Investor Stories 40: What’s Next (Benaich, Tsai, Carter)

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On this special segment of The Full Ratchet,

the following investors are featured:

  • Nathan Benaich

  • Christine Tsai

  • Jeffrey Carter

Each investor discusses sectors, drivers and/or

trends that may have significant impact in the

future and are potentially positioned for outsized-returns.

FULL TRANSCRIPT

Christine Tsai Investor Thesis Strategy

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Venture Weekly Editor’s Note – 5/23/2016

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The Reality of Equity Crowdfunding

This past week, the SEC’s new equity crowdfunding rules enacted under the JOBS Act officially took effect, so as of last Monday, previously non-accredited investors (basically those with less than $1M net worth, excluding their home) can finally start investing directly in startup equity.

In this week’s issue we’ve featured a post from Jason Calacanis about equity crowdfunding.  Jason is certainly one of the most bullish public advocates for the new rules, and it’s easy to understand why, given that he is the leader of one of the largest AngelList syndicates.  However, in his post Jason paints a picture of a world where every mom and pop will be able to share in the wealth created by technological disruption, a vision I believe is overoptimistic.

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-Mike Droesch, Founding Editor


Venture Weekly Issue 50

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Top Story
   »Discussing Brad’s approach to making difficult decisions

 

Perspectives
   »Discussing the need for venture scale returns on a venture-oriented timeframe

 

   »Discussing how non-accredited investors should think about jumping into crowdfunded angel investing

 

   »Explaining the different exit options for startups and why we need more IPOs

 

Market Trends
   »Analyzing the journey of disruption through the lense of traditional retailers being disrupted by e-commerce

 

   »Illustrating the landscape of tech companies providing alternative data for investors

 

Startup Focus
   »Analyzing why A/B testing may not be applicable for early stage SaaS companies with limited user traffic

 

   »Discussing the benefits of having happy employees in the workplace

 

   »Guiding founders on how to build a well-balanced and effective early stage board

 

Interviews
   »Discussing how to approach studying and getting smart on an emerging market sector

The Customer Volume-Value Curve

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Below is the ‘Tip of the Week’ from Ep82: Getting Smart on a New Market, Part 2 (Charles Hudson)

We’ve spoken a lot in the past about companies that receive more benefit as they increase their customer-base and customers become more active. Companies like LinkedIN, Netflix, Twitter, etc. all increase the value that users receive as the user base itself increases. But today, in a simple and direct manner, Charles took it a step further and talked about something I’m choosing to call the customer volume-value curve.

The example we discussed was Slack and how in a smart, but maybe even diabolical way, they are set up so that the more customers using the platform the more value is created for users and for the enterprise. So, not only does the value for the community of users increase, but the value for payers does as well. In this case, the more people Slack has using the product, the more value the paid features have for the enterprise.

In most cases, it seems that this value is more of a linear relationship. Imagine that number of users is on the Y axis and $ per user is on the X axis. The more users a social network has, the more ads they can sell. The volume side of the equation is most critical here. We know how much money we can make per user, so how do we get more users? The below graph depicts the case for most businesses where volume of customers does not impact the price that can be charged per customer:

$ per User is fixed

But what if the more users they acquire, the more they can charge for every ad click? What if as volume increases price increases as well… Here the curve starts to look less linear and more exponential:

$ per User goes up with Volume of Users (ONE revenue stream):

And, on top of that, Slack has taken that a step further; with Read More…


Ep82: Getting Smart on a New Market, Part 2 (Charles Hudson)

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Download_v2Listen to The Full Ratchet on SoundCloudNick Moran Angel List

Today we cover Part 2 of Getting Smart on a New Market with Charles Hudson of Precursor Ventures. In this segment we address:

  • New Market thesis part 2 Charles HudsonHow do you look at companies addressing industries where the incumbent product offerings are free.  Businesses like Slack that were replacing free options
  • Fresh Eyes… You’ve written about how you don’t look at decks before the first meeting w/ an entrepreneur. Can you touch on the key reasons why you take meetings without reviewing the deck?
  • If you are evaluating a startup that is pre-traction – what do you look for and why?
  • In the spirit of continuous improvement… What are your thoughts on how one can learn and improve once they have a job in VC?
  • What startup investor has inspired and influenced you most and why?

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Ep81: Getting Smart on a New Market, Part 1 (Charles Hudson)

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Download_v2Listen to The Full Ratchet on SoundCloudNick Moran Angel List

Charles Hudson of Precursor Ventures joins Nick to cover Getting Smart on a New Market, Part 1. We will address questions including:

  • Developing a POV on a New MarketWhat Charles’ experience at SoftTech was like and how he made the transition to founding Precursor.
  • What his continuing role as a Venture Partner at SoftTech entails.
  • How Charles decides to study a new, emerging market and some of the markets that he’s analyzed over the years.
  • The three components of his approach to getting smart on a new area.
  • How important timing is and how he considers if the timing is right for a new area.
  • If he assesses markets vertically and looks for the level within the supply chain stack to see where a company is playing and which level within the chain is going to exert the most control over the market.
  • How he breaks down market structure and the critical components therein.
  • The importance of the degree of homogeneity of the customer base within a target market.
  • How he thinks about companies disrupting existing markets and those creating brand new markets.
  • We discuss how there’s always a good reason to say no to startups and, more importantly, the key, recurring reasons that come up that cause him to say yes.
    and we’ll wrap up part one by discussing:
  • How he measures TAM in an area that’s nascent where the market doesn’t yet exist.

