VC's: Experienced 50 year old with good ideas. Will you talk to me?

[random_user]

For context:

https://news.ycombinator.com/item?id=6932327

I have a ton of business and tech experience. I've launched several garage businesses. One did really well but the economy, circumstances and a perennially under-funded state (hardware is capital intensive) killed it. All were interesting experiences.

I've never raised any money. I self-funded everything I've ever done. The last one to the tune of over half a million dollars of my own money. I am no stranger to being all-in and putting it all on the line for something I believe in.

Circumstances are different now. Either I take my time and bootstrap from small to large projects or look for investors.

Sadly, I will not move to SV and I will not live on noodles. Bummer.

I have identified two opportunities I think have merit.

The first is a pure software web/mobile service. As is often the case, it is a twist on existing product. I believe the twist is what makes it very interesting, gives it wide appeal and could make it huge. It can go global. I have a 70 page deck covering just about every aspect of this venture. No, it's not a new Facebook. It's a B-to-B, C-to-C (and permutations thereof) service.

The second is a novel use of quadcopters. No regulatory issues I am aware of. Sizable world-wide appeal. This is definitely a case of first-mover advantage. With proper funding and support, execution would be fast and painless. This wouldn't be a an R&D project. This is a D project. Define, develop and go to manufacturing. Heard of "live long and prosper"? This one is "move fast and conquer". Probably the Klingon version. I don't have a deck on this one. It's a recent discovery of mine and I've put zero time into developing a deck. With one video I can show anyone this is a good idea.

Looking for a low impedance bank account to help launch either or both of these.

[smartwater]

Ideas are a dime a dozen. It's the execution that matters. Show investors traction, growth, or profit — if you can't reach any of those milestones, rinse and repeat until you do — now you're ready to talk to investors, but wait, now you've reached a point where you don't need investors anymore.

I actively avoid entrepreneurs that are looking for an investment as a form of business validation. An entrepreneurs job is to validate ideas, to find something that sticks.

[random_user]

> Ideas are a dime a dozen. It's the execution that matters.

And you are right. And if I had done absolutely nothing in my life. If I was a kid either dropping out of school or just out of school your sermon would be well applied. I'm not.

After over thirty years of entrepreneurship I tend to use "idea" to really mean "opportunity". Most ideas are utterly worthless. They are great as thinking tools. Never stop generating ideas! A few ideas are worth millions, o billions. Instagram started as an idea. Of course, that idea happened thousands of times. One team executed it well and at the right time.

What this means is that ideas are not always obvious identifications of market opportunities. To over-use Instagram, I know I would have thought that was a stupid idea. I wouldn't have given the Instagram idea the time of day. I would have discounted it as useless and moved on. So, here's an idea, worth billions when matched with the right team, timing and execution, that most people would think was just plain stupid.

As I got older I've tried to be less critical of ideas. I listen to them and I log mine assiduously. I allow myself to generate and consider ideas that, on first inspection, seem utterly ridiculous. I try to review them from time to time. What happens is that sometimes two or three combine into one. That's the case of the quadcopter opportunity I have uncovered. It's the combination of a number of thoughts and an interest in a couple of market segments I've had for years, decades, possibly. Now it's just about execution.

Still, inspired by your comment I edited my post and replaced "idea" with "opportunity". That's what I am talking about, opportunities, not ideas. I have hundreds of ideas, the vast majority of which are not opportunities.

Thanks.

[crindy]

The problem isn't the word "idea". It's the fact that you haven't gotten past the part that's in your head. You can't be sure that an idea is an opportunities until you've put them out there and seen if you can get them any traction.

[random_user]

With respect, I think you are drinking too much of the cool-aid. Yes, in general terms you are right. The difference is that if you have thirty years of entrepreneurship under your belt, having tried, failed and succeeded you should develop a good sense of the good, the bad and the ugly. I am not coming here as an idealist who's never done a thing to proclaim I can save the world.

No. I have logged somewhere in the range of 500 ideas over the last three years. Most are not what I would consider to be opportunities. And that's the way it usually goes. I am fairly certain there are a few that are very interesting and, yes, they are true opportunities waiting for funding and execution. One of them is based on years of using similar services in the context of running my own business and then realizing there's an interesting approach that could do very well. The other, as I said in another comment, is one that's the result of constantly thinking and being involved in one way or another in a couple of market segments and finally having "seen the light" that connects the two worlds. The markets are there for the taking. It's all about funding and execution.

[phaus]

>With respect, I think you are drinking too much of the cool-aid.

With respect, anyone that has ever said "its not an idea, its an opportunity" shouldn't be accusing others of "drinking too much of the cool aid."

I wish you luck, but I think you will find it difficult to attract attention when you have given virtually no information at all about either of your ideas. Then again, I'm not a VC so what do I know?

