Author Archive

What’s Your Gateway Drug?

In today’s interview, Jordan talked about how there are two kinds of startups.  Those that are solving a real problem and those that are addressing something that customers are totally unaware of and, in the process, changing their behavior.  I wanted to attempt to connect these two concepts and illustrate a pattern that I’ve observed with many founders.  And this pattern has revealed itself to me, in the form of two different startup types.  Without question, every pitch I come across can be categorized in one of these two groups.
 
Type 1:  We’re solving a narrow problem for a specific customer.
 
Type 2:  We’re building a platform that will change the way consumers behave.
 
There are problems with each of these types.  In the case of startup type 1, solving a narrow problem, often the problem is too narrow and the market is too small.  So even if their solution is incredible, the opportunity size doesn’t justify investment.  In the case of startup type 2, the market sizes are typically massive, but they can’t get adoption.  In the pursuit of boiling the ocean and creating a whole ecosystem, they’ve confused and overwhelmed users.  In the absence of addressing a real problem, there is no business.
 
To provide a quick example of each… let’s consider smart watches.  On one hand, you have GPS-enabled smart watches.  They perform a targeted function and solve a real problem.  I’d imagine the majority of the customer base is runners that are using the device to track splits and distance.  This would fall into Type 1.  Real business, real value, niche market.  On the other side of the spectrum, you have the Apple Watch.  This product attempted to recreate all features of the mobile device in watch-form.  Apple took a new use case and went from zero to 100 on day one.  The jury is out on success or failure of the Apple watch but clearly it has vastly underwhelmed vs. their expectations.  So, while it has massive capability, consumers don’t quite understand the value.  And the behavioral changes required are too significant to be comfortable.  Recall that the apple phone did not launch with thousands of apps and immense capability.  It was, quite literally, a mobile phone with beautiful industrial design.  The user experience was unrivaled, resulting in fast adoption.  Apple iOS and the “platform” we know today was a gradual development.  Consumers learned how to use the enhanced capability, app by app, version by version.
 
The best pitches that I see, have a Type 1 mandate and a Type 2 vision.  They are solving a real problem with a narrow customer-base, like type one startups.  But they are doing this as a Gateway Drug, so to speak.  The initial solution is a means to a much bigger opportunity.  The gateway drug gets customers in the door, using the product.  This allows the business to grow with the customer and become a type 2 startup.  If I were to have made a suggestion to Apple, it would have been to roll out the watch as they did the phone.  Find the single, most visceral problem to address w/ the watch… and create a product that is far better than anything else for that use-case.  Then, over time, they can become a platform, with many additional features, just as the iphone did.
 
So, today I facetiously recommend to find that Gateway Drug.  Use it to build something much bigger.  Founders that do will have real business and may have the opportunity to build a household name.

128. Sector & Niche Focused Funds, p2 and Driving Value with a Regulatory Focus (Jordan Nof)

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Today we cover Part 2 of Sector & Niche Focused Funds with Jordan Nof of Tusk Ventures. In this segment we address:

  • Given the current regulatory environment, are there specific verticals that you find particularly compelling?
  • Do you expect more micro VCs, niche and sector focused funds to launch in the coming years?
  • Tell us more about the various ways that you specialize at Tusk.
  • When is the right time to start interacting with regulators?
  • What are your thoughts on working with regulators at the federal vs. the local levels?
  • Do you have any advice for founders and/or investors re. today’s topic?

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127. Sector & Niche Focused Funds, Part 1 (Jordan Nof)

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Jordan Nof, head of investments at Tusk Ventures, joins Nick to cover Sector & Niche Focused Funds, Part 1. We will address questions including:

  • Jordan Nof Sector Niche Regulatory Focused FundsToday we are talking about Sector/Niche Focused Funds. First off, at a high level, what categories and in what ways have you seen funds specialize?
  • What are your thoughts on thesis, thematic and horizontal driven focuses vs. sector, geo or other vertical focuses? 
  • Do you think specialization is a new trend or one that’s always existed?
  • I’m in an area with a lot of generalists. Why do think we are seeing the emergence of so many specialized investors?
  • What are the benefits of niche/sector focused funds?
  • What are the drawbacks?
  • Is it more appropriate to specialize at early or later stages… or is stage irrelevant?

