1Mby1M Virtual Accelerator Investor Forum: With John Frankel of ff Venture Capital (Part 5)

Sramana Mitra: Unicorn mania started to rationalize a little bit in 2016. This year, it has stabilized. But there is still a huge amount of late stage capital out there. Traditional VCs have raised very large funds. As a seed investor, you could get buried under later stage liquidation preferences if valuations run up like that. How do you protect yourself?

John Frankel: When valuations run up, you’re fine. It’s when valuations stall or run back that you have issues.

Sramana Mitra: Both happen. Once valuation runs up, it stalls because fundamentals don’t deliver to valuation. >>>

1Mby1M Virtual Accelerator Investor Forum: With Mackey Craven of OpenView Venture Partners (Part 4)

Sramana Mitra: There’s another dynamic, which is a lot of these seed stage investors who are working in the very early stages are exiting into those kinds of mega rounds that come in Series B and C. That is a very healthy trend because I think these two segments are different. It could take a long time to traverse the full spectrum from friends and family all the way to something that is actually scaling at a significant pace. You can’t have small funds taking positions all the way through.

I also have some mixed feelings about this over investment in the seed and post-seed stages. In many of these cases, these companies don’t have either the velocity or the TAM to be venture-funded companies, but the entrepreneurs are setting themselves up with expectations that they’re going to be venture-funded companies. 

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1Mby1M Virtual Accelerator Investor Forum: With John Frankel of ff Venture Capital (Part 4)

Sramana Mitra: I’m going to ask you a few trend questions. How do you process the current investment climate where capital is moving further and further upstream? How does a seed investor mitigate the Series A gap? The number of seed investments that are happening have gone up but the Series A number has stayed steady. How do you parse this trend?

John Frankel: There’re a lot of data points out there. It’s easy to string them together into a story. The thing to understand is once a venture capitalist invests, probably two-thirds of their portfolio goes nowhere. One third gets written off. One third, they get their capital back. The last third is where the returns are. >>>

1Mby1M Virtual Accelerator Investor Forum: With Mackey Craven of OpenView Venture Partners (Part 3)

Sramana Mitra: You’ve been investing for a while. Let’s look at your 2017 deal flow. Give us some flavor of what trends you are seeing. How many deals do you see in a year? How many do you invest in? What are the highlights of the trends in that deal flow? Let’s just focus on 2017 just because we’ve just finished that time and it gives us a snapshot of what’s contemporary.

Mackey Craven: As a firm, we speak with roughly 5,000 companies and invest in five. We make concentrated investments that we think have the opportunity to be large and enduring. 2017 was no different. However, given the number of businesses and entrepreneurs that we speak with, one of the more interesting trends that we saw last year is directly related to the previous question around geography. >>>

1Mby1M Virtual Accelerator Investor Forum: With Laurel Touby of Supernode Ventures (Part 3)

Sramana Mitra: What do you think of this particular phenomenon? We’re in the beginning of 2018. Lots of stuff have already been built. Nowadays, there aren’t so many wide open opportunities with multi-billion TAM’s but there are many niche opportunities.

Some of these businesses need to be built for very small amounts of capital – $1 million to $2 million and sold for $10 million. Maybe even smaller investments – $500,000 and then sell for $5 million. Do you have appetite for these kinds of investments?

Laurel Touby: As long as the founder is not trying to create a lifestyle business that they want to hold on to forever and they’re >>>

1Mby1M Virtual Accelerator Investor Forum: With John Frankel of ff Venture Capital (Part 3)

Sramana Mitra: That is a very reasonable strategy for Indiegogo. You mentioned that Indiegogo’s equity crowdfunding platform has been successful. What are the trends? What kind of ventures are gaining traction in the equity funding world of Indiegogo?

John Frankel: A lot of the things they’ve been going for are what you might consider lower beta type of projects. These are ones that may not be shooting hundred times returns but can really do well. Maybe less of the kinds of things that the venture capitalists back. We’re in the early days. It’s too early to say that crowdfunding is a niche. It’s somewhere between the first and second inning with regards to the opportunities that crowdfunding brings. >>>

1Mby1M Virtual Accelerator Investor Forum: With Mackey Craven of OpenView Venture Partners (Part 2)

Sramana Mitra: It also gives you a flavor of how good a product it is. Is the product really meeting the needs of the customers? I think churn is a very good indicator of that.

Mackey Craven: Coming back again, it really doesn’t have to do with revenue scale. It has to do with validating that repeatable value proposition. Aside from conversations with customers, that quantitative metric often speaks strongly about that point.

Sramana Mitra: I’m going to switch the question to another quantitative myth that comes up all the time in early stage financing, which is TAM. Let me phrase the question slightly differently. At the beginning of 2018, lots of stuff have already been built. >>>

1Mby1M Virtual Accelerator Investor Forum: With Laurel Touby of Supernode Ventures (Part 2)

Sramana Mitra: What have you invested in? Give us an example or two and tell us why you chose to invest in those.

Laurel Touby: We are about to close the first close of our fund. We’re now looking at investment for that fund. In my angel investing, you can see some indicators of some  companies that I invested in personally that have been doing really well. One of them is a company called AppBoy which is in marketing tech. I did it five years ago. It wasn’t quite as crowded as it is today.

It has changed its name to Braze. It’s basically software to help marketers reach out to their community via the app. It’s managing your community of users better through your app. It’s analytics. It started out as doing one or two things. Another one is >>>