[random_user]

Anyone serious enough wanting to have a conversation about what I've got on the table can easily contact me off-list and have detailed discussions. I've already had a number of them with people who reached out.

I understand you might want to see more info exposed publicly. Sorry. Not going to happen. I suppose you might not understand this until you experience what it is like to be open and have a good opportunity taken away from you by a competitor. Having lived that wonderful experience I chose to conduct things using a different approach.

[mcintyre1994]

I don't see why your opportunities are any better than ideas, aren't they just your really good ideas? The opportunity is surely for you to execute it now, because to everyone else it's just a really good idea?

[random_user]

No. An opportunity is an idea connected to a market need.

There's more than one way to connect an idea to a market need.

One case is where the market already exists either entirely or to some degree and you have a solid idea of how to make it better: iPhone.

Another is where you are the target market yourself and know the market very well. You see the need. You see the pain points and you are equipped to address them. I could argue that might have been the start of Hewlett and Packard.

FedEx is a case of an idea that was discounted and then proven to have been right on the mark. Some ideas can't be tested with $15,000 over a summer.

There are other cases where the idea and the market opportunity reveal themselves during some kind of an instant or event that provides the necessary clarity, if you will, that connects the two. A friend of mine and I had the idea for what eventually became LoJack a year or two before that company came out with their product. We were young, making very good money at our respective jobs and simply didn't have enough of that "clarity" (for lack of a better word) to take the idea seriously. To this day we laugh about it.

Ideas that are just ideas with no connection to a market happen at least two ways.

One is the case of a well established or entrenched set of players against which it'd be almost impossible to compete. It'd be hard to go up against Google or Facebook. The insight an idea would have to have in order to connect with a market opportunity in search or social would have to be so incredible that people would literally want to throw money at you. Even with that, it would cost hundreds of millions of dollars to even begin to have a shot at that. For all intents and purposes you can say that ideas in social or search really don't have a market because you really can't get that market.

The other category are ideas that really don't have markets, at least in the context of what makes for a good scalable company. Local restaurants. Great idea if you want to work 20 hours a day seven days a week, have huge risk of failure, no real scalability and no prospects of any kind of an exit that makes sense. For some people that would be a market. If it weren't there would be no mom-and-pop local restaurants. For most ventures that are looking for or need scale in order to be considered successful a mom-and-pop restaurant idea is an idea without a market.

I could go on. There are, of course, ideas that really lead to nothing useful. Most of those are obvious to most except for the guy married to the idea.

[graycat]

>Ideas are a dime a dozen. It's the execution that matters.

Bad ideas are a dime a dozen. Ideas that are good and early on have solid evidence that they are good are rare.

Here are some ideas that, just as ideas, should be valuable to VCs:

(1) An algorithm that shows that P = NP and is fast. Why? Because it could commonly save 5-15% of costs in transportation, logistics, Internet backbone design, manufacturing, and allocation of resources more generally.

(2) A computer operating system that is nearly 100% compatible with Windows and can run any software safely, even malware.

(3) An algorithm that can implement the fundamental theorem of arithmetic, that is, factor integers of thousands of digits into a product of prime numbers quickly.

> but wait, now you've reached a point where you don't need investors anymore.

Not exactly true in all cases, but there is a major point here. E.g., recently I added the cost of high quality parts for a server in a mid-tower case -- 8 core processor at 4.0 GHz, 32 GB of ECC main memory, 10+ TB of hard disk -- ~$1500. Can get a wire rack shelf unit from Sam's Club, 18" x 48" x 72", and could put about 12 of those servers on a rack. That's a LOT of computing. If have a Web site that can keep that computing busy and send with the Web pages ads at, net, $2 per 1000 ads sent, can support a family in style:

Suppose can send a Web page for 400,000 bits, have 4 ads per page, half fill upload bandwidth of 15 Mbps 24 x 7, and get paid $2 per 1000 ads displayed. Then get monthly revenue of

2 * 4 * 15 * 106 * 3600 * 24 * 30 / ( 2 * 400,000 * 1000 ) = 388,800

dollars. A year of that and have as cash as much as many series A equity rounds.

[Cardeck1]

I agree. The reason people think ideas are "a dime a dozen" is because everyone overrates their ideas and you can't really measure the value of an idea unless it's executed. However, I must admit that after years of experience I must say the statement is not really true. 80% of the ideas suck. Plain and simple.

It doesn't matter if you are in the Valley or if you are super smart, some people are not made to create/innovate, only execute based on someone's idea. But those people who are able to create are an exception.

Have you ever met someone without a degree or any experience, looking at your product and telling you 100 ways to improve it?I met a guy/wonderkid or whatever that was able to do just that, and he is working for a hedge fund now as far as I know. It took him 20 min to give us an entire improvement plan on how to increase revenue without any papers or anything prepared.We had even backup plans and future competitor moves. He basically humiliated my A+ employee stars who were struggling for months.I was shocked.

