On this special segment of The Full Ratchet,
the following investors are featured:
Each investor describes their investment thesis and
how they evaluate startups for investment.
In this episode, Nick answers questions from the listeners including:
- First off, a question from Dave at a family office in the midwest… Dave asks: “Nick, I recently reviewed a great startup but am not going to pursue because of the terms. Our lawyer requires a that a convertible note has a path to equity in all scenarios. This startup’s note does not. This stance makes sense to me, but I see so many other Angels invest in this type of note that it makes me wonder if this stance is justified. I would be interested in your opinion.”
- Sam, an aspiring practitioner in Florida asks: “Nick, I will be matriculating for my MBA this fall and I’d like to get into venture capital. It has been suggested to me to do investment banking first and use that experience to get into VC. Do you think that’s good advice?”
- Stephen, from Chicago, asks: “I have an interview in a couple weeks with a VC fund. What type of modeling do you think I should be ready for?”
- Sara, an entrepreneur in Ann Arbor, asks: “Nick, I’m interested in beginning conversations with investors for my SaaS, edtech startup. Do you know anyone in edtech that you could introduce me to?”
- A question from Jon, an angel investor in Nashville: “How have you found the startup dealflow to be on Angel List? I’d like to back your syndicate but I’m not sure about the quality of the startups you’re getting from Angel List.”
- After sending this info to John, he followed-up by asking if I back other people’s syndicates…
- Paul from one of the largest VCs in the midwest asks: “Nick, we are in the process of hiring for an Analyst role. Someone with 0-3 years of experience and love of the startup world. The role will focus on supporting our portfolio. If you have any strong candidates, please feel free to refer them to me this week. We are going to be closing the top of the funnel shortly, but welcome your referrals.”
- From Ted in Chicago: “I just received a formal offer from a startup. They are still an LLC, so they are offering LLC Grants, rather than equity options.”
Today we cover Part 2 of “What’s Wrong with Venture?” with Dave McClure of 500 Startups. In this segment we address:
- Are there any problematic issues that you’ve observed w/ founders?
- Any thoughts on who might be one of the most misunderstood people in the venture ecosystem?
- How do you think about the landscape of accelerators and how do you differentiate at 500?
- Any other comments on challenges in the venture environment and what you’d like to see change going forward?
- On the other side of the coin, what positive trends have you observed in venture over the past few years?
- What startup investor has inspired and influenced you most and why?
Below is the ‘Tip of the Week’ from Ep94: What’s Wrong with Venture? Part 2 (Dave McClure)
Today Dave talked about sectors and trends that are hot and attract many investors. Even LPs are wooed by the new, sexy tech trends; which has influenced the thesis of VC fund managers. Dave has seen many cycles over the years and has structured his thesis around long-term, sustainable competitive advantages. And as I reviewed his comments, I saw a parallel at the business-model level. I considered my dealflow and the businesses that have staying power. Not at a sector or technology level, but in the way a business attracts and retains customers. And I asked myself, “”From this list of startups, which have long-term, sustainable value-creation? Are their customers a one-time event or a loyal customer for life?
I just received a deck yesterday form a company that has developed a SaaS platform for highschool athletes. They have great adotion, high engagement and seem to be providing strong value to their customers. But their business has distinct limitations. They do not want to serve pre-highschool athletes and there is no strategy to expand to college. They have a four-year window to serve their customers.
Another startup deck that I received a couple of weeks ago was from a company that has re-imagined the baby crib. They have a beautiful, free-trade, organic product that has had strong success selling direct-to-consumer on the internet. Cool product, great founding team, healthy traction. But again, this is a one-time sale, at a distinct point in time.
