3 ms·

Most Seed VC's are investing in a Team and an Idea. "Founder" as a singular rarely get investments. No man is an island, and you don't want your investment to

by drakaal 13y ago

Most Seed VC's are investing in a Team and an Idea. "Founder" as a singular rarely get investments. No man is an island, and you don't want your investment to get hit by a bus.

enko 13y ago
> you don't want your investment to get hit by a bus So take out life insurance on the founder. And if two founders are essential for a successful startup, then there is actually twice as much chance of it failing by one of them being hit by a bus.
- drakaal 13y ago
  A typical pair is a business guy and an IP guy. You don't have twice the risk because it is assumed that they talk to each other, and you could replace either based on what the other could fill in. You can only insure for the amount of your investment, that offsets the risk but doesn't cover your gains. Also since the cost to do so is 1/10th of your investment over 3 years, you would typically not opt for the coverage. I don't know of an investor who does. There is also a belief that no one guy is "that smart" that anything 1 person can build has any competitive advantage.
cynusx 13y ago
The only genuine reason I see for not investing in single founders is that startups are a lot of work and it's unreasonable to expect that a single founder can focus on all the different bits that need to align for a business to take off. However, taking this as a given doesn't strike me as right as founders can definitely get to some sort of market traction on their own and hire people to fill in their deficiencies. It also strikes me as odd that while Dropbox is one of YC's biggest hits they still hang on to this 2-founders doctrine. I can't help but think that not investing in single founders is caused by the social signalling involved of single individuals. The reasoning would be "If you can't convince somebody else to join you, why would I invest my money in you?". Another genuine concern would be that this individual would have to have mastered a broad set of skills to run a successful business independently and such people are unicorns.

by drakaal 13y ago

Most Seed VC's are investing in a Team and an Idea. "Founder" as a singular rarely get investments. No man is an island, and you don't want your investment to get hit by a bus.

enko 13y ago

> you don't want your investment to get hit by a bus So take out life insurance on the founder. And if two founders are essential for a successful startup, then there is actually twice as much chance of it failing by one of them being hit by a bus.

drakaal 13y ago
A typical pair is a business guy and an IP guy. You don't have twice the risk because it is assumed that they talk to each other, and you could replace either based on what the other could fill in. You can only insure for the amount of your investment, that offsets the risk but doesn't cover your gains. Also since the cost to do so is 1/10th of your investment over 3 years, you would typically not opt for the coverage. I don't know of an investor who does. There is also a belief that no one guy is "that smart" that anything 1 person can build has any competitive advantage.

cynusx 13y ago

The only genuine reason I see for not investing in single founders is that startups are a lot of work and it's unreasonable to expect that a single founder can focus on all the different bits that need to align for a business to take off. However, taking this as a given doesn't strike me as right as founders can definitely get to some sort of market traction on their own and hire people to fill in their deficiencies. It also strikes me as odd that while Dropbox is one of YC's biggest hits they still hang on to this 2-founders doctrine. I can't help but think that not investing in single founders is caused by the social signalling involved of single individuals. The reasoning would be "If you can't convince somebody else to join you, why would I invest my money in you?". Another genuine concern would be that this individual would have to have mastered a broad set of skills to run a successful business independently and such people are unicorns.