As a rule I am an optimist but…
Someone asked me at dinner the other night why is it that I do what I do. He pointed out that it can’t be the possible financial rewards so what is it? He also noted that being as early as I am takes a certain amount of patience and frustration that isn’t for everyone. Both of these points are something that has been rattling around my brain for months.
Everyone loves financial rewards no matter what your bank account looks like. I absolutely want to see financial gains but more important is I like to win. I really hate losing and my moral compass is large so I do not like being taken advantage of either. Seeing founders that I have backed hit the high notes makes me insanely happy.
I was one of the earliest investors in Nestio and originally was on the advisory board and then led one of their rounds and ended up on the board and still am today. I know how well that they are doing so going up to their office and seeing 50 people sitting there with room to grow on their own floor with a big Nestio sign looming over the team is beyond rewarding. It makes my heart sing and it feels fantastic. That might even be more gratifying than an exit because you see it and feel it in a very different way.
The frustration is the capital. There is a lot of cash out there but it doesn’t always end up in the companies that I have invested in. I scratch my head daily seeing large sums of cash back companies that I do not believe will have the potential to be large wins which is what those investors are looking for. Like founders I also have fundraising dreams. I had one the other night where the founders couldn’t raise the cash and they were paying someone to pitch for them instead of going to the meetings. I freaked. Thank god it was just a dream.
Vinepair had an event this week with Coravin where they did a day of events on branding and wine classes. I spoke with Adam, the founder of Vinepair, on Wednesday evening about investing in the food and wine space. We spoke about what type of opportunities that I was seeing in the food space. It was the first time I have ever left an event thinking I wasn’t my normal optimistic self. I am not convinced that many of the big bets that have been made will succeed. I actually think many of them will implode.
We discussed a few things. The big box retailers are still relying on old school ways of bringing new products on to their shelves putting all the costs of marketing on the onus of the young brands. That the money is getting more difficult to raise when people bet on start-ups that did not turn out to be multi-million dollar businesses. For instance when ecommerce fails, VCs tend to back away for awhile before jumping back in. I do believe there is an opportunity in the back end of the food chain so more applied technologies vs consumer facing products. I talked about pursuing your dream but being realistic about the market, the money you can raise and perhaps thinking about scaling a business that can do a few million a year and be able to create jobs, a great culture and live really well without having to report to investors who expect massive scale quickly. Also if you bring on investors make sure they really understand your business. That is the biggest value ever.
Maybe it is the expectation of investors wanting massive scale quickly without being thoughtful about the reality of how big you can become or being willing to hit a mesa before really thinking about unpacking your gear for a bit and thinking thoughtfully about the next steps. As long as the company is not losing money but can continue to be profitable it isn’t a bad thing to take time out to think about next moves.
The environment of start-ups is changing. The next two years will be very interesting. My advice to the companies I am in…get profitable, don’t expect another round, buckle down and be scrappy, listen to the market, read the landscape and be agile.
Comments (Archived):
on it. and yes it is baffling the kind of startups money follows into and the kind money doesnt. Its been a scrappy journey and the ignominy of justifying your business, your metrics and watching someone supposedly smart never “get it” and go fund some stupid on-demand gas filling app is deeply frustrating.
Deeply frustrating.
It is also the reason my cap table is filled with a lot of the same people because they continue to get it and double down all the time.
Pranay I really like what you are doing and your website seems greatly improved since the last time I took a look at it. One thing I would suggest is a tab and/or more info giving examples and anecdotes of the type of people who you’ve helped. [1] I think that will make it easier to help the target market understand what you can do for them. If you have celebrity examples even better (maybe give away for free to a celebrity or two your services just be be able to highlight what you did for them). By “type of people” I mean examples with actual names or even pseudo names (you already have other info which illustrates categories).[1] Or could help.
Thanks, Sir! Sincerely appreciate the feedback and the support. The website is a constant work in progress – We’re actually talking thru the idea of scenarios v/s case studies since case studies dont encourage customers with diverse needs to step up.Atleast until first contact then we could send case studies.
If you ever start a choir, @pranay:disqus, let me know, because I will certainly join in on that refrain. I think the biggest moment of incredulity for me came when I was pitching investors about our global play in the emerging market of civic tech where their investment held the potential of high returns and creating significant impact on the future of cities – and then reading about the implosion of Color Labs, whose team turned to dust their $41 Million infusion of investment capital and tanked their purported $200 Million acquisition offer from Google (which they turned down) – and wondering how the slog could be so hard for some startups and far too easy for others. I have no answers but definitely commiserate with the frustration, although I’ve learned the only answer for myself is to focus on the mission, the goals, our clients and our team to do everything I can to lead us to a successful exit to validate the vote of confidence from the investors who have given us the fuel to continue and to make it a little easier for other viable startups in this industry to secure investment.
Amen!
You were also a realist *before* the 2001 crash, from what I’ve gleaned from various interviews of you. Being optimistic is important, but also seeing that the light at the end of the tunnel is actually a train is key to survival!
A realistic for sure. Businesses have to make money. Pretty simple
I kind of wrote about this this morning. You need to invest in people who have already had their existential crisis … or who are capable of having one. But how do you ever know if they’ll have one? People who never examine their beliefs or approaches and just impose their way of doing things on the world…. the worst of the worst. Bleh.
Question…what investments do you think are being made in blockchain technology?
Many companies will start to see the blockchain as a way to build their businesses. It will become a platform that more founders will start to look at as how to integrate it into their businesses.
100% agree with Gotham Gal. Early days. Rome wasn’t built overnight.
We discussed a few things. The big box retailers are still relying on old school ways of bringing new products on to their shelves putting all the costs of marketing on the onus of the young brands.That “cost shifting” is just a quick and easy filter. It is really similar in a way to an investor looking at credentials and past history and taking those into account when making investment decisions with startups. (And we all do this in a way). So the retailer says “show me that someone else believed in your idea and vetted you enough to give you the money to do this marketing and I will consider shelving your product (or taking your slotting fees)”.
Ah, introspection. I am so with you on that one. Good for an investor and bad at the same time…. Your advice at the end might be the most optimistic thing for a start up-and a cold splash of reality. Sort of like telling a child to take responsibility for their actions. I remember the time I told my daughter, “When you get out of school don’t expect to be living in an apartment in this neighborhood.” The blood drained out of her face. I have the exact same thoughts you wrote about sometimes. Sometimes I go for a walk and I see bums all over the street and think….one bad move and that could be me…..Here is how to rally yourself. You have a very keen sense of where the world is going. You have made bets on it. As the world’s story unfolds, other people are going to start to read the same book as you are reading. My goodness does it take patience! I have a close friend that says the world I talk about will NEVER happen. You just hope that the startup is scrappy enough, and that they can survive until the world discovers that they way they see it and the way you saw it is the way it should be.