April 2011 Archives

I've Joined Launch Capital

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To some of you, the news has been trickling out but now it's time to do a real announcement: Yes, I've left the ranks of angel investing and joined Launch Capital, a seed stage fund based out on the East Coast.

I met Launch Capital about 3 years ago when we both were invested in two Bay area startups. I got to know the managing director, Elon Boms, very well through the years. We found we had mutual agreement on investing philosophy and approach, and about a month ago, he offered me a job as West Coast Director of Operations, doing seed stage investing on the West coast where I am mostly based, but also covering internet-tech and mobile in NYC where I am often.

I am excited to see my career go in this direction. As an angel investor, I discovered that I loved working with startups and helping them and their products grow. Now, at Launch Capital, I could do more of the same but with more resources and under a prominent brand. While I enjoyed being an angel investor, I think that it is much more preferable investing in startups with the ability to bring more money, resources, and help to bear than just what I can bring individually.

If there is anything I've learned from angel investing, it's that angel investing is hard - easy to have fun, but hard to make money. As individuals, we can only bring so much to help except for those individuals with exceptional resources and backgrounds; the majority of us may have enough capital to invest but have limited capability to help beyond that capital. But now I can work with startups with the ability to bring more capital to bear than just my own quickly dwindling resources.

To be totally open and frank, I hit that tough place being an angel investor: I've been actively investing for about 5 years now but the economic crash and lack of exits has made deployable cash harder to come by. I had contemplated potentially stopping angel investing for the time being until the opportunity at Launch Capital came along, for which I am eternally grateful so that I could continue to work with startups.

Likewise, I found angel investing to be sometimes a lonely place. I have worked with others in the past, but each of us, either angel or fund, had very individual reasons for investing (see my post Why I Hate Social Proof). However, now, I am glad to be working with an experienced team of investors with a singular mission, all to invest smartly for Launch Capital. Over the last 4 weeks I have come to value their feedback and help on my deals, which has sharpened up my decision process greatly.

To all you entrepreneurs: I look forward to working with you in my new capacity at Launch Capital.

What's the Real Problem with Your Startup?

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After I wrote my post Talk About the Problem, Not Just the Solution, I've had a series of pitches all characterized by the same thing: a singular focus on how wonderful the product is.

Unfortunately, I've got news for you all you MIT/Stanford/super-genius engineers and hot shot designers:

Product development is a commodity.

In today's day and age, you can build just about anything. There are very few things out there being worked on that really require rocket scientists. But most of them don't. Most products and services have plenty of models to copy from. Or if you don't have something to copy, we have all these well defined processes to find solutions such as customer development by Steve Blank, as documented in his classes and in his book The Four Steps to the Epiphany, or Eric Ries's Lean Startup principles.

So if that's true, building product is not the problem. In fact, anything that is under your direct control is not a problem for your startup. And that's why I'm not interested in seeing your product just yet; I want to hear about how you're going to solve all those problems that you have no control over.

Every startup has approximately 1-3 things that will make or break their business at early stage and very, very rarely is one of them the ability to build the product (by the way, if it is and if it's something that doesn't require rocket scientists, you've got bigger problems than you can imagine, if you can't even get your product built).

For example, I've recently met some local startups. They all showed nice product design but the real problem lay in how the heck where they going to scale customer acquisition, if there customer was every local merchant down the block, in every city, in every state in the US?

Now that's worth talking about! Because if you can give me a convincing scenario where you may have a novel solution to this problem where so many have failed, your startup actually has a chance. But if you don't have a great answer to that problem, your beautiful product is not going to magically leap into the hands of local merchants, and certainly not fast enough to get you enough revenue to survive as a company.

Usually it's pretty straightforward to figure out what those 1-3 key problems are. If we can get past those, then we should take a look at what you're building. Assuming you're doing all the right things, I'm guessing that whatever you build is probably going to be good enough to start, or to get there after you launch.

But until we get past those 1-3 key problems, I'm probably going to keep interrupting you, derailing your pitch, until we do. Or if we can't get past those key problems, I think you need to go back and figure those out or else it is unlikely that I will invest.

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This page is an archive of entries from April 2011 listed from newest to oldest.

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