DARE caught up with David Teten – one of the most illustrious investor and entrepreneur, operating at Silicon Valley and Northern America, at Discovery 2012 – the ongoing innovation showcase at Toronto, Canada.
David has several credentials attached to him. Currently, he is a partner at ff Venture Capital (which invests in technology based early stage companies – have made 150 investment rounds in around 55 companies so far – including Klout, Indiegogo, 500px – and some of the latest investments include Interaxon, which is in the domain of thought-controlled computing). He is also Chairman and Founder of Harvard Business School Angels New York; co-founder and chairman at Navon Partners – a data mining and analytics company studying data of privately held companies and is a mentor of board of several institutes and start-up incubators. David spoke to Satish Kataria, Consulting Editor, Dare. Excerpts from the interview:
Thanks David for taking out time to speak with us. So let’s start with your perceptions on the start-up investing world.
David: It couldn’t be more interesting. The evolution of ecosystem over last few years have been instrumental in fuelling great new ideas – which will define our societies and the way we all live – few years down the line. The governments have been playing their part – realizing the importance of innovation to build their economies – and initiatives like these (Discovery 2012) supported by Ministry of Economic Development and Innovation at Ontario, Canada – just sets some right benchmarks for the other governments to follow through.
But do you think that investing in start-ups is almost becoming a bubble?
David: I wouldn’t put it that way – but yes, the fact remains that there are lot of start-ups out there, who have managed to get seed-funding even though they truly didn’t deserve it and there will be fall-offs in a year or two – which will test the relationship and mutual trust between investors and investees. It’s an evolutionary process – and then – there are some really strong new ideas there too – which will thrive. Furthermore, there will be certain lessons for the investing community – and some of emerging trends here include realization that operational guys make better investors than just financial experts and fad- investing will not take one too far.
So what in your opinion are some key mistakes that start-ups may end up making?
David: Some of the prominent ones, which come to my mind currently, including:
- Me-too ideas: Until & unless you are attempting to replicate an idea into some totally different market or adapting it with different set of dynamics and features – plainly copying existing business ideas will not take one too far. There are only so many ‘Facebooks’ that can survive and sustain the user interest.
- Being over-protective of ideas: Lot of young entrepreneurs become too possessive with their ideas – not testing them, not taking feed-back from the market and attempting to do too much with a simple product – and that could be a huge challenge in making
- Not listening to Market: This is again to do with previous one. There are some very simple means to know your initial market feedback without revealing too much – and you should be proactive and adaptive to listen to these feedback and tweak your business accordingly
- Having too much money: I have always favored boot-strapping or benchmark-based financing of an idea – as too much money in early stages can actually kill the business rather than growing it.
And what are your thoughts on some emerging domains, which are attracting investors?
David: Some of the key emerging domains:
- Business focused social media – something like gated communities or B2B networks
- Automation and enhancing efficiency of business operations
How do you feel crowd-funding will emerge out and does it pose a serious challenge to the angel investor community?
David: Crowd-funding is definitely a huge boon for entrepreneurs – as they now have a vibrant (and hopefully a transparent) platform to perhaps pre-convince and then pre-sell to their proposed consumers. Thus any business, which endeavors to capture public imagination and is primarily targeted at mass markets – use of crowd-funding platforms will be great aid. I also guess it’s a better substitute for some low-quality investors who could otherwise endanger a business by placing unrealistic returns expectations. And I don’t think it as a threat to angel investors. Primarily, businesses seek us not just for the money, but for the value which we bring on table – and that will not be substituted very soon. Further, it will still take time for quantum of crowd-funding to grow to a size of being able to fully raise the desired amounts a start-up may require – until ofcourse it is just a creative project and not a long-term start-up project.
(Trevor Coleman, COO & Founder – Interaxon (an investee company of David Teten) – who was also part of this interview, further added: Let’s also not forget that raising funds on crowd-funding platform is also not a cake-walk. You need to prepare strong pitches, keep your social media & PR buzzing, maybe even invest in videos and online pitches, keep the audiences regularly updated with developments. So crowd- funding – while a great parallel way to raise funding – also requires substantial effort and so far, at best, should be seen as a supplement to regular angel investment)
Finally, what makes you identify a potential winning start-up?
David: I guess one should really see who is getting the value out of one’s idea – and that itself determines the potential of the business and to what rate can it be scaled up. And finally – I guess any entrepreneur needs to do business about something he is truly passionate about – if he is doing business merely for the sake of returns – he’s just missed the point!
David Teten’s website has lot of useful resources for start-ups and entrepreneurs. Do check out www.teten.com for more!