Just in time for the weekend…some VC advice, fresh off the Internetz!
“Is the cost of starting a business less than zero?” by Seth Levine of Foundry Group: “We recently announced our investment in LeadPages – a platform that allows publishers to quickly create and host lead and conversion pages. The company actually started by selling the product that it was thinking of building, rather than building it first. Co-founder Clay Collins put out the idea for the LeadPages product on his marketing blog and before they had even scoped the project had $40k of pre-orders (paid pre-orders). With that money he built the beginnings of what became LeadPages.”
“10 Things I Think I Think on Bitcoin,” by David Lee of SV Angel: “I think whether it is ‘legalized’ or ‘outlawed’ by the US is almost irrelevant. There can a flourishing Bitcoin economy because of this multipolar world described above. It may turn out to be something like online gambling in the early days.”
“Can You Hit Your Quota?” by Tomasz Tunguz of Redpoint Ventures: “How do you validate an idea for a software startup before the product is built? Last week, a founder of a SaaS business and I were wrestling with this problem. It’s a question without a universal answer. After a while, we came up with a quick and dirty rule of thumb for his business…”
“Stitch Fix: Reinventing Retail Through Personalization,” by Bill Gurley of Benchmark: “To be candid, I entered my first meeting with the company with some skepticism. Despite Benchmark’s strong association with ecommerce during the late 1990’s due to the success of companies like eBay, we have not been particularly active in ecommerce in the past several years. Fundamentally, we share the common concern that many of the new “Ecommerce 2.0” companies lack a core competitive advantage or material barriers to entry. A new pricing or packaging model does not by itself represent a meaningful core differentiation, and the rising abundance of “subscription” or “flash sales” companies heightened our concern with regard to barriers to entry. Also, many of these companies were built with heavy doses of advertising spend, a clear red-flag in our book.”
“Profitless Prosperity,” by Fred Wilson: “Amazon is not the only company that is plowing back all of its incremental profits into growing its business. This is very common for enterprise software companies as well. Salesforce has made or lost a small amount of money every year for the past four yearsbut it has grown its revenue from $1.3bn to over $3bn in those four years. And its market value has gone from $12bn to $32bn in the same time frame. Workday hasn’t made any profits in the last four years, in fact the net losses have been increasing. But the stock has doubled in the past year and the company is now worth almost $14bn.”.