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It seems like this investment thesis(low valuation, not in the bay area, willing to give up a board seat) is aimed at investing in second-tier startups. It woul
by fearless 14y ago
It seems like this investment thesis(low valuation, not in the bay area, willing to give up a board seat) is aimed at investing in second-tier startups. It would be interesting to contrast this strategy with that of most other investors, who are actively trying to fund the best/category leader startups.
- epi0Bauqu 14y agoI'm not interested in second-tier startups, and I disagree with your premise that those things equate to second-tier startups. It all depends when you get involved. And FWIW I'm no longer interested in board seats though I think they are completely misunderstood by first-time entrepreneurs and it is good to have an active investor (hence party rounds suck). As for valuations, the key is ownership %. You can get there a number of ways (put more money in, advising relationship, etc.), but if you are super early you can also get there with a low valuation (and I'd argue it makes sense since the risk is much higher).
- runako 14y ago"Not in the Bay Area" strongly implies "low valuation" for a variety of reasons. #1 on the list is the lack of competition by overfunded VCs throwing cash at startups, driving up valuations. Since an investor's returns are strongly influenced by entry price, investing in the Bay Area raises a higher hurdle for exits than similar deals elsehwere. Outside the Bay Area, since it's harder to get VC funding for even good companies, fundable ideas are more likely to be "real" companies. Outside the Bay network it's going to be impossible to flip a photo site for 9 or 10 figures, but there are always buyers for profitable & growing tech businesses. It's likely that investing outside the Bay Area is a competitive advantage for investors of all sizes.