If you’ve ever wanted insight into the mind of an investor, but straight no chaser, then venture capitalist Paul Singh is your guy. Formerly a partner at 500 Startups, the founder of Disruption Corporation, which was then acquired by 1776, Singh is now the publisher of Results Junkies, a weekly newsletter/blog that offers entrepreneurial advice, as well as frequent asides on travel, photography, and more.
In March 2016, with an Airstream trailer in tow, Singh, his wife Dana, and their dog Jack set out for a six- or seven-city road trip to promote founder and investor networking. Seven months later, the crew has circuited the USA and Canada three times. Thirty-six cities in, Singh’s 2016 Results Junkies Tech Tour hit Wilmington last week.
Thanks to event organizer and host Jim Roberts and his organization Network for Entrepreneurs in Wilmington, regional and Silicon Valley players alike were brought in to help educate and inspire local startup founders and investors. With home base at Ironclad Brewery in downtown Wilmington and a stop at tekMountain during the week, the three-day event focused on building and promoting your company, accessing state resources for startups, securing funding, and startup success stories. This tour is all about cutting the fluff and buckling down for some straight talk. Here are the top 10 Takeaways from Singh’s keynote last Tuesday:
1. “The venture industry is changing from a passive industry to an active one.”
Singh’s idea is that, for the past 75 years, entrepreneurs had to travel to New York City or Silicon Valley just to get a meeting with investors, let alone to secure investment. Now, thanks to regional tech hubs and the increasing interconnectivity of our culture in general, many startup founders are already happy with their current city’s quality of life. So investors have begun to chase down their potential investments.
2. “It’s cheaper than ever to start a company.”
Singh cites the evolution of data transfer and storage, software licensing, and payment methods over the past 20 years as why it only costs “$5,000 to start a tech company today.” Where companies once had to buy physical servers and connect them to the internet, cloud services have drastically reduced data storage costs. Also, premium software costs, from companies like Microsoft and Adobe, have been combatted by the advent of open-source software. And thanks to Stripe, Paypal, and Square magstripe readers, gone are the days of personally guaranteeing against chargmicrosofe backs just to be able to accept a credit card.
3. “The things that make a lot of money tomorrow look like toys today.”
Singh called this “the dirty secret of venture capitalism,” and he uses Snapchat as his example. He claims investors get a lot of flack for investing in apps that simple, to which he argues that “the average person spends something like five times more time on Snapchat every day than they do watching over-the-air media.” He then points to how, on Saturday mornings, before the advent of the internet, everyone was watching cartoons. Singh asked, “Now what do you do when you roll out of bed? What’s the first thing you do?” His answer: “You pull out your phone and check social media. It turns out that Snapchat is a media company.”
4. “Traction is the new intellectual property.”
Regarding his group’s investments, Singh said, “Off the top of my head, out of like 1,700 companies, I think less than 10 have patents.” Singh’s belief is that “good products don’t win in this decade, or even this century–growing products does.”
5. “When you say the word ‘they,’ you absolve yourself of the responsibility of fixing the problem.”
The context here is disgruntled founders who can’t secure investment.
“Here’s the reason why entrepreneurs, right now, just 24 hours in, why I think Wilmington entrepreneurs are not getting on the national radar so far,” Singh said “Let’s just say you’re calling an investor in New York City who wants to invest in companies, right? That New York investor is thinking . . . about how to dodge traffic. They’re thinking about 60 other deals they heard about today, they’re thinking about the kids, they’re thinking about all this other stuff . . . And then you call. ‘Hey, how’s it going? Hey, so, where are you from originally? Hey, so, what do you like to see?’ You’re using dinner-party etiquette in a business meeting, and then you’re surprised when the business people are like, ‘I don’t have time for this.’”
6. “If you start any conversation explaining the product, you f***** up. If you spend more than 50% of any meeting talking about the product, you f***** up.”
“For the entrepreneurs in here, if you keep talking about the product, and then you’re wondering why nobody’s actually investing or buying or writing about your stuff, don’t be surprised,” Singh said. “You’re the problem. We live in an attention economy today.”
7. “Talent is equally distributed. Ambition is equally distributed. What’s not equally distributed . . . is a little bit of self-awareness for the entrepreneurs.”
Singh extends his point: “There’s only two stages to a company: Will it work? And how big could it be?” So, in Singh’s mind, when meeting with investors, a founder must remember that the investors assume (to a certain extent) that the founder’s concept already “works.” So the more important question is “how big will it be?” This all stems from one of Singh’s catchphrases for the week: “Lead with the traction!”
8. “If you ask five investors what traction is, you’re gonna get like seven different answers, and none of them are clear.”
So if you’re supposed to “lead with the traction,” what the heck is traction in the first place?
Singh said, “For me, traction is the point when you get past ‘will it work?’ And for me, ‘will it work?’ means that one person you don’t know pays you at least one dollar. Because, now, the conversation that we’re gonna have is gonna be, ‘Well, are there 10 million other people who could buy this? Or either 1,000?’ Both of those are good businesses, but one is venture scale, and one is not.”
For Singh, a B2B company with three companies that pay it is a good early indicator that the B2B knows how to sell, and that the three companies are paying for something that they want.
For a consumer company: “Let’s just say you happen to want to build something you’re gonna monetize later . . . it’d be nice if you had something like 100 repeat users, it’s up to you if it’s daily or weekly. But, if you’re consumer[-based] . . . it’s much harder to monetize that, but . . . repeated usage is much more important.”
9. “For God’s sakes, don’t build an app!”
Here, Singh means companies whose lone product is an app. He claims that the average person downloads almost zero apps per month. He also claims that the average person, per day, only uses somewhere between three and seven apps.
“So don’t be surprised when investors don’t want to invest in your app company,” Singh said. “We’re not investing in an app. We’re trying to invest in someone or some team that’s trying to be one of those three apps.”
10. “In a world where we don’t know who the next unicorn is gonna be, all we can do is listen to as many pitches as we can and invest in the least terrible idea, people who are focused on the future, and just wait.”
Singh’s strategy is called “moneyball for startups.”
Singh said, “The more companies that start means there will be more business licenses that are filed. The more business licenses that are filed, theoretically just means we have more at-bats. And someone in there has a higher probability of actually building something that will create jobs.”
The mission of the 2016 Results Junkies Tech Tour is to visit secondary cities, places that are in the middle of building a significant tech hub, where the startup community is growing fast and the investor population is strong. It’s no wonder Singh decided to make a stop here in Wilmington.
No matter where your company is located, if you’d like to know how your own mission fits into the southeastern North Carolina tech community, contact tekMountain today.