I am tired of reading blog posts from “bubble predictors”

Posted on November 15, 2010. Filed under: startups, venture capital | Tags: , |

I am tired of reading blog posts from “bubble predictors.”  It’s such an easy position to say things are crazy, this isn’t sustainable, when you don’t set a timeline for when we will begin to see a correction.  Oh really? You think valuations are eventually going to come down after a period of growth.  That’s novel, way to go dude.  Even better when you hedge your call and say “this isn’t sustainable, but I’m going to keep playing, just in a smarter way then everyone else who is doing the same thing.”  I can’t wait for you to point back to your November 14th 2010 post 24 months from now and say “look, I called it, nobody listened.”  If the market corrects in 6 months, you got it just right, if the market corrects in 24 months, you got it just right, what a cowardly position to take.

What pisses me off even more is that every time you voice your nebulous position on the trajectory of our market, you negatively impact it and contribute to the fulfillment of your prediction.  What’s the best way to catalyze a bubble?  Start talking about a bubble.

Generally I’m a fan of Suster’s blog and perspective, but I love how he complains that Angel investing is “driving up prices beyond their inherent value.” Guess what Mark, every single Angel deal that has been done in the last 10 years has been done above it’s inherent value.  That’s because 2 guys and a dog don’t have an inherent value.  Value is entirely market driven at our stage of investing, and if you think the pre-traction consumer facing web application is “inherently” worth $2M pre, but is not “inherently” worth $4M pre, you’re wrong.  Guess how much it’s actually worth?  About $60K, or whatever number you can arrive at by multiplying the number of man hours that went into it by the market rate of that labor elsewhere.

It also pisses me off that people are complaining about the number of angel investors that have entered the market.  Sure, this makes it harder for you to generate returns as an venture investor, when prices go up, etc…but more angel investors mean more founders can start more companies, realize more dreams, and create more innovation than they could 24 months ago.  Personally, I welcome anyone who wants to cut a $50K check to support a new product and pull a smart mind out of wall street or advertising or any other industry that is not pushing the limits of what can be.  I’m not saying all these companies that are getting funded deserve the funding or valuations they are raising at, and many of them will die, but I’d rather see a slew of dead carcasses on the side of the road with a single world changing product leaping over them on the way to victory, than a road with no carcasses and a world that could have been changed but wasn’t because you scared all of the new angels out of the market with your fire and brimstone analysis of why “angel investors who think they are cool at parties aren’t really cool.”

So here’s the deal.  I’m not saying that there is no funding gap, there will be.  I’m not saying that people aren’t overpaying for deals, some are (and btw some are smart to overpay for deals.  You would have said the Bijan overpaid for Twitter and David Sze overpayed for Facebook, and they are both laughing all the way to the bank at the slew of investors who sat on the sidelines when prices got high).   I am simply saying that all of this entrepreneurial activity is a net-positive for the world.  Founders and investors, take note that you are playing in risky waters and lots of you are going to lose lots of time and money over the next 5 years.  Some of you are going to make gobs of money, change the world, and do it on your own terms.  If you don’t like that setup, go be a lawyer.  If you do like that setup, put your head down, make the smartest decisions you can, and play.  Don’t complain about it.

P.S. I realize there is a very good chance I am going to have to eat these words in the foreseeable future, but I have no interest in hedging.  Suster: it’s all love, but I hated your most recent post.

 

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“Pull” Your Ideas from the Ether

Posted on March 25, 2010. Filed under: startups, venture capital | Tags: , , , , |

Sort of the nature of being an entrepreneur is that you see opportunity all around you.  The question “what if?” comes into your head 10 times a day, and most of those what ifs exist for a moment and then dissipate back into the ether.  What I’ve learned over thousands of what ifs is that if you don’t grab those ideas, almost right at the point of conception, and forcefully pull them from the ether into reality, most of them will never return to your consciousness.  A lot of building companies is about making concepts and ideas real…bit by bit.  You write an idea down on a napkin: slightly closer to reality.  You test it on a friend: slightly more real.  You test it on 100 friends: slightly more real.  You incorporate: slightly more real.  You build a product: MUCH more real.  You get a customer: really real., etc…

The mechanisms of making an idea real are learned with practice.  I remember quitting my first banking job out of school, thinking “I am an entrepreneur.  I have a ton of ideas.  I quit.  I am going to start a company.”  That quitting part was easy.  And then, at 23 years old with not a shred of experience executing…I found myself paralyzed in the effort.  I literally had no idea how to put one foot in front of the other to make these ideas I had been cultivating into real things.  The chasm between the stage I was at and operation appeared infinite.

I was not as resourceful then as I am now, and I more or less resolved that I needed to learn how to put one foot in front of the other from people who had achieved what I wanted to accomplish.  My route was to join General Catalyst, where I would work with a bunch of successful entrepreneurs that I could literally study.  This was the right move for me, although in hindsight, it turns out I could have used this magic machine called “Google” to figure out the first 10 steps to making my ideas real.

Different entrepreneurs have different styles of thinking.  Some go deep in a vertical, understand everything about a market, and then figure out what it needs.  I am much more of a horizontal thinker.  Ideas tend to come when I see similarities between markets, and the opportunity to apply successful models or concepts from one market to another with analogous characteristics.  One easy practice I have developed for capturing these ideas and pushing them slightly closer to reality is simple:  I keep a spreadsheet with everything I think is interesting, and force myself to power rank my conviction around each one.  My best ideas earn a 1 and sit at the top of the sheet.  My worst ideas earn a 4 and are waaaaaay below the fold.

Once the ideas are captured, making them more real than that becomes a bit of a bandwidth issue.  With only 19 working hours in a day, I find myself constantly pulled between JumpPost (85-90% of my bandwidth), and the myriad of other concepts that deserve to become real.  Taking on an investing role with Lerer Ventures has allowed me to use that remaining (10-15%) of my energy to make a whole lot of great ideas a little more real.  Now instead of building all the 1’s on my spreadsheet (which I could never do), I let those ideas influence where I spend time investing the fund, and more often than not, I am able to find people smarter than me who have recognized similar opportunities.

My advice to those who are thinking creatively: start tracking and ranking even the faintest of dreams.

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    About

    I’m a NYC based investor and entrepreneur. I've started a few companies and a venture capital firm. You can email me at Jordan.Cooper@gmail.com (p.s. i don’t use spell check…deal with it)

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