Entrepreneur-Investors:Elad Gil and Pejman Nozad
Elad Gil is a serial entrepreneur, and investor/advisor to companies such as AirBnB and Pinterest. Pejman Nozad is the Founding Managing Partner at Pear Ventures.
A company with a mediocre team but a great market position might still be worth investing in. Of course, a great team and a great market is the key to real magic.
Try first considering the startup’s market, and then the team. Granted– don’t make deals with jerks! You could be with this team for the long haul and you should be sure they’re considerate and trustworthy before you sign anything.
Customers already paying for a company’s product or service is a great indicator of future success. Of course, this is most applicable if the company is charging a premium. A critical note: companies shouldn’t be aiming to create the market’s cheapest product unless it is a scale company.
Is the product something you or your company would use?
If you could see yourself or your company using the product, it may be filling a crucial gap in the market. For example, if you see a product and your first thought is “Wow, this would make my own workflow 10x smoother,” it just might be a superb product.
Think about the actual basis on which a market depends and situate it within larger trends– what assumptions about society and people is it built upon? Will these assumptions be as strong in the future? Also think about market saturation… are there already too many companies in this niche? (That said, saturation may not be a dealbreaker if new technology is creating gaps in the market.)
Consider whether or not this company could become unbeatable.
Investors often talk about ‘moats’ in considering how unbeatable a company could become. Consider if the ‘moats’ for a company you’re looking at are real or fake! Truly gated moats are extremely rare and don’t exist in most industries.
Some factors to consider when examining defensibility are the long term margin percentage, the compounding scale, the revenue renewal/reoccurrence, and the customer mix.
Once you are confident in the market, look carefully at the team.
Does the team have a physical product at their seed fundraise (even just a prototype)? Are they notably fast learners? Do they sell themselves and their product with ease? What are their actual motivations in building this company… whose story is driving them? This last question can reveal a lot about a company’s potential.
Helping early startups is different than helping late-stage ones.
Helping an early startup is easier than helping a later one.
For a new company, you can help with hiring, firing, culture, fundraisers, deals, customers, distribution, M&A exits, and supporting the mental wellbeing of the founder. You read that last one right– founders often need emotional support! Their job is extremely demanding and tiring.
Later stage startups often need much more specialized help. For instance, executive hiring and management, board management, late-stage round assistance, secondary/tenders, IPO, product co, internalization, M&A buying others, and again supporting the mental wellbeing of the founder.
Putting your personal interests over a company’s is poor form and, unfortunately, all too common. Never give bad advice, don’t try to offer any advice in areas beyond your expertise, and don’t block good exits!
Does the founder have a big idea or a real problem?
A promising founder is determined to solve a real problem. If they or someone they love has come up against this problem directly, they’ll have an intimate knowledge of it and potentially know of a critical need that their startup meets.
Uncork Capital founder & Managing Partner, Jeff Clavier
XG Ventures co-founder & Managine Director, Andrea Zurek
Jeff and Andrea touch on playing the long game, teaming up with other investors, and keeping an eye on your rep as an angel.
In March of 2018, something big happened: the best startup investor on the planet shared its entire playbook. This investor also happens to be the world’s most famous startup accelerator, Y Combinator. From Airbnb to Doordash to Dropbox to Stripe, YC has funded many of the biggest
startups you can name.
We wanted to put YC’s Startup Investor School videos right at the fingertips of our favorite people out there, Wefunder investors. To that end, we put in some crowdfunding and Wefunder-specific tid-bits, too.
While we are a YC Alum, Wefunder has no current affiliation with Y Combinator. So, many thanks to Y Combinator for all of the video material used on this page! They produced and own all of these wonderful videos while we wrote the summaries.
786 startups have raised $334,214,156 on Wefunder
Wefunder supports three different federal laws that allow startups to raise money legally. To comply with the law, Wefunder Advisors LLC and Wefunder Portal LLC (both owned by Wefunder Inc) also list startups depending on the regulation used.
Legal May 16th 2016
Wefunder Portal LLC
for 693 startups
Wefunder Advisors LLC
for 162 startups
for 3 startups
Curious how well the companies have done? Or how many raised follow-on financing?
Some fine print: 1) These numbers include startups currently live on Wefunder if they pass their minimum target. 2) Some startups use two different laws at the same time (i.e., Regulation D and Regulation Crowdfunding).