Mother of God it’s hot in entrepreneur land.
This weekend, Kojak and Phil Donahue (Yuri Milner and Ron Conway) invested $6 million in the Y Combinator ETF.
My blogging is so weak of late that I forget how to do lot’s of links and frankly I am sick and a little tired so happy to even be blogging just a smidge, but this is some serious shit. The only people it is NOT serious for is Yuri ‘machine gun’ Milner and Ron ‘great hair’ Conway. For these two and their investors, it’s great branding and pocket change. I honestly think they could give rat’s ass what anyone thinks. They just bought the equivalent of the an entrepreneur superbowl ad for twelve months and for their branding… it can’t hurt. It truly is a great time to be investing in startups and they already have killed it off this run and if they truly are marking the top, I don’t think it is, they still have bought mucho entrepreneur brownie points.
You can’t blame the alpha dogs for marking their territory. Green is better than yellow as well.
I find my deals by calling the founders of products I like (cold calling) or because I meet an entrpreneur I would back regardless of the product they are selling. After that, if the price is right I am generally in. I am not going to change how I invest because of this deal.
I do expect this deal leads to some sort of tradable ETF for startups and/or another public CMGI. Lord knows I have been investing around the idea of the return of CMGI and screaming at people I have invested in (they know who they are) to get public already and cash in. The institutions are playing this game with $SINA as a proxy for Twitter and $TZOO as a proxy for Groupon so don’t shoot the messenger.
I believe you must give the public what it wants or Goldman Sachs will!
Is this one of those signs that we’re in trouble?
For every Facebook we hear about, there will be hundreds and thousands of startups that will never make any revenue, despite raising boatloads of money from private investors. The bull market for hype always seems to persist, but the reality of building the next Google, Amazon, or any other social media/ecommerce juggernaut is more of a lottery ticket than anything else. Playing with other people’s money (angel investors, VC’s) has never been sexier — and more fraught with risk for those willing to sacrifice years of their lives chasing ever-elusive and constantly changing social media themes/flavors of the day. As an entrepreneur myself, my advice to the lure of great riches is to pursue an area of great need, but also one that you have experience in as well. Do what you love, and if the field is robust, the money will eventually follow. Don’t try and build the 5th best facebook competitor, but instead build a business where you can be #1 whether it is online or offline.
You may be sitting on a boatload of great recipes and all you need is a small storefront to open up the next great food franchise where you could be a leader. “Me-too” businesses are fine too, but make sure you are a good judge of demand for what you are pursuing to build. Hair salons are a dime a dozen, but if the location is good and the talent is in your hands, you can have a nice career. This I know firsthand as my dad has been cutting hair since he was 14. Bootstrapping my own Dividend.com business was the best move I ever could make and it saved me the hassles of raising money before I even had a proven business model. Too often entrepreneurs make the mistake of raising a round first without having a real business model in place, then when it’s time to raise the next round, they face a big haircut from a dilution standpoint if their business is going to be given the lifeline to live another day.
Like in trading and investing, weigh the risk/reward carefully before you sign on the dotted line. Money is never free, so do as much if not all you can to bootstrap your way to actually making money.
For Yuri the $6M is not an investment, since he’s doing it with his own money. If it was a real investment he’d be using OPM. This is the guy that raised $300M from Chinese in April, well over half billion from Kremlin’s Usmanov over the last two years. Also notice how the terms of the loans rattle the angel community by being too easy, coming from this Wharton MBA.
Ever seen a poker player win a major tournament and start tipping waitresses and dealers with stacks of black chips? Yuri scored a billion or more in two years with FB and Mail.ru and is now sharing the wealth in the community. Professional angels need not worry, it’s a one-time deal, unless he scores another billion on Groupon.