Angel investor: Want my money? Here's my checklist • Hacker News Board

Re: Angel investor: Want my money? Here's my checklist

#41

Post by trevelyan » Tue, Oct 07, 2008, 10:55 AM UTC

ph0rque wrote: post #13

nostrademons wrote: post #11

Earlier quoted context omitted.

Enterprise (or paid small-business services) always comes back in style in recessions. Look at 2002: the two big IPOs were PayPal and LoudCloud/Opsware. It's because ad spending - and particularly, ad spending in unproven mediums - tends to fall dramatically when money is tight. It's the first thing to go, well before productivity enhancements. Of course, this means that for entrepreneurs starting companies now , con…

> Sucks for people (like me) who started consumer web startups in 2007, though. Do you have anything you're working on now, Jonathan?

I don't understand why this is supposed to be a bad time to monetize through the customer. Maybe it's bad if you are relying on getting advertising revenue from indiscriminate advertisers in the mass market, but....

We're doing something consumer focused and are close to breaking even on content costs after about a month in beta with less than 500 users. We're planning to increase our ad spending significantly, and I couldn't care less if our customers spend less money overall as long as we are their best option for the product we sell them.

I could see this being a problem if you have to position yourself as a cheaper, better alternative to established competitors to survive, but the issue there is more about branding than business model; can you move from being a low-cost play into being a premium brand if you need to cut revenues to compete in a crowded market?

Just build your product into the best product it can be and you'll change the market. Let others worry about competing with you and focus on giving people tons of value for the money they give you. As long as the market exists, you'll do ok.

Re: Angel investor: Want my money? Here's my checklist

#42

Post by chmike » Tue, Oct 07, 2008, 12:54 PM UTC

nocivus wrote: post #27

It seems to me that the hardest part about implementing an idea is probably figuring out how to make money out of it and, since that is something (smart) investors require for starters, my question is: How does one come up with a business model for, say, a website for monkey owners to ask questions about their food (not the owners', the monkeys' :))? Is the grand majority of websites limited to rely on advertisement…

Interesting point. I'm currently working on it. My impression is that it takes as much effort to design and implement the business model than to design and implement the product (idea). Another conclusion I draw from this effort is that it requires different skills and competence. It would be unusual to be good (or preferably the best) in all domains, but I believe it is possible.

My rule of thumb, to be successful in each domain, is to explore zones left in the shade (disregarded) and find something new and profitable. This applies to the idea (solving a problem) as well as to the business model.

A good strategy to be creative is to identify the assumptions we make, check their validity and see what comes out when you change them. Combine this with the appropriate combination and exploitation of the fundamental forces in play (assuming one has taken the time to properly identify them), and you can come up with a revolutionary and disruptive business model. If you manage to be very objective, rational and exhaustive in the exploration and evaluation process, this can work. (I hope I can prove it soon :] )

I see the startup community as an ant colony, following main tracks as a flock and just explore a bit away from the main paths. If one wants to increase the chance to discover something really new and disruptive, one has to follow orthogonal paths which means calling back into question common assumptions and habits. Otherwise you'll be in competition with zillions other ants, most of them being much more efficient and competent than we are.

Re: Angel investor: Want my money? Here's my checklist

#43

Post by nocivus » Tue, Oct 07, 2008, 1:21 PM UTC

chmike wrote: post #42

nocivus wrote: post #27

It seems to me that the hardest part about implementing an idea is probably figuring out how to make money out of it and, since that is something (smart) investors require for starters, my question is: How does one come up with a business model for, say, a website for monkey owners to ask questions about their food (not the owners', the monkeys' :))? Is the grand majority of websites limited to rely on advertisement…

Interesting point. I'm currently working on it. My impression is that it takes as much effort to design and implement the business model than to design and implement the product (idea). Another conclusion I draw from this effort is that it requires different skills and competence. It would be unusual to be good (or preferably the best) in all domains, but I believe it is possible. My rule of thumb, to be successful i…

Exactly. Thinking outside the box is usually not easy; you have to be able to abstract yourself from the domain you are considering, otherwise you are biased from start and might miss obvious information.

Re: Angel investor: Want my money? Here's my checklist

#44

Post by nostrademons » Tue, Oct 07, 2008, 3:32 PM UTC

trevelyan wrote: post #41

ph0rque wrote: post #13

Earlier quoted context omitted.

> Sucks for people (like me) who started consumer web startups in 2007, though. Do you have anything you're working on now, Jonathan?

I don't understand why this is supposed to be a bad time to monetize through the customer. Maybe it's bad if you are relying on getting advertising revenue from indiscriminate advertisers in the mass market, but.... We're doing something consumer focused and are close to breaking even on content costs after about a month in beta with less than 500 users. We're planning to increase our ad spending significantly, and I…

Our problem was really that we were a "vitamin": something that was kinda-sorta-tangentially-useful, but didn't solve a clearly-defined, pressing pain point. Which is really my screw up and not the economy's fault, but the point is that a strong economy can mask these problems ($500M valuation for Slide?) and let entrepreneurs get away with startups that really shouldn't exist.

I suspect that there are still many entrepreneurs in a similar boat - as recently as a month ago, there were "Critique my startup" posts that presented startups that really weren't all that useful, and YC has funded a couple that in their present form are pretty weak.

Re: Angel investor: Want my money? Here's my checklist

#45

Post by Prrometheus » Wed, Oct 08, 2008, 9:27 AM UTC

netcan wrote: post #40

joshu wrote: post #16

The problem with this list, in my mind, is that it's a checklist of descriptions of a successful company. If the signs are this obvious then the valuation would already be high enough to be unattractive to an angel. I've done some (roughly 8 deals) angel investing myself, and prefer to look for something market-shaped; matching buyers to sellers, or similar; a team I would seriously consider working for; and a workin…

I disagree. The first list is. The latter list: # Initially sells to the enterprise for branding, credibility, awareness and early revenues # Can get to revenues within 6 months, tops # Is sold on the basis of ROI, e.g., helps generate revenues or reduce headcount/costs # Integrates easily with existing platforms and/or programs # Either leverages existing open source programs or can itself become partially or fully…

It's not bad for an angel to focus on one subclass of business models that he feels capable of understanding and judging.

Re: Angel investor: Want my money? Here's my checklist

#46

Post by Prrometheus » Wed, Oct 08, 2008, 9:31 AM UTC

sd wrote: post #8

cbrinker wrote: post #2

Not sure if that's exactly for the YC crowd. While everyone would love to have a multi-million dollar business, the reality is that there are a lot of smaller good ideas that don't need $1mil+ funding. I think YC takes a better approach in the way of financing. However, I think YC forces a group to be extremely frugal and thoughtful in their fiscal decissions. I think receiving large funding may lead to improper inve…

It seems like the core message (apart from getting to profitability quickly) is pretty important to YC startups keen on getting acquired - "in a poor economy, companies really need to find better, cheaper, and more efficient ways of operating." In other words, stop making widgets that turn your Facebook friends into zombies and start creating ones that make it easier for people to sell or make things.

>- "in a poor economy, companies really need to find better, cheaper, and more efficient ways of operating."

The economy isn't that poor, though. Ignore the headlines. Watch GDP, GDP per capita, and unemployment. If those things aren't going negative, then people are still going to spend money.

Politicians live by demagoguery and fear. Businessmen should look at facts.