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Venture Weekly Editor’s Note – 5/17/2016

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Is the Tech Press Hunting Unicorns?

Startups had another tough week in the tech press. William Alden wrote a damning expose on Palantir, one of the Valley’s most secretive companies up to this point, to which co-founder Joe Lonsdale replied on Quora. Former VP of Engineering at uBeam Paul Reynolds published a blog post this past week basically saying that the technology can’t work as advertised (which was picked up by many, many outlets). Mark Suster, VC at Upfront Ventures and uBeam board member, responded here.

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Venture Weekly Issue 49

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Top Story
   »Sharing Om’s thoughts VC, and its outsized impact on innovation, on the occasion of his partner stepping down from the NVCA

 

Perspectives
   »Explaining how an investor’s emotions can impact the quality of the investments they make

 

   »Responding to uBeam retractors and more general thoughts about staying focused, taking risks and the challenge of innovation at the bleeding edge

 

   »Summarizing key lessons for developing strong startup ecosystems based on the history of Silicon Valley

 

Market Trends
   »Analyzing the decline in VC investment over 2016 and which stages have been hit the hardest

 

   »Illustrating some notable differences in financial performance between the top B2B and B2C companies

 

Startup Focus
   »Explaining the components of Brand Marketing and best-in-class examples from the former CMO of Just Eat

 

   »Using customer “inflection points” to help your startup gain distribution and scale

 

   »Guiding SaaS founders on how to overcome the challenge of growing from initial traction to $10M in ARR

 

Interviews
   »Diving deeper than just the “pipeline problem” to uncover what is truly driving the lack of women in tech

Investor Stories 39: Why I Invested (Shah, Huston, Draper)

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Download_v2Listen to The Full Ratchet on SoundCloudNick Moran Angel List

On this special segment of The Full Ratchet,

the following investors are featured:

  • Semil Shah

  • John Huston

  • Adam Draper

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.

FULL TRANSCRIPT

Semil Shah Path to Series A


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Venture Weekly Issue 47 – Entrepreneurship is Both Risky and Daring

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Top Story
   »Defending why seed investors should lead
Perspectives
   »Describing why there has been a spike in established VCs raising new funds in early 2016, and how other firms should consider approaching LPs
   »Championing bold entrepreneurship in the face of staggering odds as the way to truly change the world
   »Describing why investors need to be thoughtful and respectful in passing on investment opportunities
Market Trends
   »Exploring the old saying “too many VC dollars chasing too few good deals,” and why this is unlikely to change any time soon
   »Highlighting top companies at Collision 2016
Startup Focus
   »Explaining in simple terms why each $1 of funding means $10 in expected exit value – and the implications thereof
   »Arguing that there are only three ways a startup should approach pricing
   »Describing how understanding learning profiles can improve hiring and reduce employee turnover
Interviews
   »Discussing how to approach investing in great hardware companies

 

Entrepreneurship is Both Risky and Daring

What is a venture? A search on Google returns the following definition for “venture”: “a risky or daring journey or undertaking.” This definition seems to perfectly encapsulate the meaning of a venture in the context of entrepreneurship. But this definition actually represents two definitions, one skewing towards “risky” and one skewing towards “daring.” Both perspectives are important, both are true, and it is an awareness of both that makes the pursuit of entrepreneurship so rewarding.

 

Regarding the “risky” piece, Bryce Roberts rehashes in Are We Reaching the Limits of Silicon Valley’s Venture Model? the adage that there are “too many VC dollars chasing too few good deals,” and that this is a trend that won’t end well: “Maybe the answer to the liquidity problems facing the Silicon Valley VC model isn’t a cleaner termsheet or a wider IPO window. As the old saying, history and data suggest, there are ‘too many VC dollars chasing too few good deals,’ but that hasn’t stopped anyone from doing more of the same.” This is a cold, analytical, and important component of entrepreneurship, typically found in greater measure on the investing side.

 

On the “daring” side of things, Vinod Khosla states in The case for intelligent failure to invent the future, “Too often, there is a tendency, especially among investors, large corporations, and public officials, to reduce the probability of failure to the point that the consequences of success become inconsequential [… ] Skeptics and cynics never did the impossible, and we need the impossible to bridge our resource gap. Please don’t call a committee hearing or start a research study to follow up on this idea. Just go do it.” This is a passionate, mission-driven, and crucial component of entrepreneurship, typically found in greater measure on the founder side.

 

In the end, entrepreneurship is, and must be, both risky and daring. Fortunes, whether they be financial, temporal, or emotional, are won and lost in this pursuit. But as long as you can feel that what you are doing is both risky and daring, you will know that you are on the right path.

 
-Teddy Lee, Contributing Editor

Listener Feedback

Ben Smith

@TheFullRatchet part two with @chudson was useful and informative. It's exactly what I needed to hear as I'm starting to plan my next steps