Sramana Mitra: Have you selected where you want to play in this continuum?
Jon Staenberg: I haven’t. Maybe it’s a bad strategy on my part to say I’m more opportunistic, but I don’t have a fund right now. I’m investing on my own or I’m investing with syndicates. I have a group of people I work with as well. I back people first. People always ask that question. Is it market or people? I’m backing people.
I’ll give you two investments I’ve done recently. One was a company called Tomorrow.me. Surprisingly, there is a large audience that doesn’t have a will yet. This was the first round of funding. There are some great people around the table but the team had worked together. By the way, it is not an obvious category and it really hasn’t been cracked before. We’ll see. It is a big category. It is a team that I believe is mature enough and has seen enough. That was early stage.
Another one that is also early which would be considered A or B at this point is a company called Stellar, which is trying to be the Uber for private jets. This is a really interesting company that could create that marketplace. It’s an interesting and large opportunity for the flights carrying no passengers. It’s a spin out of a major aerospace company. People who are leading the round are more of a private equity firm than a traditional venture fund. I had a conversation about this yesterday.
The culture of traditional buyout of private equity firm and venture capital is very different. In some sense, maybe the right answer to your question, to boil it down, is I’m looking for the differentiated thing. Every day, I get deals that are a little bit different from something I saw the week before but not terribly different. The thing that’s different today is, if you can think about it, you can immediately say, “I’m going to start a company doing that.” That’s both good and bad.
Sramana Mitra: The entry barrier is very low. However, to make something a success is still difficult. It’s cheaper to get going, which is why I think all this commotion is happening in the early stages.
Jon Staenberg: It’s not only cheaper; it’s being encouraged.
Sramana Mitra: It’s glamorous.
Jon Staenberg: It’s glamorous. It’s sexy. I’m in the wine business also. I call it lifestyle pornography. Everybody from the outside looks in and says, “That’s so fun.” I got an empty bottle right here and I assure you that people hearing this are thinking, “Wow! You got a wine business.” It’s hard work.
Sramana Mitra: If you look at what happened in Napa and Sonoma this year, these guys are really hurting.
Jon Staenberg: Forget natural disasters. The wine business is not a bad parallel because in the last 10 years, the wine business has become exponentially more competitive. There are micro-distilleries. There are micro-breweries. People forget it’s still a business at the end of the day. That’s the same thing that’s happening in the world of startups. It’s hyper-competitive. Because there are less barriers, more people are doing it. That means your idea better be that much better and that much more differentiated.
Sramana Mitra: Yes, and your competition is international which brings me to my next question. What is your geographical sphere?
Jon Staenberg: This is a direct result of what we’ve been speaking about. I get a lot of overt requests and I just want to say to people to not do that. With all politeness and respect, I’m just not willing to entertain that. If I don’t know you or I don’t know somebody who knows you, I can’t do it. I don’t have enough hours in the day to do that kind of due diligence.
Secondly, if you’re not in either the 415, 650, or 206, it’s just really difficult for me to get over that. I hopefully want to add value. If you’re out of those geographies, there must be a really compelling reason why. I’ve invested in Argentina. I’ve invested in New York. I have invested in a variety of places, but those are the exceptions to the rule. Generally speaking, I’m focused on the Bay Area and Seattle.
What I try and do to differentiate myself is I say to people, “How can I help you? How can I help you do business development?” One company that I invested in wrote an email and said, “The product is done. It’s working. We’ve got customers. I need 14 introductions.” I spend two hours and they have 14 large companies in Seattle they’re introduced to. I can do that because I do a CEO and Founders dinner every single month in Seattle and San Francisco. I’m pretty clear about where I’m trying to add value and also where I’m not to so good.