[Discuss] Startup?

[richb at pioneer.ci.net (Rich Braun)]

Steven Santos asked:
> So, I have come up with an idea ...
> I could spend the next 20 years trying to do this on my own, but its
> too good of an idea not to do something with.
>
> Have any of you ever pitched a big idea to an angle investor?
>
> Any advice for pitching such a big idea?
>
> Where do you find an angel investor for such a thing?

Where should I start.  Yes, I've been through this. And in fact it was even
with a big idea circa 1994. In the end it came out like the model-rocket
engine I played with when I was 12: peeling it apart, I dumped its powder on
the ground and took a match to it; luckily the fireball was only the radius of
my arm.  The Internet blew up a lot bigger than that in the late 1990s, and
though I was absolutely right about the market's potential, I wasn't
well-enough connected in those early days to maintain control of any
significant part of the business as the market developed.

A business competes not only for customers and investors, but also for every
kind of stakeholder from employees to vendors to board members to referral
connections.  This is probably the main benefit of going to a top-10 MBA
program: to get a leg up on those connections.

It was only after my startup (which did OK, I was able to triple my two
angel-investor's share prices) that I made the effort to get into an MBA
program.  The only trouble is, chances of getting in are about the same as
winning on a scratch-ticket game, and the application process is about as much
work as just doing your startup.  So...what's my advice now?  If you're 21 and
reasonably well-connected already, then just launch your business and cross
your fingers.  You'll have plenty of time to do it over a couple more times
until you get it right.  Otherwise:

Skip the MBA.  Choose your niche.  Choose which city to be in based on that
niche.  (Hint, these days the Internet of Things is not based in Boston.)  Go
to meetups, push your LinkedIn contacts list past 500 toward 5000.  Don't
write a formal business plan, but do be prepared to spell out how your project
works, how it will keep up with the Big Guys when they start to notice your
startup is making money, how it will generate free cash flow, and when the
investors can expect to see an exit strategy.  A 5-page powerpoint with a
2-page spreadsheet addendum will go a lot farther to persuade than a 75-page
formal business plan.

In 2011 I was attempting to launch a startup in the Boston area.  I already
knew that most VC firms (many of which became customers of my 1990s company)
in the Boston area are only interested in making mezzanine-level financing
deals on companies already generating cash but which need a boost to get to a
public market (i.e. those which need $20M to $500M, not $2M to $20M).  Also
there's more of a business-to-business focus among Boston investors than those
elsewhere; though my 2011 idea was b-2-b, it wasn't going to attract those big
Boston firms because the niche is closer to $100M gross sales than your
addressable-market idea of $20B+.

So in 2012 I pulled up stakes and moved to where the action is in my niche:
SoMa in San Francisco.  The move sapped my energy and my funds, so I didn't do
a startup since, but events of the past 3 years have made me believe in this
advice more strongly.  If your idea were in the health-care arena, Boston is
the place to be.  If you want investors who can understand gadgets, gizmos,
mobile-apps, continuous-deployment software, and the like: get yourself out to
SF.  (Not the South Bay anymore, the city itself is where the startups and
their investors are, since the 2007 real estate crash opened up tons of SoMa
office space.)

-rich