This must be the favorite sentence uttered by entrepreneurs. But who can really lay claim to this statement being true? Could someone truly have no competitors?
Usually what happens is, after the pitch I go back to our research team and after their digging, we find a mass of competitors. How could that be?
In thinking about competitors, I find there is generally a difference of opinion between me and the entrepreneur that is driven by the different types of competition, and whether the type of competitors that exist matter to us investing or not. Then add to that how market forces shape competition and this all gets pretty complex.
The Different Types of Competition
What are the different types of competitors? Looking out on the Net, I found these categories of competition:
Direct/Existing Competitors – usually the easiest to find, these are companies with products who are the same are very similar to yours, and attempt to serve the same need.
[source: Different Types of Competitors by Peter Halim]
Entrenched direct/existing competitors are those who have been around for a while and have grabbed a lot of market share before you showed up.
Indirect or Mindshare/Category Competitors – these are companies who provide alternatives to the need your product solves or the resources that your using your product would occupy, but it may not be obvious that they are taking away share from you.
“Just because your offering is unique, doesn’t mean it is unique in the mind of your prospects. To a prospective customer a marketing strategist, web designer, direct mail specialist, graphic designer, video producers, and print shops may all provide “marketing”.”
[sources: 4 Types of Competitors, Different Types of Competitors by Peter Halim]
Potential Competitors – these are companies who have the capability and the will to enter into the marketplace with a product and become a direct or indirect competitor to you.
[source: Different Types of Competitors by Peter Halim]
Replacement Competitors –
“A replacement competitor is something someone could do instead of choose your product, but they’re using the same resources they could have committed to your product.”
[source: Market Competition 101: The 3 types of competitors to keep an eye on by Daniel Burstein]
Budget Competitors –
“Even if your products and services are truly unique, you still have to compete for the same budget dollars that other service providers are vying for.”
[source: 4 Types of Competitors]
This also applies to the regular consumers. How hard is it to get customers to part with their money, if there are other choices possible? How many subscription services can a consumer have on their credit card before they say enough is enough? Advertising agencies have set budgets per year; if it all gets spoken for, you may not get access to valuable ad dollars simply because it’s been all committed.
Doing Nothing – In the face of certain situations, it may result in a potential customer doing nothing as a way of deciding. This may result from having too many choices, or too difficult choices, or somehow being prevented from making a decision comfortable to the customer. It is worthwhile to ask, how can you eliminate this type of competition?
[source: 4 Types of Competitors]
What Matters to Us in Investing
You’re probably thinking – Wow, Dave, that’s a big list! Isn’t that being a bit unfair to a fledging startup? Wouldn’t the world be our competitor if we lay this kind of analysis on my startup?
You’re partially right – as investors we like to look at your project from all angles and weigh the odds. What’s the probability that a competitor, or competitors, will emerge and make life difficult or impossible for a startup we’re looking at?
So taking those categories of competition above, we try to see who is there and who is not.
Direct/existing competitors are the worst. You have to come up against them and fight head to head for market share. Some of them are entrenched and thus you could have a tough time grabbing share from them. On the other hand, if they are traditional, slow moving big corporations, you may have an advantage in being a quick moving startup entering with a significantly better product. Competing against other startups – that’s sometimes much harder.
The other categories are much harder to judge. We have to make a personal call as to whether or not we think the risk is too high or low enough to give the startup a fighting chance.
Market Forces Confound the Competition Analysis
The only problem is…there are too many internet startups now. There has been an explosion of entrepreneurism which complicates the competition problem.
Previously, we talked about Mindshare/Category Competitors. This was when your competitors could come from a broader category and those could become your competitors inadvertantly. However, with the enormous number of startups out there, the Category becomes so broad to emcompass all internet, meaning the fight for customers becomes the battle for attention where everyone is your competitor.
