Startup Investing

Want to identify successful startup founders? Check Linkedin.

Over the past few weeks on the blog, we’ve been exploring how to identify successful startup founders (obviously, this matters A LOT to investors in early stage companies). Are entrepreneurs born or made? I remember a few years back, there were some (credible) studies that seemed to point to the existence of the entrepreneurship gene. In the book, Born Entrepreneur, Born Leaders: How Your Genes Affect Your Work Life, author Scott Shane looked at identical and fraternal twins and their inclinations to be entrepreneurs. The siblings who shared 100% of their genes demonstrated higher rates of entrepreneurship — leading Shane to estimate that 30-40% of successful startup skills are innate. Successful entrepreneurs are more tribal This startup gene theory is being challenged by some more recent work at MIT’s Sloan School of Management (admittedly, the existence of the startup gene would be b-a-d for the MBA program business). In The Power of Alumni Networks — Success of Startup Companies Correlates with Online Social Network Structure of Its Founders, researchers found that university networks whose alumni have a stronger “old-boys-network” (larger...

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The portfolio approach to investing in startups

Should startup investors bet heavily on one sexy startup? Or, should you keep your investments in startups relatively small and spread them out over multiple early stage companies? This question of how many startups an investor should invest in is one of the most frequently asked questions in the startup investing world. For people who invest in venture capital funds, it’s not really a question they need to address. They assign a representative — a venture capital fund — to make investment decisions on their behalf. But with the rise in popularity of angel investing and crowdfunding, investors are becoming more active in the startup investment process. The issue of the right number of startup investments an investor should make becomes a more integral part of the investment process. 2 approaches to investing in startups Concentrated, large bets: This approach is all about zeroing in a single or small number of investments with a relatively large bet on their success. It’s like a sniper who is down to just a couple of bullets in his investment gun. When he pulls...

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On Crowdfunding: An interview with the award-winning journalist, Amy Cortese

Amy Cortese is an award-winning journalist and author who has written extensively on crowdfunding. Her book, Locavesting: The Revolution in Local Investing and How to Profit from It addressed an early, growing trend of investing locally and she recently penned an article for the New York Times entitled “ The Crowdfunding Crowd is Anxious about recent developments in the crowdfunding sphere. I recently had a chance to ask Amy a few questions on the connection between local investing and crowdfunding. Why do you think investing in local communities is so important, and how are investors accessing local opportunities? Amy Cortese: At a macro level, small businesses are having a hard time obtaining the capital they need to grow and expand, and that is holding back an economic recovery, since small, young firms create the bulk of jobs in this country and drive innovation. But there’s a more intimate side to this as well: across the country, many communities are struggling. Their downtowns and Main Streets have chipped away by box-box stores, strip malls, e-commerce and globalization. And that affects tax revenues,...

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Network Technology Giant, Cisco acquires Intucell For $475M

M&A in the 2013 Israeli start-up realm begins with a bang as Network equipment giant, Cisco acquires Intucell  for a whopping $475M. Intucell’s technology provides a solution for cellular networks to optimize their mobile traffic’s speed and keep disrupted calls to a minimum. Founded in 2008 and located in Raanana, Intucell has grown at a rapid pace, evolving from an idea to a commercial success in less than a year, and has branched out on a global scale to the United Kingdom and Singapore. US based Bessemer Venture Partners, one of the most successful VC funds in the world, will take close to half of the sales price, after funding Intucell’s $6M series a investment round in late 2011, entirely on their own. Intucell’s Co-Founders, CEO Rani Wellingstein and VP products Ido Susan stand to make a nice chunk of cash as well estimated at around $80M each. This is the 12th company and one of the largest deals made by Cisco in the Israeli technology market. The Wall Street Journal summary of M&A in 2012 showed that even...

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How to choose a winning startup (hint, start with the founders)

The 3 M’s angel investors consider before investing As an investor (whether angel, VC, or seed) arguably the most essential element in identifying a promising investment is the management team.  This idea led to the famous mantra that just like in real estate there are 3 L’s – Location, Location, Location; in the startup investing world there are 3 M’s – Management, Management, Management. In fact, many VCs prioritize talented, creative, and experienced management over a great idea, product, or booming sector.  Carlos Eduardo (not the European soccer player) is the co-manager and partner of Seedcamp (a leading micro-seed investment fund in Europe) — he claims that: “A startup’s management team is its lifeblood… no amount of awesome ideas will ever overcome a fundamentally flawed management team.”  (Source) Still not convinced?  Why do startups with great ideas fail? According to research from the University of Tennessee, while almost all startup failure is due to some sort of mismanagement, 30% of all startup failures can be directly attributed to what it describes as Unbalanced Experience or Lack of Managerial Experience....

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