124. Space Tech Investing, Part 1 (David Cowan)

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David Cowan of Bessemer Venture Partners joins Nick to cover Space Tech Investing, Part 1. We will address questions including:

  • First off, David what was the thought process that led you to invest in this area?
  • You’ve written in the past about the roadmap approach toward investing.  Was it this approach that led you to space tech?
  • What are the major categories or sub-groups within space tech?
  • It seems that there has been a recent surge in space tech investing. Was there a catalyst or a series of factors that has driven the opportunity for VC investing in space technology?
  • Are the risk/return profile and capital intensity of investing in this area fundamentally different than that of other tech sectors? Why or why not?

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123. Cram Session, Episodes 61-66 (Nick Moran)

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Welcome back to TFR for another Cram Session. In these special releases, we have aggregated the takeaways and tips from previous episodes. In this installment, we will be recapping the following episodes:


Investor Stories 57: Exceptional Founders (Wilkins, Mason, Benaich)

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On this special segment of The Full Ratchet,

the following investors are featured:

  • Peter Wilkins

  • Galen Mason

  • Nathan Benaich

Each investor describes an outstanding entrepreneur that

they’ve worked with and what key traits and behaviors

make for the best startup leaders.

FULL TRANSCRIPT

Wilkins Startups What's Next


Read More…


What Makes SaaS so Special?

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Many articles are written, every week, about how to succeed in SaaS. But less often do people write about why SaaS is so special. It’s a business model, applied to a product type that has become a massive focus area. Venture has not seen a category of startups like it before. Some investors create an entire thesis, just focused on software as a service. So, rather than spending this week’s tip on another top ten list of HOW to win in SaaS… instead, let’s explore WHY the category, itself, is so special.

It boils down to three simple reasons: Proximity to customer, measurables and value focus.

1. Proximity to Customer: Part of the brilliance of SaaS is that companies develop a direct relationship with end-users. They often sell directly to them and have an ongoing feedback loop with them. While this provides numerous product and versatility advantages, maybe the biggest advantage is in what this eliminates. Proximity to the customer dis-intermediates traditional channel players. Wholesalers, distributors, resellers, retailers… what intrinsic value do these players provide? None. They reduce margin, for the value creators, and they increase price, for the value consumers. By removing layers upon layers of mouths to feed, the only transaction necessary is between the creators and the customers… thus all the value resides with them.

2. It’s Measurable: When I think of metrics I recall Peter Drucker’s famous quote, “You can’t manage what you don’t measure.” Or you may remember this one from Dwight Eisenhower, “Plans are nothing; planning is everything.” The set of standardized metrics available makes the category much easier to assess. Problems are more easily uncovered. Best practices are readily transferable. This gives both founder and investor a playbook to work from. It helps each identify the root cause of issues and take action against them. The forecast itself may be terribly inaccurate but it drives the right discussions and allows for fast reaction.

3. Value Focus:  SaaS business typically charge upfront and ongoing. Strong value must exist from customers to pay for the product. And this value must sustain or the customer will select out. With many businesses, the value transacted ends after the initial sale. With SaaS, it’s the opposite. The first transaction is the beginning of a long, healthy annuity. This puts pressure on the startup to provide real, increasing value. And, as I wrote about in a post called The Customer-volume value curve, the startup can share in this value as they expand it over time.

It’s no secret that my strategic focus area is not SaaS. I’m a hardware investor. I hunt for compelling startups developing IoT with a recurring revenue stream…. for now, I’ll refer to this as IoTR, standing for Internet of Things w/ recurring. So, why would I knowingly choose something other than SaaS, when I’m aware of its massive advantages over other types of businesses? Read More…


122. Customer-centric Startup Investing Down Under, Part 2 (Niki Scevak)

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Today we cover Part 2 of Customer-centric Startup Investing Down Under with Niki Scevak of Blackbird Ventures. In this segment we address:

  • Niki Scevak customer-centric startup investingWhat’s your take on water and the water crisis in Australia?  How do you see innovation happening around water in the country?
  • Would a company like Instacart be within your thesis or not because it requires some localized presence to build out new markets in the short-term?
  • In your estimation, are some companies better off being founded in the valley vs. one of the tech centers in Australia? If so, what type of companies?
  • What advantages do startups founded in Australia have over startups founded elsewhere?
  • What advice would you give to founders starting up in regions outside of the states?