The Last Category: Everyone is Your Competitor
While this is probably true to some degree at any time, it jumps to the forefront in times like today. That’s what is happening now; there are too many startups for both consumers and B2B customers to process quickly. If they cannot choose you fast enough, then your growth is stalled, causing you to burn through your cash before you can get to breakeven. Time is the enemy of startups – you cannot wait for people to process too many choices; you need them to use you quickly and they simply won’t. This is why we see startups needing 24-30 months to get to someplace of stability, or to get to their next funding event.
This makes the investment decision much harder to process. What’s an investor to do?
We could wait for times to change. The world moves so fast now – it is possible that within a year or two, the battle for attention may abate. Or it could get worse.
What it does mean is that for now, as we evaluate startups, the best we can do is to acknowledge the battle for attention is very real but we are being very picky now.
At this point, we try only to pick startups that have really no direct competitors, or have only old, traditional entrenched competitors. The world of internet startups has reached to almost every corner of every major industry; however, we are still finding some unturned stones, businesses and markets that have not been touched by internet startups yet. This is where we are finding the last remaining internet startup opportunities that literally have no direct competitors, or at best, competitors that are old, traditional companies which we are betting cannot move as fast, nor have the expertise or innnovative spirit of a startup.
In the old days, investors picked startups who had no competitors. The internet wasn’t around back then and competition was different in other industries. With the internet, competition pops up with great ease and speed. We now look for those rare, few startups that have still no direct competitors and advise them to stay stealth, just like in the old days, to avoid other internet entrepreneurs from creating competitors literally out of thin air.

A few weeks back I met with an entrepreneur who had recently closed a round with a large VC. We got to talking about what it was like to work with that VC, and he mentioned that it was a little strange because the VC was pushing for these really bizarre terms. After he described them to me, I too agreed they were bizarre, but then I said I’m pretty sure I knew why he was pushing for them, which was I bet he had gotten burned on them in the past. The entrepreneur’s eyes lit up and said that was right! Eventually, the VC admitted this to him, talked it through, and they came to agreement on terms.
I can sympathize with that VC. Since 2006 when I started investing in startups, I’ve gotten caught by a lot of unexpected traps and rookie mistakes. These have definitely driven my current thinking on how I like to pick startups and their teams, finance them, and what terms are important to me. I would definitely admit that this was the most expensive education in any subject I’ve ever learned. Where else can you piss away 10s, if not 100s of thousands of dollars on situations that you may have avoided through better experience or forethought? Or maybe lady luck just decided to slap you down this time out of nowhere?
It was one of the reasons why I wrote this post a few years back: More Reasons Not to Invest in Notes. In the notes that I’ve done, I’ve seen many unexpected things happen. And this is why my boilerplate note has grown to include many things beyond the vanilla convertible note that someone might use.
But then, there are investors I’ve met out there who have never had anything bad or weird happen to them. This fact still amazes me that there are those out there like this. Still, it is my belief that the more you invest, the more likely something bad will eventually happen. You can’t avoid everything bad that can happen to you; you can only do so much to protect yourself.
In our attempts to protect ourselves, the entrepreneurs we meet often suffer from our past. We argue for certain agreements and terms, some of which seem downright strange and we can be pretty adamant about those terms. We may even get emotional about them and refuse to back down on them as negotiable items.
Sorry about that. The more we invest, the more we are scarred. The best thing you can do is to be like a good therapist; sit and listen to us rant and rave. Nod with sympathy in your eyes. Let us know you understand. Pat us on the back. And when we calm down, we may actually give…or not. Like traditional therapy, some things can be cured and others…well…probably never…

Lately, I’ve been doing meetings with young startups in recent accelerator batches and meeting them for the first time. It’s been great to hear that they’ve bought into the iterative method of customer development and most of them have found their Minimum Viable Product or MVP, or they are well on their way to finding MVP.
This is awesome but in today’s world, you can’t raise money on achieving an MVP. Investors demand more than that.
