Tag Archives: technology

Guide to Angel Investing

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I’ve been dabbling in startup investing for a few years now. Nothing extraordinary, and I’ve definitely not made it a career, but I have developed a guide of sorts that I follow when making the final decision of whether or not to invest.

This is written from the viewpoint of a single angel investor. Here it is:

  1. Risk: Understand the high risk in angel investing. Mentally, assume you’ll write off all investments as soon as you make them. Invest only what you can afford to lose.
  1. Avoid life-support investing: If a company comes for funding, where the founder says/implies something to the extent of: “fund us or we’re going out of business” – usually gravitate to not investing. Life support investing is a bad idea (not to mention stressful!).

Lean towards companies that will survive regardless of whether or not you invest in them.

  1. Three companies come in for funding:

A – Entrepreneur has the best idea ever! They need funds to build the product.

B – Entrepreneur has the best product ever! They need funds to market.

C – Entrepreneur has a product which shows great traction. They need funds to                    scale.

Everything else equal, investing in C has the most promise.

  1. Follow-up investor: For the new investor, prefer being a follow up investor rather than leading rounds.
  1. Investment hierarchy: First invest in companies with great traction. If that does not exist in the options, then invest in those with great people, followed by those with a great product.
  1. Bet on people rather than product: Early stages, funding is a bet on people rather than product. Products can change more easily than people.
  1. Never invest in something you don’t understand: Doesn’t matter what it is, who is involved, who has invested or how well the market is going.
  1. Entrepreneurial grit matters: Invest in entrepreneurs who show they’ll simply never give up on the company – no matter what. Perseverance is crucial. When things get hard (and in startups they will!), you want someone who has the grit to stick through it to figure a way out.
  1. Scaling: Always think about how the company can scale. If scaling is expensive or hard, lean towards not investing.
  1. Avoid niches: Niche markets are starting points – but that’s it. The ultimate market cannot remain in a niche space. Successful companies need to scale.
  1. Viable business or science project?: Is the company capable of being a business or will it remain a technology/project? Not all technologies can become businesses.
  1. The Fence: If you’re on the fence about a company for a long time – defer the investment.
  1. Entrepreneur’s knowledge: The entrepreneur needs to know more about the space than you. If you seem to know more about his own space – that’s a red flag.
  1. First versions will suck: Products require several iterations of trials and failure to become great. The key is if the entrepreneur/team is unfazed by failure to keep at it despite the obstacles.
  1. What if Google/FB does it?: Assume the incumbent is always going to copy the entrepreneur if he does well. What is his strategy?
  1. Does the product create delight?: Do you feel delighted when you use the entrepreneur’s product or service? If not, at least do the customers absolutely love the product? Defer the investment until that is true.
  1. Simple enough for your mother: Can your mother use the entrepreneur’s product or service? Simplicity is key for widespread adoption.
  1. Failure is a learning process: Past failures > No failures.
  1. Return time period: Expect returns no less than 5-7 years.
  1. Differentiate between the decision and outcome: Decisions must be taken using all information available to you at that time. You can’t predict the future and hindsight is always 20/20. A bad outcome does not necessarily mean a bad decision and vice versa. Don’t beat yourself up too much over a bad outcome, and then again don’t let a good outcome go to your head.

Good luck! And as always, if you do discover the next Google or Facebook, do let me know! 😉

With that said, here is the obligatory legal disclaimer that goes with any investment advice – Please invest at your own risk! 

Unreasonable Obsession for the Startup Grind

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When getting a co-founder, employee, investor or any other stakeholder for your startup, one of the most important metrics you want to scan for is belief in the startup over and above any monetary compensation. Simon Sinek says it beautifully – “If you hire people just because they can do a job, they’ll work for your money. But if you hire people who believe what you believe, they’ll work for you with blood and sweat and tears.”

In any startup – things will go wrong, stuff will break, investors will pass, your product will suck, employees will quit, hiring will be a problem, deadlines will be pushed, users will not be engaged, partners will bail – but you and your team still need to keep pushing through.

