Strategies for investing in the early stages of Internet startups
First theses.
1a Regarding the Internet, only star startups can justify venture capital investments.
2a At an early stage, it is impossible to calculate a star startup. Paul Graham specifies that stellar is not equal to just a successful, non-stellar success of startups with sufficient experience can apparently be predicted.
3a Paul also adds that even at a not very early stage - the first two years - stardom is also not determined.
From here conclusions about possible strategies for investors of early stages:
1b . Inflate bubbles. PR and escalate the pathos of both around individual (their portfolio) projects, and around the startup movement in general. In fact, this minimizes the risk, since the stardom becomes mainly media and controllable, it ceases to be an objective market characteristic of demand. In part, this is also a way to really form a non-existent demand, but such an aspect in full-fledged execution requires serious investments, which is usually not done for the initial stages. The result is a profitable investor business, where the investor of the next stage may be the loser if he cannot blow up even more and then resell the project to someone else. ( Update on 9/11/2012 - on this topic is an excellent text with research on Instagram ).
2b . Invest in many projects, relying on statistics - if, conditionally speaking, one out of ten shoots, then it will pay back all costs, including the rest, and bring a good profit. However, we are looking at point 3a - the investments of all the early stages fit into two years, where nothing is normally predicted. Those. an early stage investor basically has no statistics, he always sells cats in a bag, even if they are really fat and really beautifully packaged. So this item is practically excluded from consideration.
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3b . Minimize costs, not risk, through cooperation with many other investors. I can’t say anything about this mini-crowdfunding investor. Perhaps this approach requires authoritative instigators. More precisely, it just needs to be purposefully developed. In general, crowdfunding itself looks like an attractive thing.
4b . Refute paragraph 1a and invest in just successful projects, even if they are not stellar. Nowadays, claims have often come up that Internet startups are just business. Normal business. Ordinary business does not necessarily require a stellar shot. You can make money figuratively speaking on a tent with shawarma and gradually open the second tent and the third. But then of course you need to take into account the specifics of the Internet - everything changes quickly enough in it. You will develop and build one for a long time, then another will suddenly appear and completely change the market.
Further purely my ad-libbing, completely opposite to the current state and trends in the industry.
1c . Emphasis should be placed not on events in real life. Personally, my experience suggests that in real meetings projects can never be presented and understood better than on the Internet. This is similar to Skolkovo - I initially said that it is absurd to invest huge money in real objects, but in the Internet version of Skolkovo it could have a tremendous effect. In short, I argue that in the future all the same all will be reduced to Internet implementations.
2c . To analyze the projects to appeal to the wisdom of the crowd, this should be part of the Internet implementation mentioned. In doing so, use advanced things, such as prediction markets .
3c . From paragraph 2a it follows that the money should be given in general to all Internet projects. Well, except for obviously inadequate. This is especially true of Russia, where the total number of projects is very small.
4c . If money is given to everyone, the number of inadequate will increase dramatically. Therefore, it is necessary to develop rating systems and eliminate screening by rating level. They probably correctly say that the main thing in a startup is people. So it is necessary to analyze people, but not always directly. There are indirect characteristics of a successful person and they are likely to appear outside the thematic area of a particular startup. With modern technologies, it is quite possible to calculate all one start-ups and all start-ups.
PS Once I even proposed a certain project in which the mentioned approaches would be implemented.
1a Regarding the Internet, only star startups can justify venture capital investments.
2a At an early stage, it is impossible to calculate a star startup. Paul Graham specifies that stellar is not equal to just a successful, non-stellar success of startups with sufficient experience can apparently be predicted.
3a Paul also adds that even at a not very early stage - the first two years - stardom is also not determined.
From here conclusions about possible strategies for investors of early stages:
1b . Inflate bubbles. PR and escalate the pathos of both around individual (their portfolio) projects, and around the startup movement in general. In fact, this minimizes the risk, since the stardom becomes mainly media and controllable, it ceases to be an objective market characteristic of demand. In part, this is also a way to really form a non-existent demand, but such an aspect in full-fledged execution requires serious investments, which is usually not done for the initial stages. The result is a profitable investor business, where the investor of the next stage may be the loser if he cannot blow up even more and then resell the project to someone else. ( Update on 9/11/2012 - on this topic is an excellent text with research on Instagram ).
2b . Invest in many projects, relying on statistics - if, conditionally speaking, one out of ten shoots, then it will pay back all costs, including the rest, and bring a good profit. However, we are looking at point 3a - the investments of all the early stages fit into two years, where nothing is normally predicted. Those. an early stage investor basically has no statistics, he always sells cats in a bag, even if they are really fat and really beautifully packaged. So this item is practically excluded from consideration.
')
3b . Minimize costs, not risk, through cooperation with many other investors. I can’t say anything about this mini-crowdfunding investor. Perhaps this approach requires authoritative instigators. More precisely, it just needs to be purposefully developed. In general, crowdfunding itself looks like an attractive thing.
4b . Refute paragraph 1a and invest in just successful projects, even if they are not stellar. Nowadays, claims have often come up that Internet startups are just business. Normal business. Ordinary business does not necessarily require a stellar shot. You can make money figuratively speaking on a tent with shawarma and gradually open the second tent and the third. But then of course you need to take into account the specifics of the Internet - everything changes quickly enough in it. You will develop and build one for a long time, then another will suddenly appear and completely change the market.
Further purely my ad-libbing, completely opposite to the current state and trends in the industry.
1c . Emphasis should be placed not on events in real life. Personally, my experience suggests that in real meetings projects can never be presented and understood better than on the Internet. This is similar to Skolkovo - I initially said that it is absurd to invest huge money in real objects, but in the Internet version of Skolkovo it could have a tremendous effect. In short, I argue that in the future all the same all will be reduced to Internet implementations.
2c . To analyze the projects to appeal to the wisdom of the crowd, this should be part of the Internet implementation mentioned. In doing so, use advanced things, such as prediction markets .
3c . From paragraph 2a it follows that the money should be given in general to all Internet projects. Well, except for obviously inadequate. This is especially true of Russia, where the total number of projects is very small.
4c . If money is given to everyone, the number of inadequate will increase dramatically. Therefore, it is necessary to develop rating systems and eliminate screening by rating level. They probably correctly say that the main thing in a startup is people. So it is necessary to analyze people, but not always directly. There are indirect characteristics of a successful person and they are likely to appear outside the thematic area of a particular startup. With modern technologies, it is quite possible to calculate all one start-ups and all start-ups.
PS Once I even proposed a certain project in which the mentioned approaches would be implemented.
Source: https://habr.com/ru/post/151505/
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