As Steve Blank likes to say:
A Startup Is a Temporary Organization Designed to Search
for A Repeatable and Scalable Business Model
[source: Nail the Customer Development Manifesto to the Wall – Steve Blank]
The unfortunate reality is – an MVP is not the above! Yet most of the newly minted entrepreneurs I’ve met think their job is nearly done when they’ve found MVP – they think they can go build a pitch off their early MVP and raise money!
A startup does require MVP but it is much more than just MVP. The problem is that MVP means early adoption of product and its features, maybe even some who will pay. But it doesn’t tell you how many people will do it in the long term and whether this can support the company (the people and operations within) that is behind it.
So startups are much more than MVP and requires thinking beyond just the product. This is where I’d like to coin a new acronym, which is Minimum Viable Company or MVC.
What is a MVC?
First, I would say MVCs only apply to early stage startups – you can’t really talk about achieving MVC status for a company that’s been around for a longer period of time. To be minimally viable as a company, I would say:
1. It has achieved breakeven or profitability, or has a believable and achievable plan to get there.
OR
2. It has achieved enough metrics to reach its next funding event. This includes the first funding event.
Or ideally both.
The Fundable MVC
An MVC must have achieved some sort of MVP, but having MVP doesn’t mean you have achieved MVC automatically. Nor does it mean you’ve achieved the next level of MVC which is a FMVC or Fundable MVC.
Remember that many MVCs can generate cash, but how much exactly? If you reach small or medium business status, that is great; it takes no little effort to make $500K, $1M, or several tens of millions of dollars per year. It is a notable achievement to employ a building full of workers, insuring them pay and livelihood, and providing or shipping product and services to customers. This is a win by many measures.
However, many companies like these, while there is every reason in the world for them to exist, unfortunately are not attractive to investors. This is because while they are doing great work, the likelihood of investors getting their money back and then some is very low or zero. This is the difference between an MVC and a FMVC.
We have not, as an startup/investor community, figured out how to invest in those companies whose trajectory is heading towards small or medium business status. Right now, all startups are being funded as if they are going to exit like any high growth startup. Anybody on a lesser trajectory simply won’t attract the funding it needs unless more effort is done with other funding sources or structures.
Therefore, it is the FMVC that every startup needs to achieve. What are the characteristics of a FMVC? Everything that a seasoned, high growth investor looks for: big market, big vision, lots of revenue potential, world domination plan, etc. This is what will increase the likelihood of funding, not presenting your MVP at a demo day, or even a plan for a MVC, but your plan for a FMVC.
How do you turn your MVP into a FMVC?
First, you must realize that not all MVPs yield a FMVC. MVPs could yield a MVC but not FMVC. Many MVPs have potential to attract some customers, but not enough to create a company and an opportunity large and tasty enough for investors to want to put money in. This is also dependent on the market in general, meaning that 5+ years ago when there weren’t so many startups sprouting up all over the place, you could have achieved an FMVC with your project; however, in today’s crowded startup world, you cannot.
While every project is different, I point you to some suggestions on examining what you are doing now in hopes of turning it into a FMVC:
1. Iterating on MVCs is a good thing to do; keep trying out business models and plans until a FMVC shows up. It may mean giving up on your current MVP and looking for another one. Do not be afraid of going back to the drawing board if you find your MVP does not yield a satisfactory FMVC!
However, your time limit is your bank account. Never forget that. So working rapidly and lean is key.
2. Do you have a World Domination Plan? Is it believable? If you can envision a world where your MVP dominates whatever market and customers it is pursuing, is that big enough?
3. Are you too focused on the solution and not on the problem? Becoming too myopic about their product and forgetting about how this turns into a big company is something that I find happens with many entrepreneurs. They get caught up in the success of finding a MVP, but don’t realize that they not only need a MVP but need to achieve MVC and hopefully FMVC.
4. Following on 3., it would probably be a good idea to pick up some MBA skills and start running models and scenarios to see where a given MVP can become a MVC, or potentially a FMVC.