[graycat]

> you can't really measure the value of an idea unless it's executed

Well, thankfully for US national security, the US DoD has been doing just this with batting average much higher than for VCs for 70+ years. Examples include the proximity fuse, sonar, radar, the atomic bomb, the U-2, the SR-71, GPS, and more -- all of these were funded just from proposals just on paper, without any 'execution', and came out fine.

For projects by entrepreneurs, my guess to do something similar is (1) pick a big problem, one where clearly a new and good or much better solution will be warmly embraced by the market, (2) do some research, original, powerful, valuable, to get the desired solution and a high barrier to entry. (3) Do (1) and (2) so that the solution can be delivered by software in a Web server costing $2000-. Then go live, get the revenue, grow the server capacity, etc. It's what I'm trying to do. Current obstacle: Windows and trying to use XCACLS and CACLS to delete a file system directory that doesn't want to be deleted. Previous obstacle: Poor Microsoft documentation for the differences between GUIDs and SqlGuids and how to convert between them. Previous obstacle: A virus from the security problems with Flash and the fact that Windows doesn't know how to run malware safely. Previous obstacle: The fact that Microsoft's ASP.NET is much easier to work with when inserting Namespaces, DLLs, and source code than Visual Basic .NET. Previous obstacles: A long list more from Microsoft. The work uniquely mine has all been fast, fun, easy, without delays. But I'm getting past the Microsoft nonsense.

Problem sponsors at DoD, DARPA, and NSF are used to being able to evaluate projects just on paper with high batting average. Apparently VCs don't want to do any such things.

> 80%

All the percentages on what arrives in a VC's in-box don't mean much because what a VC has to find are exceptional projects; that is, what the average project is, or what most of the projects are, is not very relevant -- again because what's required are exceptional projects. How exceptional? There has been a claim by A16H that there are only about 15 projects a year worth a Series A. If VCs would learn to read as well as, say, NSF problem sponsors, then there might be a few more, not a lot yet, but a few.

A problem of information technology entrepreneur project 'ideas' is that they are usually just a short description of what the product/service does, a description like might be given to a prospective customer/user. So, with such an 'idea' and description, usually there is no good way to evaluate it. E.g., how the heck, early on, to evaluate Twitter? Twitter fails my (1) about solving a big problem. Since it was not clear that Twitter would solve a big problem, it was difficult to evaluate.

What is wanted for (1), for an extreme example, is, say, a safe, effective, cheap one pill cure for any cancer -- there we don't have to wait for 'traction'.

As in my (1), a 'good' information technology project should have significant value as easy to see. And as for such a pill, want to stand on some research for an especially powerful, valuable solution with barrier to entry. The VCs just are not thinking this way.

It is quite possible for a person to be bright without education. If the field they are working in, e.g., computing, doesn't really require a lot of formal education, then a person can be bright and good in that field without formal education. But, doing really well in a Ph.D. program in a top research university tends to confirm that someone is 'bright'!

[andyakb]

Im very confused about what you are trying to prove with your server example. The hard part of your example has nothing to do with building a cheap server rack and everything to do with the fact that it is very difficult to build a website that attracts 50mm hits a month, a point you completely hand wave around

[graycat]

We agree on what has been said, but the point I was making was so obvious I didn't say it! Point: Servers are so cheap that don't really need VC equity funding to buy a good one. So, if the 'idea' is good in the sense that it can get the coveted 'traction', then the 'funding' the entrepreneur needs is essentially just the food, shelter, etc. to write the software plus $2000- for hardware, then go live. The if the idea is good, can get $300,000+ a month from a $2000- server. So, tough to see just there the VCs have a role. The OP made a similar point.

Then, the next obvious, so far unstated, point is, to play in the game, the VCs will have to do something much like the entrepreneur does -- evaluate the 'idea' long before 'traction', i.e., VCs will have to actually read the 'business plans', think about what they are reading, and be able to do an accurate evaluation instead of just waiting for traction, significant and growing rapidly and for some strange event that then has the entrepreneur wanting to take equity funding, go from 100% ownership to 0% ownership with his 50% +- on a four year vesting schedule and report to a Board that can fire him before much of the vesting has been done and take the company.

[random_user]

Cash is like the blood running through the veins of a venture. You need it to survive. You also need it to walk and you need more of it to run. There are web businesses that can certainly be entirely bootstrapped, sometimes by a single coder/designer/everything.

On the other hand, most businesses that scale need more people and more resources and more of everything. This is where the "it's just a server in a rack" model breaks down quickly. Scaling means, at the very least, hiring people and providing them with all of the resources they'll need to do their work. You could very easily be at a $50K per month burn rate very quickly after launch, say, thee months. That doesn't account for legal fees and other expenses that might not be obvious on first inspection.

