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Venture Capital

Access and Community are more important than Capital, Deal Flow and Judgement

Written by Paul on April 18th, 2013

Investing in companies, especially early stage, has historically been about capital, deal flow and judgement. If you had the money, you would get the deal flow and then you could take your time picking your favorites.

Capital, deal flow and judgement are table stakes today. You need those three things to get into investing but it’s simply not enough to make any money. Investors today need to be thinking about access and community.

Access, as Brendan Baker might say, is about …

Within Five Years, Most VCs will have a Partner Focused on Electronic Trading

Written by Paul on March 4th, 2013

Traditionally, venture capital firms  raise a pile of money and then have specific partners responsible for the deployment of that cash into specific industry and regions. Over the next few years, that behavior will adapt to the increasing amount of online trading available in the private markets.

At smaller funds (or funds focused on early stage opportunities), this partner will likely focus on helping their portfolio companies raise more follow-on money from other online investors. At larger funds, this partner will …

The Rise of the Angels (and the Entrepreneurs)

Written by Paul on December 16th, 2012

This post includes video, slides, and a full-text writeup. At 3,500+ words, you probably don’t want to be reading this on your phone.

Over the past two years, I’ve been lucky enough to be involved with 500 Startups as we’ve invested in 400+ companies in 20 countries. As we’ve started to ramp up operations in India, I’ve spent quite a bit of time there in 2012 and was asked to speak at the Unpluggd conference a few weeks ago. I thought I’d …

India Has a Series A Drought

Written by Paul on December 7th, 2012

There’s been a lot of recent talk about the Series A crunch in the US. Having spent the last two days at the AVCJ conference in Mumbai, I’d like to propose that India has the opposite problem: there’s a Series A drought in India. Many Indian firms can write large ($500K-$1M+) checks but there simply aren’t enough companies looking for that capital.

As with most conferences, the most interesting conversations tend to be on the sidelines and in the hallways. …

Investors: Risk And Uncertainty Are Not The Same Thing

Written by Paul on December 6th, 2012

[I’m speaking at the Asian Venture Capital Journal event here in Mumbai later today and these are the speaker notes I’ll be using for my talk. The audience is primarily LPs which is a fancy way of saying that they’re the people that give investors like me money.]

Today, we’re supposed to be talking about mitigating investment risk. Here’s the problem though: risk, as defined by economist Frank Knight in 1921, is something you can put a price on. In other …

Investors Need To Lose Their Egos And Founders Need To Gain Some Confidence

Written by Paul on November 25th, 2012

I’ve spent a lot of time on the road this year and, though I’ve visited a handful of countries, the majority of my time outside the US this year has been India. (Note: I’ll assert that what I’m about to say applies to any startup ecosystem outside Silicon Valley — both in the US and internationally.)

Across every startup ecosystem I’ve seen, it seems to me that there’s only one real way to to help startup ecosystems mature: investors need to

The goal is to make good decisions, not to make money

Written by Paul on September 13th, 2012

Google Ventures’ Joe Kraus recently wrote about unconventional investing rules and this particular portion caught my eye:

This rule came from a three-day poker camp I went to seven years ago. One of the pros got up to the front of the room and asked the question, “What’s the goal of poker?” Of course, someone put their hand up and fell into the trap. “To make money” they said.  Wrong. “The goal is to make good decisions, not to

Fund The Founder Or The Prototype, But Not The Idea

Written by Paul on September 3rd, 2012

When you invest in a company, you’re choosing to back the founder, the idea or the prototype. Or some combination of those. It seems to me that the only reasonable choices are to back the founder or the prototype, but not the idea.

Either back the founding team and be very clear about it (eg, like YC funding founders without ideas) or back a prototype with some sort of small but meaningful traction. Anything between those two extremes is unnecessarily adding …

On being an API to Venture Capital and Functional Expertise

Written by Paul on August 9th, 2012

I’ve been thinking about this idea for a while: that it’s *everyone’s* job to be an API to venture capital and functional expertise. (Though, I owe a big hat tip to Fred Destin for being the first to publicly use the “API” term to describe 500.)

If you’re a startup founder, your sole job is to build a fantastic business. Rather than spend time organizing the …

Thoughts on the JOBS Act (or, Coming Soon: More Liquidity In The Private Markets)

Written by Paul on June 15th, 2012

The JOBS Act is a hefty bill with a number of key points but, for the purposes of early stage tech startups, there are two material items that will drive the increased liquidity of the private markets:

  1. The JOBS Act legalizes crowdfunding. This means that the average person will now be able to invest up to 10% of their yearly income or $10,000 (whichever is less) in exchange for an equity stake. Startups can raise up to $1M per year (or $2M

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