5. A good measuring stick I use with startups is to ask what the $100M/year revenue scenario looks like. Generating $100M in business per year is no small feat – you get there and you’re well on your way to becoming a big business. So can we imagine a world where your startup is making that much and believe it?
6. The weird thing about some startups is, that some break into such new territory that it is very hard to model or you can’t model anything. New industries, new markets, or products and services that customers cannot imagine having or using are like that. So the FMVC you could create is purely via pitch, arrogance, confidence, etc. – whatever it takes to woo an investor to write a big enough check on what you plan whether you have product or not. In order to accomplish this kind of FMVC, your credentials must be unique: you must be well-known to the investor, you must be trusted. Ideally, you would have had an exit or more for that investor. You must show “extreme” entrepreneurial traits: be able to employ persuasive language, compelling/grand planning, superb salesmanship skills and technical skills, among others. These are the people who can get funding on a powerpoint when others flounder even with revenue.
This can be enough to win you funding and survivability.
In short:
1. An MVP is great but not enough in today’s market to win funding.
2. An MVC generally means you have MVP, but an MVP does not guarantee MVC.
3. An MVC can yield a small to medium business, or a big world dominating one. There is nothing wrong with building any of those types of businesses and the world is big enough for all kinds.
4. However, we do not know how to properly invest in small to medium businesses. Our money may not be returnable from such businesses using the current equity structure of our investing. Thus, we want to invest in FMVCs.
5. As someone who is trying to build a real high-growth startup, therefore, MVPs or MVCs are not enough. You must search for a FMVC.

As an advisor to startups, I’ve spent a lot of time developing my skills at teaching, guiding, and influencing people. But things aren’t always so rosy for startups – people who have done startups before know that there can be incredible highs but also incredible lows. The tough moments can be extremely challenging to the psyche. But who can guide them through these times?
Lately, I feel like I’ve been playing the role of helping entrepreneurs through tough times, not only with what they do, but what they feel also.

It’s hard being an entrepreneur. Sometimes, you have nobody to talk to. This is why we encourage entrepreneurs to have a co-founder, and to find good advisors. But I’ve found that while many give great advice and are awesome at the “doing” part, and are great problem solvers, they are awful at the “feeling” part.
Therapists have lots of skills – among them are:
1. The ability to listen.
2. The ability to be non-judgemental. What is, is. Don’t place value judgement on what is there in front of you.
3. Be able to practice “tough love.” Don’t be wimpy and only shower someone with good feelings; listen and then guide them to a better place. Don’t be afraid of confrontation – too many people, especially in California, avoid conflict. It’s stupid.
4. To be able to reflect what you heard from them and then guide.
If there is anything I’ve learned in my life, it’s that humans are AWFUL at the above. A good friend said it to me best:
Our society is awesome at creating doctors, lawyers, physicists, scientists. We put them through 12 years of grade school, then another 4 years of college, and then another few years of advanced training. They become AWESOME at what they do. YET we do not train someone to deal with another person positively and for a long time which arguably is just as or more important than your profession.
Those of you who know me know that I am mentor at 500startups, Lemnos Labs, and StartX. I was also mentor to Ycombinator startups when they had a short trial mentor program. And since 2006, I’ve been advisor to 20+ startups, and Venture Advisor at Betaworks. I’ve learned a lot about being a mentor and advisor over the years (see Advising with Influence and Resonance, Advisors for Early Stage Startups Presentation at Yale Entrepreneurship Institute, How Does One Advise So Many Companies at One Time?, The Three Faces of My Schizophrenia, What If I Advise But Don’t Invest?) but think one aspect that has come to the forefront lately is mentor-as-therapist.
So I listen. I hear what they are saying. I don’t be judgemental. I hear the problem or problems.
I can’t get my co-founder to agree!
Why haven’t I got 1 millions users yet? I think my product sucks!
I gotta bridge at a terrible valuation! Depression sets in!
My bank account is at zero! What do I do?
I can’t raise $100M at a billion dollar valuation! The world is so unfair!