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Investor Stories 59: Lessons Learned (Olsen, Collett, Sanwal)

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On this special segment of The Full Ratchet,

the following investors are featured:

  • Chris Olsen

  • Mike Collett

  • Anand Sanwal

Each investor illustrates a critical lesson

learned about startup investing and how

it’s changed their approach.

FULL TRANSCRIPT

chris olsen drive capital midwest venture capital

Mike Collett Why I Passed on a Startup

Anand Sanwal What's Next Startup Trends

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126. Cram Session, Episodes 67-72 (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 58: What’s Next (Kurzweil, Buttrick, Hudson)

Download_v2Nick Moran Angel List

On this special segment of The Full Ratchet,

the following investors are featured:

  • Ethan Kurzweil

  • John Buttrick

  • Charles Hudson

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

Ethan Kurzweil Developer Platform Investing

Buttrick USV Startup Thesis

Charles Hudson Why I Passed on a Startup

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Vertical Integration and the Space Stack

Despite advances in recent years, the space industry still has it’s major challenges. Namely, launch, remains the biggest challenge. There’s the cost of launch including the payload, the risk that your payload blows up, and the timing of launch; many have to wait long durations to get their payload into a launch queue. Another challenge has to do w/ the human biological hazards of space. David thinks this may be one of the hardest problems to solve. And finally, there’s the ideological challenge of the “Space Stack,” so to speak. The leader in the sector, SpaceX, has found success by adopting a vertically integrated model. Similar to what he’s done w/ Tesla, Elon aims to build the components, sub-systems, systems, integration, and assembly all in-house. And it’s this approach that has driven much of their success, allowing them to re-think and re-design rockets from the ground up. But it also can be limiting. David discussed the technology ecosystem required to achieve objectives like inter-planetary travel and asteroid and moon mining. These are not easy challenges and, as with any industry, it’s unrealistic to think that one company can solve them all. I’d imagine many tech companies grapple with the choices of vertical integration, and ask the question, “Do we bring things in-house or do we leverage services and/or components that allow us to focus on our strengths?” It’s common for leadership to consider this when building a solution that addresses a specific problem. What’s more unique is a company asking their-selves this question about an entire sector. And Elon’s mission Mars is much bigger than solving the problem of launch. To illustrate the scope of this mission, we did an entire interview about w/ Tim Urban. So, in a way, David believes that Elon’s approach is limiting the advancement of Space 2.0 While Elon attempts everything in-house, David roots for technologists anywhere with both his voice and his wallet. It is reasonable to believe that, regardless of what Elon does, creators will continue creating. Building solutions to both narrow and broad problems. And regardless of how this plays out, I couldn’t be more excited to see how the Space Stack evolves and what the frontier holds.

 


125. Space Tech Investing, Part 2 (David Cowan)

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Today we cover Part 2 of Space Tech Investing with David Cowan of Bessemer Venture Partners. In this segment we address:

  • Why is SpaceX moving the industry forward in the wrong direction?
  • I recently read a Fortune article titled ‘VCs Invested More in Space Startups Last Year Than in the Previous 15 Years Combined.’ An excerpt from the article states “50 venture capital firms invested in space companies in 2015, signaling that venture capital has warmed to a space industry it has long considered both too risky and too slow to yield returns.” David, Why do you think now is the right time to be investing in space?
  • The amount of data that can be collected and analyzed now via satellites is an order-of-magnitude greater than it was only a short time ago. How do you think about the data opportunity and what role does data play in driving space tech forward?
  • When you look forward to the next 10-20 years, what are your thoughts/predictions on how space tech will evolve and impact society?

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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)

Download_v2Nick Moran Angel List

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:


Listener Feedback

Pete Maglio

The takeaways to end this episode are fantastic! Thanks @TheFullRatchet & @BenEinstein! pca.st/Fey4 #smartHardware #startups