see so many co's pitch and it's one less risk to worry about. The later the stage and bigger the check, even more pressure.

Earlier stage is always more welcoming than later stage. Risk is lower for angels b/c betting on team means the startup can pivot (harder later) and can always exit for lower amounts ($20-30M exit for a $50K check is more of a 5X return than the goal of 10-100X return-the-fund, but a few of these still works and is more doable)

Different VCs work at different stages and take on different types of risk depending on what they know and have done.

Roughly:

The earliest investors (mostly angels, usually not VCs) are taking the risk of "can you ship?"

The next round (some angles, but mostly VCs) are taking the risks of "is there any market for this?" and "can you sell to a few customers in that market?"

The next round (almost entirely VCs) are taking the triple risks of "is this a real market?", "can you sell to LOTS of customers?" and "can you scale a business quickly?"

And every round (exclusively VCs) are taking the dual risk of "can you expand your customer base into adjacent segments?" and "do your economies of scale eventually work?"

Unfortunately, no stage proves the next one, sometimes what looked like market early on turns out not to be one (many of the dotcoms), sometimes the math never works out (MoviePass, 98% of the dotcoms), sometimes the people who got you there can't get you to the next level and can't admit it, and there's the occasional frauds that slip through (Theranos).

There are hundreds of other, more nuanced reasons investments fail but those are the big ones.

Reply on news.ycombinator.com