Instagram got a billion, why not me?
I’m outta my comfort zone! Panic!

I may suggest solutions, but sometimes I suggest nothing – (in case you didn’t know, suggesting NOTHING is actually an effective way of helping!). Sometimes it can take several conversations. My intuition is fully on – can I actually push a solution now or should I wait? Maybe I can toe one in to see if it will work? I sense their receptiveness or lack thereof. I use a bit of humor. I rag on them to see the absurdity of it all (after all, what’s REALLY important in life – this stupid startup or something else?). If the time is right, I practice tough love. Some get defensive – that’s too bad – some take it in. It can be very taxing on me – isn’t it frustrating when the other party just won’t change or see the light fast enough? I just relax and be very patient because in my experience, the right answer always eventually comes. But ultimately, my hope is that I get them to a more positive place than they are today.
Yep, I’ve got a new job title – just call me “Venture Therapist”….

Since the beginning of this year, I’ve been helping a number of my startups prepare for series A (you can read some tips I’ve collected in my last post Some Suggestions on How to Prepare for a Successful Series A). This seems to have become a full time job in itself.
When I first started investing as an angel back in 2006, I wanted to be helpful. I offered up my previous experience as a UX/product guy to startups and they were thankful for that. Since 2006, I’ve learned a ton about startup building in and around the product and have broadened my areas to help.
In yesterday’s world, having a kick ass product equalled getting customers which then equalled getting your series A. In today’s world, it’s a LOT more complex.
Think about it. Everyone is out there trumpeting the entrepreneurship horn. Never before has it been so easy to start an internet startup; all the costs and barriers have dropped. But this also means that competition for the next round of funding has grown more fierce. While the number of startups has grown exponentially, the venture funds who fund at the series A level has not grown to match. Some have called this the series A crunch – see Elad Gil’s excellent post Why Fewer Companies Are Successfully Raising Series A Rounds. Others have denied there is one. Still, as I watch my startups start their funding meetings with VCs, it’s obvious that you better be better than the best of the best of the best or else you won’t have a chance.
Startups must exhibit the correct strengths and have minimal weaknesses. But what are those strengths? And how do you minimize weaknesses? Startups without guidance aren’t going to have a great chance at getting their next round. Thus your chances increase when you have help, hopefully in your advisors and investors.
I’ve been involved with over 30 startups now through my angel investing and through Launch Capital. While I started with helping with just product and UX, I find myself now more importantly broadening that help to prepping the startup for their next round. Perhaps this was obvious to those more experienced than me as an investor; however, just this year, I’ve become painfully aware that while I can help on product and UX, it’s much more important that I am helpful with a broader overview of the startup, with the specific aim of successfully landing a series A.
So I sit with founders and drive them to exhibit all the characteristics an investor may want to see. All of those are detailed in my previous post, Some Suggestions on How to Prepare for a Successful Series A. I push them to spend all their waking hours (before their bank account runs too low) to figure out their key metrics, work on whatever their weaknesses are, make money and/or get tons of users, and to put their business in the best light – especially against the competition. I bring them news from the marketplace on what investors might look for, and which ones are the best ones for their market and which ones are not. I watch the calendar and make sure they hit the fund raise trail at the right times of the year. I dress them up for the funding prom and hope that they are the prettiest one there.
To me, preparing startups for series A has become the most important function an early stage investor can perform for their startups now, more than any other function. Early stage startups should strive to not only find key advisors and investors with expertise in the right fields, but also those who can help and are willing to spend time with their startups to successfully land their next round.

I’ve been thinking a lot about investment theses and their development and use over these last few months. As I observe some of the theses that I’m investing against now, I find that investment theses move through a cycle similar to Geoffrey Moore’s Crossing the Chasm technology adoption life cycle model:

Source: Powerpoint-Templates on Slideshare
The earlier we develop a thesis, the further left on the graph we are. Thus, we truly are “Early Adopters” of this thesis because practically no one else has spotted yet, or very few. As we invest, we approach the chasm. This is where we find out if our thesis is right or not; if we are wrong, the thesis hits the chasm and falls to a brutal market death (taking our investment dollars along with it). Internet startups in this phase tackle the broad market since it is wide open with almost no competitors.