Read More…


121. Customer-centric Startup Investing Down Under, Part 1 (Niki Scevak)

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Niki Scevak of Blackbird Ventures joins Nick to discuss Customer-centric Startup Investing Down Under, Part 1. We will address questions including:

  • To start off… in your estimation, what are the key factors that make a startup investable?
  • What are your thoughts on a company like Box? At the seed stage the team didn’t seem to have domain expertise, it doesn’t look like a passion project and they were going after a completely different customer set than what they eventually had success with. How would you assess companies like this at Blackbird?
  • You’ve written before about how you look specifically for startups w/ happy customers who come back again and again. Can you expand on why this is such a key focus area?
  • How do you think about early customers, the innovators/early adopters so to speak, vs. the early and late majority… and if those innovators are going to be representative of the mass market?
  • What role does the degree of homogeneity of the customer base play in your assessment of whether an early product can cross the chasm?
  • What are some of the customer-centric metrics that you are looking for when reviewing startups?
  • Do you have a bias toward sales-driven or marketing-driven startups? If so, what’s the bias and why?
  • Do you invest any companies that do not have a SaaS business model? Why or why not?

Read More…


120. Cram Session, Episodes 55-60 (Nick Moran)

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Welcome back to TFR for another Cram Session. In these special releases, we have aggregated the takeaways and tips from previous episodes. In this installment, we will be recapping the following episodes:

 


Investor Stories 56: My Investing Strategy (Mohnot, Mougayar, Tunguz)

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On this special segment of The Full Ratchet,

the following investors are featured:

  • Sheel Mohnot

  • William Mougayar

  • Tom Tunguz

Each investor describes their investment thesis and

how they evaluate startups for investment.

FULL TRANSCRIPT

Sheel Mohnot What's Next in Fintech Venture Capital

Mougayar Blockchain Investing

Tunguz exceptional founders venture capital

Read More…


Red vs. Blue in VC

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Based on the title, you’re probably thinking this is a post about politics. It’s not.

This reference is to red oceans and blue oceans as discussed in the book, Blue Ocean Strategy, from authors Mauborgne and Kim. And I touched on this concept previously in a post called “Finding the Whitespace,” but I’d like to put a finer point on it here. And there is no topic that applies more directly than disruptive innovation.

In the interview, Mark mentioned that goal for disruptive technology is to compete against non-consumption. His position is that startups should focus on developing inferior products that can access a much larger number of customers across new applications. And this point was also discussed in detail in the book. A red ocean, is one where the market is set. There is a certain volume of customer that purchase a product at an average price. The market is well established and does not fundamentally change. Thus the strategies employed by large players in these marketplaces are one of share gain. Every player is trying to take market share from their competitors. It’s a competitive, bloody, fight for more market share… hence the ocean is red. Blue Oceans, on the other hand, are emerging markets. They’re not yet fully established. The number of customers and the price a product can command are both in flux… and there are no direct competitors. The fight is not one of competition but rather awareness. Companies fortunate enough to be playing in a blue ocean have the only product of their kind. By introducing non-consumers to their product, they grow the market itself.

This is why, at New Stack, we talk about companies that are creating new markets or fundamentally redefining the market they’re playing in. Every market is price * volume. If you’re familiar w/ Mekko Maps, imagine a Mekko. If not, think of a stacked bar on a chart. Each stack within the bar represents a competitor with market share. With a red ocean, the size of that bar is fixed. So, if you want more revenue, you’ve got to take it from others. With a blue ocean, the market is completely redefined along both price and volume. Price is significantly lowered, allowing access to a huge volume of customers that previously didn’t purchase a product for this problem. The original target customer is now only a small percentage in relation to total customers accessible. And, in addition to new types of customers, you get to add application adjacencies as well. So, you take a narrow customer that uses a product in a limited way. And you allow masses of customers to use a product far more than they had previously. Mark’s example was the Sony Walkman. A software example that just popped in my head is Read More…


119. Economic Theory in Venture Capital, Part 2 (Mark Suster)

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Today we cover Part 2 of Economic Theory in Venture Capital with Mark Suster of Upfront Ventures. In this segment we address:

  • What are your impressions of what Bryce Roberts is doing at Indie VC?
  • How have your thoughts on investment psychology and economics been influenced by The Black Swan by Nassim Taleb?
  • What other principles of economics, that we haven’t touched on, have informed your investment philosophy?
  • In light of today’s topics, what are the key things you’re looking for in startups?
  • Can you talk about Defy Ventures and your experience visiting California State Prison and the impact that Defy is having?

Read More…


Listener Feedback

Shawn Swyx Wang

@TheFullRatchet @davidcowan @BessemerVP this was a very refreshing interview! had no idea there was a moore’s law going on in spacetech!