With each of these businesses, are they selling to a customer that will remain loyal in perpetuity? Is there an opportunity to build more value and sell more to that customer over decades to come? I think the answer is no, unless they re-imagine their customer…is the customer really the highschool athlete or is it the highschool? Is the customer the baby’s Read More…
Welcome back to TFR. We’ve got a good one today as we welcome one of the most respected and polarizing figures in venture, Dave McClure, to the program. Dave, of course, is a founding partner at 500 startups and, with Christine Tsai, they have built an organization that may be the most active startup investor in the world. In this interview, we will discuss ‘What’s Wrong w/ Venture?’ We discuss issues on the investor-side, on the founder-side and how 500 is setup to address some of those issues. We cover:
- What Dave worked on and who Dave worked with in the early days at Paypal
- Why Dave thinks most VCs are lazy and not innovative
- The ways he’s been innovative in this asset class where others have not
- If he invests in ideas and how early he’s willing to go
- Other problematic and frustrating practices by VCs
- If he thinks that LP influence is driving VC fund strategy
- If the influx of capital from new, early-stage angels is positive or negative
- Why valuations have adjusted down so significantly, particularly w/ SaaS companies
- And we’ll wrap up part 1 of the interview w/ Dave’s response to Bill Gurley’s position that current founders have never experienced a difficult fundraising environment, resulting in dirty term sheets, instead of just raising at lower valuations
On this special segment of The Full Ratchet,
the following investors are featured:
Mark Peter Davis
Each investor describes a situation where they did
decide to invest, what the key factors were that led
to “Yes” and how that investment has worked out.
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:
- Ep32: Capital Outside of the Valley (Morris Wheeler, Mike Belsito)
- Ep33: Syndicate Investing (Gil Penchina)
- Ep35: Developing Startup Ecosystems & High-touch Screening (Eric Gasser)
- Ep36: SaaS Startup Investing (Mamoon Hamid)
Below is the ‘Tip of the Week’ from Ep91: SpaceX & Elon Musk’s Mission to Mars, Part 2 (Tim Urban)
In today’s interview, Tim talked about the challenge for first movers. Not only do they…
1. have to build a business and
2. have to innovate & develop new technology;
3. but they also have to teach the world about the importance of this new industry.
The first internet service provider’s biggest opportunity came not from converting a small number of internet users; but rather getting non-internet users to use the internet.
The early automobile maker’s biggest challenge was not convincing people why they should buy their brand; but rather why they should consider purchasing an automobile in the first place.
Even a more modern example, take a company like Fitbit. They may have gotten early traction with consumers that already had GPS and health monitoring fitness watches; but the big opportunity that they capitalized on was getting the mass market to see the benefit of wearing a Fitbit all-day, everyday.
The First Mover in a space clearly has tremendous opportunity, but therein faces a dilemma. This is related to the concept we often hear about “Competing against non-consumption.” Often the single biggest competitor for any company, in any sector, is non-consumption. There are always far more people out there that could be using your product, but aren’t using anything. And this is why I dislike seeing startup pitch slides that talk about the competition. If one is addressing a real pain point, in a unique way, they will be Read More…
Today we cover Part 2 of SpaceX & Elon Musk’s Mission to Mars with Tim Urban of Wait but Why. In this segment we address:
- When does Elon project that the first crew of people will land on Mars?
- The surface of Mars is not livable. How does Elon plan on addressing the atmosphere issue?
- After finishing the series on SpaceX and Elon’s mission to colonize Mars; what were some of the takeaways that impacted you most?
- What are the key, defining things that make Elon such a unique figure in human history?
- What is it about Elon that makes him a visionary creator?
Tim Urban of Wait but Why joins Nick to cover SpaceX & Elon Musk’s Mission to Mars, Part 1. We will address questions including:
- Tim, can you start us off by telling us your story and how that led to the launch of Wait but Why?
- You’ve written about Space travel, AI, the Fermi Paradox, Procrastination, Cryogenics and much more… Where do you come up w/ your topic ideas?
- Today I want to talk about your interaction w/ Elon and specifically the story you put together on SpaceX… to start off, how did you first get connected w/ Elon?
- You’ve also done a specific feature on Elon as well as Tesla… can you talk about why you felt it was so important to do this piece on SpaceX?
- When discussing Musk’s Mission to put 1M people on Mars… one first needs to understand the nature of extinction events. You introduce that well by presenting a bet between two aliens, Zurple and Quignee, on the planet Uvuvuwu. Can you walk us through the bet and why they are making it?
- Can you talk about the number and magnitude of extinction events that the earth has already experienced and the potential causes of extinction events?
- You use a hard drive analogy to explain why Musk wants to put 1M people on Mars. Can you recap this analogy?
- Can you describe your discussion w/ Elon on ‘A Will’ and ‘A Way’ and how this led him to the mission of revolutionizing the cost of space travel?
- Can you give us an overview of the major costs for rockets and how SpaceX has and potentially will continue to significantly lower these costs?