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Leo more a question about your investment thesis. I can understand the focus on B2B startups with a real competive advantage, but why limit to minor traction? M

Leo more a question about your investment thesis. I can understand the focus on B2B startups with a real competive advantage, but why limit to minor traction? Minor traction is unlikely to provide much insight as to scalability and passing on this requirement would allow you to invest on much better terms.

lpolovets 10y ago
Three reasons: 1) I think there's actually a significant difference between "we think customers will really want what we're building" and "a few companies like our product enough to pay $20k/year for it." (If you a found a few customers like that, you can usually find many more.) 2) The practical reason is that often (but not always), when my partners and I see an interesting pre-launch or pre-traction company, we think "this looks promising, we just wish there was a little bit of traction to validate that this is solving a real problem in a meaningful way." So waiting for a little bit of traction before engaging saves time for us and for founders. 3) Investors can get a lot of insight from talking with one or two live customers before making a decision.
- danieltillett 10y ago
  Thanks for the reply. 1 and 3 should be solvable by talking to potential customers in the market, while I guess 2 is a pragmatic choice based on time. I do a bit of angel investing and I have found far more value talking to non-customers in the target market than to actual customers. My experience is many startups end up creating a product too focused on the specific needs of their current customers at the expense of future customers. I prefer to invest in a startup that has built a product that I think has general appeal in the market and zero customers than one that has a few customers and a product that has lost some of its general appeal. These startups are also way cheaper which covers a lot of mistakes by me. The only downside is you have to vet more companies, but this approach has got me access to some rather good startups that I would not have had a chance once they had traction.
  - lpolovets 10y ago
    I agree with you: there's a lot of value in talking to non-customers, too. Sometimes that's easy because we know a lot of potential customers for a startup, and sometimes it's hard because a startup is operating in a fairly obscure field.
    - danieltillett 10y ago
      If you have trouble finding potential customers then the startup will too. I have asked the startup to help me find these people and if they can't help me then this is a massive warning sign for me.

lpolovets 10y ago

Three reasons: 1) I think there's actually a significant difference between "we think customers will really want what we're building" and "a few companies like our product enough to pay $20k/year for it." (If you a found a few customers like that, you can usually find many more.) 2) The practical reason is that often (but not always), when my partners and I see an interesting pre-launch or pre-traction company, we think "this looks promising, we just wish there was a little bit of traction to validate that this is solving a real problem in a meaningful way." So waiting for a little bit of traction before engaging saves time for us and for founders. 3) Investors can get a lot of insight from talking with one or two live customers before making a decision.

danieltillett 10y ago
Thanks for the reply. 1 and 3 should be solvable by talking to potential customers in the market, while I guess 2 is a pragmatic choice based on time. I do a bit of angel investing and I have found far more value talking to non-customers in the target market than to actual customers. My experience is many startups end up creating a product too focused on the specific needs of their current customers at the expense of future customers. I prefer to invest in a startup that has built a product that I think has general appeal in the market and zero customers than one that has a few customers and a product that has lost some of its general appeal. These startups are also way cheaper which covers a lot of mistakes by me. The only downside is you have to vet more companies, but this approach has got me access to some rather good startups that I would not have had a chance once they had traction.
- lpolovets 10y ago
  I agree with you: there's a lot of value in talking to non-customers, too. Sometimes that's easy because we know a lot of potential customers for a startup, and sometimes it's hard because a startup is operating in a fairly obscure field.
  - danieltillett 10y ago
    If you have trouble finding potential customers then the startup will too. I have asked the startup to help me find these people and if they can't help me then this is a massive warning sign for me.