However if some of our investments start to do well, they gain market notice. Now other investors start jumping on the bandwagon. They too start to fund those startups which fit the thesis. Other (less imaginative) entrepreneurs start to see that startups got funded in a certain category before them, and they join in building startups too seeing that the investor community is beginning to favor these startups and raising money for them is easier. For internet startups, this begins the explosion of startups who start niche-ifying the early companies who tackled the broad market and try to do better by attacking a smaller segment more effectively than someone who is trying to satisfy the broad market. Series A investment rounds start populating the early startups who are still operating. This phase is the “Early Majority.”
Now the early startups have survived and gained a lot of traction and are making money and/or generating excitement by their growing size. Later stage VCs start funding series B and beyond, infusing large amounts of growth capital to companies whose traction has largely been proven. Still, entrepreneurs begin companies that tackle the space; for internet startups, this means not only further niche-ifying but also additional feature development for those things we wish the giants would do but do not have time to build.
At the end of the cycle come the laggards. This can mean simply that there are those who believe that they can still find some startup that can survive the existence of heavy competition that can grow to great heights. It can also mean that the next phase is IPO, as the largest of the companies drive towards the public markets and the stock market takes hold, which usually means there is significant traction and revenue generated. But paradoxically, once companies become big, history has shown that they stop innovating and then it can be a great opportunity for new investment theses to develop in areas where opportunity was disappearing not too long ago.
When I applied this to the theses I had been using up until now, I realized that two of my theses were racing along the graph now. And that was when I also realized that one of my theses was quickly moving beyond us.
What do I mean by that? As an early stage investor, we need certain parameters to fall into place for us to execute a meaningful strategy in selecting investments. One of these is the fact that startups we select must have market conditions maximized for their success. In the case of one of my theses, and when I applied this chasm graph to it, I realized that the market had definitely jumped the chasm a year or so ago and we were racing up through Early Majority and into Late Majority. When this happens, it means that there is still a market opportunity but just that this opportunity is not as viable for us at early stage as it was before. Mostly, this is because companies who emerge in this thesis category require a ton of capital to survive the market dynamics of fast, easy competition and a consumer attention problem of enormous proportions. You essentially need a lot of capital simply to go out and buy users to accelerate the customer acquisition process or else your chances of surviving by utilizing free methods of acquisition are too slow. At early stage, we simply cannot do things to move the odds in our favor any more; these investments become the province of those with a lot more capital than us.
Can you guess which of my theses I refer to?
Developing investment theses has been a fascinating exercise for me. However, now that I had developed some, it is even more fascinating to watch how I apply them to my investment strategy, see them evolve through years (sometimes months now), and then go through the mental and emotional exercise of dropping them when they are not valid for us any more.

Richard White CEO of Uservoice posted a great read entitled Revenue could be fatal: 3 reasons your startup should consider waiting. Check out the comments and see a snapshot of the emotions that are stewing around the net right now (see more on Hacker News). All of this is on the heels of Instagram being purchased for $1 billion by Facebook. How is that fair? How can that be? A startup making no money being purchased for $1 billion! That sucks right?
I feel for you. Some of you are truly toiling away at a startup that makes real money. Some of you are trying to build “Instagram, the Sequel”. Some of you get a lot of VC love and are showered with money while others can’t get a dime. It’s not fair, right?
Let’s not forget investors. So many are quietly or noisily looking for the next Instagram now. Many are bemoaning the fact that they missed that investment and now they shift to go looking for the next one. Darn it, my previous investment strategy made perfect sense – how crazy is it to see that lucky set of investors make off like a bandit on a bullshit company that doesn’t make any money!?! Life blows!
