Despite a boom in startup activity, more and more companies being formed, it doesn’t mean that more good companies are being created. I keep seeing the same names hit up investors again and again. A few successful ones are garnering a lion share of the total funding dollars, especially as they get more traction. Even those companies that have little traction are generating a lot of investor interest, while others who fall in the in-between range are getting less attention.
I don’t know how to say this politely, but a lot of it has do with the sheer laziness of investors who view what are essentially opportunities as “deals” in their backyard, preferably over expensive coffee. The polarization of investor interest is exacerbated by long standing dogma in Silicon Valley: we will invest within drive able distance. Which is strange, because the same investors are the first ones to espouse the “flat-earth” and “connected-planet” drivel. I have always said: Silicon Valley is all about, practice as I preach, not as I do. As an early stage investor, you can’t be this dogmatic.
In my experience as a reporter, just as PR people rarely brought you a good story — remember their job is to pitch to everyone and get maximum coverage for their clients — and you had to dig deeper, pound the pavement and talk to many people, before you found a good story to write. Same goes for investment opportunities — and that is why I for one, am ready to go anywhere, and everywhere to meet with great founders. True, the venture group, where I am a partner, has gone everywhere from Los Angeles, New York, Boston, Helsinki, Porto, Stockholm, London, Portland, Austin, Missoula, Ann Arbor and Seattle to invest in great ideas, passionate founders and brilliant teams.
As my partner, Puneet Agarwal recently pointed out:
We’ve noticed that small-city tech hubs tend to flourish in areas where there is (1) a thriving university, (2) some previous tech or startup success, and (3) quality of life in terms of affordable living, good schools, etc. Get this mix together and that’s usually what it takes.
As an investor, you do have to be able to commit to certain basic tenets. For instance, you do have to fly to distant cities in-order to be involved in your companies. You have to wake up at crazy hours of the day in order to make calls and discuss urgent matters with the founders. These are personal discomforts for some, but for me the bottom line is simple: if you ask your founders to go through crazy hours or expect them to travel to your office, then you as an investor have to do the same.
PS #2: My friends Venky and Anand have made global startups a focus of their data-informed investment vehicle, RocketShip.VC and are finding great success with their model.