UNI – Acquired tastes in food and investing

Between Idealab, First Round Capital, the New York Angels, and just plain email, I see about 50 new business plans a week.  Many of these are “instant pass” – they don’t fit my investment objectives, nor those of my three or four half time jobs with FRC, Idealab, etc.  While these may be heartbreaking for the entrepreneurs involved, I don’t lose that much sleep over them.

There is another category, which can potentially be big hits, and these are the ones that take most of the time – due diligence, meetings, thoughts about how to work them.  They lead to the 20 or so First Round investments each year, to Idealab’s new company startups, the NY Angels 5-10 investments, and several personal investments that I make. And over the long run, they’ve proven to be worth my investment of money and time, taken as a portfolio whole.

The heartbreaking deals are those I call UNI.  As a Japanese sushi, uni (or sea urchin) is somewhat of an acquired taste.  It is a bit slimy, but can have a wonderful sweetness to it.  I acquired a taste for it during my many trips to Japan in the 80s and 90s, and order it whenever it’s fresh.  I also see a lot of businesses that taste sweet, but have a somewhat slippery texture, I call these UNI -  User, not Investor.  These are deals where the product excites some of my sensibilities, and I can quickly see that I, and maybe many other early adopters I know, would easily become users.  But I either don’t see a business model, or see how it gets to be a very large company.  In many cases, I can see getting to a $10-20 million business throwing off  a few million a year. But there is either  market or no vision of how to get it to $50-100 million.  These are wonderful business for the entrepreneur, friends and family, and some angel investors.  They generate cash flow and great lifestyles.  They just don’t work for the venture business.

Many of the ideas we see that build on the social network or new communications platforms fall into the UNI category.  As a big user of Facebook, Twitter, et. al., tools that help me do it are most welcome, and I try many of them.  As businesses, most of them don’t have the ability to generate much revenue. The same seems true for the iPhone app business.  Lots of neat apps (see the humorous iPhone ad you’ll never see on TV), but not many generating enough revenue for long enough to build venture scale companies. 

So please don’t feel offended if I pass on your deal, after showing great excitement for your product. You may well have a winner – for small scale investors, but  cannot generate the scale that works with venture math.

Comments

[Arthur Einstein Jr]

Interesting perspective Howard. So how do you judge whether the potential is monster or not? Everything looked like a big idea once. Now, nothing seems to.
[HLM] to keep with the food metaphor, it's gut feel.

[Yuri G.]

It's very interesting opinion, but do you think those VC's who invested in Twitter or other social networking projects are not smart enough and they didn't have any projections or ideas how to monetize those kind of projects in future? It's very interesting how they evaluate capitalization of those companies now...they dont' generate any cashflow but their valuation is unreallistically high. I think i saw that one of your partner at first round invested in Delicious, isn't the same kind of projects that you are considering as a UNI :)

[Writing Course]

Great help. Fantastic Points. Well done.

[Coach Hire]

Fast-forward to 2009, as Amazon introduces its Kindle DX, the latest iteration of their wireless ebook reader that offers a larger screen with eInk technology. Just as those kings and dukes were thrilled to build ever-larger battlements against their enemies, publishers are flocking to the Kindle as the wonder machine of choice

[mini fridge]

Silicon Alley Insider notes that Amazon CEO Jeff Bezos brought a stunning statistic to light during the Kindle DX intro show: when Kindle-formatted books are available on Amazon, about 35 percent of those books' sales are now through Kindle editions.

[cara meninggikan badan]

These are deals where the product excites some of my sensibilities, and I can quickly see that I, and maybe many other early adopters I know, would easily become users. But I either don’t see a business model, or see how it gets to be a very large company. In many cases, I can see getting to a $10-20 million business throwing off a few million a year. But there is either market or no vision of how to get it to $50-100 million. These are wonderful business for the entrepreneur, friends and family, and some angel investors. They generate cash flow and great lifestyles. They just don’t work for the venture business.

[tinggi badan]

As businesses, most of them don’t have the ability to generate much revenue. The same seems true for the iPhone app business. Lots of neat apps (see the humorous iPhone ad you’ll never see on TV), but not many generating enough revenue for long enough to build venture scale companies.

[Timarkus]

So, I've been following both of you for some time (your work and pootrflio), and when forces combine, they speak volumes and create seismic impacts. Congrats on joining Orman's team!

[Pedro]

Well I prefer you writnig in English! Thanks for the follow on Twitter. By the way, you have photos of my favourite running track...in Burleigh Heads. I love running through that rain forest track. On one run I saw a HUGE manta ray surfing a wave. See you in class tomorrow!

[Ruramai]

Hey!Good ol' Whirlpool You're right about the balance, it's very imraptont. I think you've got a good mix going, with uni a few days and a few days for a life Just make sure not to neglect one or the other, too much of a good thing isn't always good, remember.Good luck with your first semester!Feel free to contact me with any questions you may have Thanks for reading!thegirlwithabow.

[Mary]

Good luck man. Orman is a great designer and yet his weseitbs are more than just design. With a programmer like you I can only imagine the future themes.