Well, here is some perspective. First, read this post, Mark Fletcher at Startup2Startup and the Evolution of Startup Business Strategy. It was at that Startup2Startup that I had that first AHA! moment about how the broader market can affect an entrepreneur’s strategy on creating a company.
Then I met James Robinson at RRE Ventures who has been investing WAY LONGER than I have and through many market cycles. This prompted this post, Time Diversification: Strategy for Investors and it showed how important it was for investors to watch the market and adjust investing strategy accordingly.
So put the two together and you have a marketplace for startups and investors that can vary widely over the years.
It makes sense that you should just build a company with real revenue. In fact, in the hyper-risky world of startups, this is the conservative approach. Find a great idea, build it, make money, we all get rich. That works fine every time.
But the markets can be really nutty. There can appear times in the markets where it makes sense to build a company for other reasons, potentially not for revenue. As Mark Fletcher had noted, there were times in the past when it made sense to build for acquisition. Pre-2008 most of us were investing in startups whose goal was to get a million users before their money ran out and raise the series A; this seemed to be the norm amongst startups at that time. Thus, a bunch of my startups that raised money right before 2008 and whose money ran out in late 2008/early 2009 were sunk. The economic crisis of 2008 hit and it was nearly impossible to raise money unless you had revenue. A bunch of my startups died during those years which totally sucked. Now the markets have changed again.
As Instagram has shown, tremendous value has been created in a company that makes virtually no money but then became a threat to another company and thus got bought for an exorbitant amount of money. There have to be buyers with the appropriate resources and reasons, competitive conditions which drive those purchases to be made, and sometimes a lot of luck to be an employee or investor in the acquired company. Market conditions were right for this happen; they may have had this fact in mind, or maybe they just fell into it when Instagram took off.
Try this in 2008-09 and you probably would have failed to get funding. Could Instagram have survived through those few tough years? Maybe they could have; maybe they would have died.
So now I’ve been hearing word that investors are out looking for Instagram-ish investments. Doesn’t make those companies raising money with real revenue feel any better when they don’t fit the “momentum play” mold. I would, however, say that feeling hatred and jealousy is natural but it’s time to let go and learn from this.
You need to watch the markets like a hawk. Like Mark Fletcher, he adjusted his startup building and fund raising strategy according to what the markets were like at that time. You go out and try to raise for one type of startup when the markets are looking for another type, right or wrong, and that means your chances of raising a round could actually be much less! (We pesky investors just love to follow the herd and be ultra-risky.) So much luck is bound in this business that the timing could just shift on you and you’re dead in the water – or you just hit the jackpot by raising at a momentum level valuation.
For us investors, we need to also watch the macro conditions and decide how we’re going to invest. Some investors will look at their strategies and available funds and go for what is hot now. Others will stick to their guns and be more conservative. Higher risk = higher potential return…or higher loss. Losing all your money in bad investments is bad enough when it’s your own money; it’s career ending when you lose your LPs’ money. Or you could be one of the investors in Instagram and now you’re a hero. Which one will you go for?
But for each of us, getting cranky, jealous and hateful isn’t productive. For me, this is whole ecosystem is fascinating and why I enjoy being an investor. It is a huge challenge to me to play in this topsy-turvy, ever-shifting world. Will I be right? Will I make the right decisions? Or will I lose everything? How can I be smarter and better than everyone else? Will I be lucky? Have I created enough luck? By the way, these decisions I make today may not have results, good or bad, for months, maybe even years. Timing is nearly impossible. Never hating, always learning and improving.
The pace of change is incredibly fast now. Launch Capital’s research into the megatrends revealed that the speed of these changes is only going get faster. It can be bewildering to think that investing in revenue generating startups was in vogue only 2-3 years ago and now people are chasing startups that have momentum in users, revenue or no. It could be mere months when the next big shift happens.
I, for one, am enjoying the ride on this rollercoaster and patting those on the back who manage to make money no matter what the market conditions are at that time.