What’s cooler than beer and pizza? How about enjoying both while listening to entrepreneur, author and venture capitalist David Teten?
Last Tuesday, StartupGrindNYC hosted the VC and blogger at AOL headquarters in the heart of New York City, four floors up above the bustling streets, where entrepreneurs, young and old—students, lawyers and professionals from all disciplines— gathered to network and hear from one of New York’s finest entrepreneurial minds talk tech. As they stared out to the busy streets, seeing the bump and grind of a city in the midst of a technological revolution below, David Teten looked in, ready to share his wealth of knowledge—which, it turns out, does, indeed, include parkour and bodyweight exercises.
Things got really cool, really quickly.
With a nod toward his mother (also in attendance), Teten began by briefly introducing himself. In case you didn’t know, Teten is a California native, born into a family of entrepreneurs. He graduated from Harvard Business School in 1998, before exercising his entrepreneurial spirit in Israel, ultimately returning to the States in 2001. After publishing two large research studies on how to maximize the success rate of portfolio companies and source great investments, he turned venture capitalist and signed on as a Partner at ff Venture Capital. He is also Founder and Chairman of the Harvard Business School Alumni Angels of Greater New York, New York’s 2nd largest angel network.
In his own words, Teten joined ffVC with a vision of “building out a portfolio-operations-focused VC . . . to increase the odds that our companies are successful by applying the appropriate levers.“ One look at the numbers show that is exactly what ffVC has done . Since he joined ffVC, the firm has grown to 22 employees (the largest early-stage VC in NY), with over 200 investments in over 70 companies worldwide.
Of course, if you are an entrepreneur yourself, you’re likely in that percentage of people thinking, “Great . . . what is your process, and how can I get in on that?” As Teten tells it, it’s not easy. ff Venture Capital looks at approximately two thousand startup companies a year, investing in only about 10–15 of them. “We say no 99% of the time—literally,” he explains, “We have to do a lot of very, very cursory screening.” What kind of screening? Well, for one: they avoid crowded markets like a fly avoids a swatter.
“One of my learnings is just how groupthink the entrepreneurial community is . . . For any given app, there is probably someone doing something similar . . . every accelerator has a dating app, a location-based social app, and an app that filters the news deluge . . . these are all crowded areas that make us nervous.”
It’s simple. Venture capital is a market. Investors—in whatever form (angel, VC, private)—are in it for the return. It’s basic economics. VC’s and VC firms are bound to be skittish about placing large sums of money in one of many startups competing in the same market. “I’d much rather bet you are the most competent person of 2 people in the same space, rather than 10.” Teten adds, addressing the risk factor.
Additionally, ffVC filters startups by avoiding what ffVC has dubbed, “Seinfeld Companies,” or—companies which cater to the needs of “urban, 20-something, single males.” He jokes, “We see many tools designed for that community . . . men, I guess, are not competent enough to do it on Amazon.” The scope of these companies is just too small, and again, the area is just too crowded. It’s not worth the risk in Teten’s eyes. When there are 10-or-so companies all thinking that they have the best “party-locator” app, any investment a VC might make will be always against the odds. If there is one thing you should know about investors, know at least that they don’t like bad odds. Startups should have an edge, and to have an edge they need to be informed. He cautions, “Have you gone on AngelList and searched for other startups in your domain? It’s a bad answer if you haven’t. You should know your competition” Underline that. Know your competition.
If you can’t account for a similar company in your space and all the things they do wrong that your company does better, no one else will be able to either. Least of all those you try petitioning funding from.
So what type of companies do pique ffVC’s interest? “We are looking for businesses that have the potential for reaching a billion dollar valuation . . . We at least want the potential,” he says. Lofty though that might be, the focus here again is on having an edge unique to your company. A less crowded market and an excellently executed idea suggests a greater chance at a return for investors.
Concerning which specific areas ffVC focuses in, David explains the firm doesn’t quite discriminate in that way. “I’m interested in everything,” he says, “My job is really to invest in the growth sector of 2018, and I don’t know what that is, and no one here knows what that is. We think that a better strategy is to keep our door open wide to the widest possible array of companies.” They filter as they might, and then hope they’ve put their money in the right places. Some of those places include companies traditionally spurned by investors, such as the 20% of ffVC backed companies who have women founders and/or CEOs (compared to the industry average of 5%), or non-conventional hardware based startups like UniKey and Reaction Housing.
As for Venture Capital as a whole, Mr. Teten seems generally optimistic. He notes, “This is a cyclical industry. Right now we are in a boom period. This will have a bust. Hopefully it’s a couple years from now—right now it’s a good time to raise money . . . the fact that we have a super computer in our pocket, literally . . . that creates tremendous opportunity to change traditional industries.”
With interest rates so low, and industry disruption so rife, now is the time for entrepreneurs to get it together, know their market and make a pitch to investors. With 22 individuals operating at the firm, and a library of best practices in entrepreneurship (most of which was researched and compiled by Teten himself), if you are an entrepreneur, you can only hope that your investor is ff Venture Capital.
“We know a lot about how you build a company, how you recruit people, how you do all the things that an entrepreneur has to do . . . We share that with our companies so they can increase their odds of being successful . . . with a balance sheet that actually balances.”
Teten then took off his blazer and proceeded to do inverted/hand-stand pushups—which is, in my book, just about the equivalent of dropping the mic to the floor and saying, “VC out,” while walking off the stage . . .
View the full fireside chat below (skip to 44:00 to see the vertical pushup.