I was sitting at The Creamery coffee shop a couple months ago with a friend, who without much segueway started raving about a local company called The Juice Shop. “Have you tried their A+ Deep Green juice? Life changing!” I was of course open to try it but their nearest location was in Cow Hollow, and so I resigned myself to likely forgetting this recommendation by the next time I was in the neighborhood.
Not to be deterred, my friend whipped out his phone and 10 minutes later a Postmate walked into the coffee shop where we sat and delivered our juices. I’ve been a regular of The Juice Shop since then.
When people talk effusively about Postmates it’s often stories like this. From the point of view of the customer this is another example of your phone as a “remote control to the physical world,” much like Uber or HotelTonight. Postmates is also often described as Kozmo, probably the most beloved of the late 90s flameout startups, only with a business model.
For a firm like Spark where we guide ourselves by the product, the strength of the experiences Postmates generates is incredibly compelling. We’ve seen the type of businesses those reactions can build. But the long term effects on the supplier side are actually just as interesting.
I’m in the process of closing a new investment right now and getting to know this CEO has been a particular joy. There is a long road ahead, but it’s a great sign when we can start off just being honest with each other.
As an entrepreneur I got terrible advice on how to relate to investors from fellow founders. One CEO described his “attachment method” of overly communicating to create the sense of ownership that would make a VC keep giving them money. Then another would tell me to never give the slightest detail of the business because it just gave them the ammo to think they can control you. The problem with these approaches is that they assume there is some formula for how to win at managing an investor.
A CEOs relationship with an investor is exactly that, a relationship. And just like there is no “paint by numbers” template on how to interact in a marriage there is not a single right way for the CEO - VC relationship.
Aileen Lee wrote a very interesting piece on Techcrunch where she lays bare some of the analysis she has done on “Unicorns” - or startups that have entered the $1b club.
It’s a rarified club, to be sure. In fact, it’s enough of a rarified club that I would call into question any conclusions one would assume by Aileen’s analysis. The long version of why this is not a good idea was the subject of my last post, but the short version is this: 39.
The starting data set is 39 companies, and perhaps it’s a bit more than that as people expand the list, but it’s a pretty small number no matter what. A number that small is just hard to reach any definitive conclusions with.
Anyone who has done a controlled study has seen many situations where the first 10 results you get point in the exact opposite direction of the later conclusion. For instance, right now the conclusion is that nearly half of the co-founders in “Unicorn” companies have worked together in school. But, if the four unicorns from this year happen to have met after college, then that number could drop to 40%.
Most early stage Venture Capitalists use very little data when investing. It is largely a world of intuition, relying on mutual relationships, and in some cases sector knowledge or thesis development.
But that tide is shifting. Today there was an article on how Steve Blank now thinks accelerators should go the “Moneyball” route. As “big data” gets more popular, the idea of using a quantitative approach to help make better early stage investment decisions is becoming more frequent. As Rob Go recently wrote, there is a strong rise in the number of VCs employing data scientists, and a couple have even made a firm-wide bet on being entirely data driven.
Unfortunately most of the press coverage of this trend generally falls into a very surface level narrative about “quantitative vs qualitative” investing. That is, early stage investing is about gut belief and vision, and you better not try to rely on numbers to make a decision. This is a false conflict, and blinds us to the fact that data, properly applied, doesn’t deter our intuitive senses it informs them.
"Quants vs the Scouts"
I think the best illustration of how the “qualitative vs quantitative” argument is false is to examine how Moneyball in baseball actually worked. The story depicted in the book was, partly for dramatic purposes, presented as a “quants vs intuition” situation. But that’s really an oversimplification.
The first bi-coastal podcast for Bijan and I. Some heavy gadget talk today, talked through the Pebble, Leap Motion, and iPhone 5s. We also talk crowd funding and accelerator mentorship. As always, drop a note if you want us to cover something next time.
I got into a debate this afternoon about human behavior. A friend was trying to explain why the phenomena of “stickers” — which are a huge feature of Asian messaging networks like Line, would never catch on in Western countries.
Honestly, I could care less about the specifics of stickers. But the perspective is one I disagree with. It felt like the same conversation I was having about emoji a few years ago, or about western social networks like MySpace before that, or about free-to-play MMOs a few years before that.
In each case the conventional wisdom was that these were regional cultural phenomena that will not translate across the globe. In each case that view was wrong.
Now I’m sure there are examples of things that are purely localized culture, but these things are becoming fewer and fewer. We should keep in mind that as products hit scale they are more likely to be touching on basic human needs and desires.