What do investors want? This is a common topic for blogs, entrepreneurs and investors. So here’s another view on it, from somebody who knows:
Naval Ravikant, the speaker, has been through the ringer a few times, on both sides of the investment table. I watched one of his ventures, epinions.com, very closely, because my daughter and son-in-law were employees. So now, a few years later, I follow his Venture Hacks blog.
Most of what he says here is pretty standard. And if you’re interested, his fellow blogger transcribed this interview on Venture Hacks. Some highlights:
“I look for two things that are paramount above all:
- Great team. It’s obvious. It’s a tautology. Everybody says it. You have to be working with some of the best people in the industry you’re in.
- Huge market. Niche markets just don’t work because the first idea never works. You always have to change the idea, so you need room to maneuver in a big market.
“There are three more factors that I look at. Not all three of them are required, but I prefer a company to have at least two of them:
- Difficult technology that is compounding over time.
- A proprietary distribution channel. A clever viral marketing, or SEO, or partnership, or whatever strategy that gives them a leg up over competitors.
- A direct monetization model. Something more than throwing up 10 cent banner ad CPMs.
Ravikant has more authority on this than I do, but his reference to niche markets bothers me a bit. I like niche markets in a world that is constantly splintering and dividing itself into finer and finer pieces. Some of the biggest markets there are started as niches: Facebook, for example, focused first on a few university campuses. Yahoo was a niche–the Internet–when it started. Starbucks was once a niche (gourmet coffee, affordable luxury) in the Northwest.