You will face rejection over and over and over again – from investors, users, and pretty much everyone you talk to. You will hear people give several reasons why the startup will not work – but you and your team still need to keep pushing through.

Ben Silbermann, CEO of Pinterest said, “There are lots of ways for investors to say no to you, and I’m pretty sure I’ve heard every single one”

Elon Musk compared running a startup as “eating glass” and “staring into an abyss of death.“

The TechCrunch stories of “we got 100k users in 2 days” – all have a long grind where they failed over and over again before their overnight successes.

Instagram slogged through Burbn, Twitter slogged through Odeo, Foursquare slogged through a failed acquisition by Google, Rovio slogged through 51 games prior to Angry Birds, Starcraft was almost abandoned, SpaceX blew through $120m almost bankrupting Elon Musk with 3 failed rockets – but they all kept pushing through.

When things go bad, and they always do, you need people who work with you with “blood, sweat and tears.” Startups are never easy and only unreasonable obsession can power you through the grind. Make sure you have it.

Entrepreneurship Material

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So, a friend had asked me how to get started with the entrepreneurship process. He said that he would come across a couple of ideas and get really excited, but was not sure what to do to actualize it. I sent him a bunch of links/talks that if he went through, he should be comfortable enough to get started.

Here they are:

Books: 

Crossing the Chasm, Founders at Work, Venture Deals, Four Steps to the Epiphany, & Innovator’s dilemma.

Videos:

http://www.youtube.com/watch?v=n-H7TAcqGko

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2735

http://startupdigest.com/marc-andreessen/

Reid Hoffman (LinkedIn founder) – http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2768

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2329

On ecorner, also see – Jack Dorsey (Twitter & Square), Drew Houston (Dropbox), Marten Mickos (mySQL), & Guy Kawasaki

http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.html

Design Thinking:

Design thinking is a field pioneered at Stanford. Design thinking classes are the most over-subscribed courses and it is pretty difficult to land yourself a spot in the courses. I took Design Thinking Bootcamp and it was simply amongst the best courses I have taken at Stanford.

What is it? Design thinking isn’t thinking about designing a pretty dress or doing interiors of a house. It is about finding solutions to ill-defined problems. A large part of it focuses on figuring out exactly what problem to solve.

Here’s the virtual crash course video: http://dschool.stanford.edu/dgift/

The First Post

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For a while, I was thinking of writing a blog about random tech entrepreneurial musings. Finally, I managed to get around to it.

A bit about me/what I’m upto:

I’m Anish Godha. I’m originally from India, currently in Palo Alto, CA. I recently got my MS degree from Stanford, have a BS degree from Northwestern and went to high school at the Cathedral & John Connon School in Mumbai.

For the entrepreneurial process, I’m founder & CEO of MochaMeet – a group planning startup that exists solely because I wanted a way to stay in touch with my friends after graduation, but could not find anything available that was ‘it’. There has been a tremendous amount of learning and a lot of my future blog posts would draw on my experiences with MochaMeet. I’ve spent about 2 years on the concept, pivoted away from an earlier direction and recently, our revamped web version went live!

I’m also co-founder of a made-to-order jewelry e-commerce company called Diamondere.com – a spin-off from our jewelry manufacturing family business in India. Diamondere is a concept where any piece of jewelry can be personalized to suit the user’s style – change gem stones, change gold color/quality & even engrave for free. Given our manufacturing background and proximity to the source (India processes about 92% of the world’s diamonds), we are able to price this at about 30-50% cheaper than other retailers.

Needless to say, I keep myself fairly occupied. Since both startups are so different – team, market, product, business model etc, I’ve been able to get quite a varied experience in a fairly short amount of time.

So, I intend this blog to be something more along the lines of random, ‘Thoughts, Musings & Erratic Ramblings’ – though most of it would be fairly focused on tech entrepreneurship.