If you have the money and the ability to scale a business and are willing to risk it all, by all means, do it. You don't need external money for this.

Most of the young folks who seem to make-up the HN audience there are lacking three things: money, experience and the business network. All three of these are critical when you need to press on the accelerator and go. Learning while doing is possible but far less than ideal. If a VC can offer smart money this is probably the best bet for young HN'ers. In this context "smart money" means that a VC makes an investment and also contributes experience, guidance and contacts to the process. This can often mean the difference between success and failure.

In many ways this concept of a good vs. a bad idea has to be qualified with a set of variables. Off the top of my head:

    Startup cost
    Market
    Competition
    Barrier to entry
    Cost of sales
    Capital intensity
    Regulatory landscape
    Technology risk
    Intellectual property ownership
    Intellectual property minefield
    Domain expertise
    Funding
    Business operating expertise
    Marketing expertise
    Local labor requirements
    

I could go on and I could expand on all of the above but that's besides the point which is that a business that isn't a hobby and can scale is far more than a server in a rack.

[graycat]

You seem to be explaining the common theme that (1) an entrepreneur has some work done that is sufficiently promising as the beginning of a big, successful business and (2) needs equity funding to scale quickly.

My response: So, when a Web site got popular and a good Sun computer as a Web server cost $200,000, which had to be paid long before the entrepreneur could have received the checks from the advertisers, then equity funding was needed for the servers, room to put them in, HVAC for the room, high speed Internet connections, etc. Okay, but now a much more powerful server is available for $1500 in parts and can be plugged together in a day the first time and an hour or so for similar servers after that. For the room, use a basement or spare room in a house. For HVAC, get a window unit AC. For the Internet connection, 15 Mbps upload bandwidth appears to be common in residences, and that is plenty for enough revenue for much more.

Growing quickly? Why do that? There are some cases, e.g., to exploit a fad, but it's not so clear just why it is necessary.

Cash? Right, it's crucial, but getting that first 8 core, $1500 server live with 15 Mbps upload bandwidth doesn't take much cash.

Then if the project is good, that first server should throw off enough cash for growth to 2, 4, 8, 16 servers, which, if kept busy should throw off enough cash to make a common Series A look a bit silly.

Growth in head count? Sure, but that's for later. For a good project, in the first year of doing well the project should have put enough cash in the bank to start hiring, slowly.

For each of the points you mentioned that need cash and, thus, perhaps equity funding, there are plenty of example projects. And generally your points hold for the 'usual' projects or 'most' projects. But as entrepreneurs, VCs, and HN readers all have learned, projects with good VC funding are like hen's teeth, in a recent comment by A15H, only about 15 such projects a year.

So, instead of 'most' or 'usual', we have to be assuming 'exceptional'. Essentially everything about a successful information technology (IT) project is 'exceptional'. So, I was trying to describe some of what an exceptional project could do. Net, net, from all I can see the VCs want to fund only projects that don't need the money.

E.g., one well known Silicon Valley VC firm wrote me that they want "100,000 uniques" before writing a check. Okay, let's see: 100,000 unique users of a Web site in a month might mean 300,000 users with, say, an average of 4 visits a month. Suppose each visit sees 8 Web pages with 4 ads per page. Assume get paid $2 per 1000 ads displayed. Then the monthly revenue would be

300,000 * 4 * 8 * 4 * 2 / 1000 = 76,800

dollars. One guy. He's now awash in free cash unless he has 50 Lamborghini cars, a 200' yacht, and a Gulfstream G650. Instead, if his car is old and rusty, then he's in line for a new SUV and a new Corvette. A few more months, especially if he is seeing significant revenue growth, and he can be hiring.

Here is a 'sanity check': I know; I know; IT startups are the big, hot, new things. Right. But they didn't invent either sex or business. Instead, the US is just awash, coast to coast, village to big city, in sole proprietorships and family businesses. When one of those gets to $76,800 a month in revenue, with only one or a few workers, they are not out looking for equity funding. Not a chance.

Such busiesses? Actually, can buy a house and support a family just being an electrician. When I needed one on a Thursday, I was up all night getting names and phone numbers and calling, trying to get the work done on Friday instead of Monday. I left about a dozen messages. Only one called back, near dawn, because he was on his way to his Friday morning golf game, but he gave me a name I'd not found. That name came and did well. Look, those guys are working 4 day weeks, don't bother with publicity, and still are being bread winners.

E.g., when I was a B-school prof, one of my students had a good career going managing Wendy's -- so, right, you can guess the B-school. He explained some of how to do well running a Wendy's: Have the staffing meet the demand, not too much (waste money) and not too little (lose business). To do this well, have to watch the weather hourly and watch for special events, say, B-ball games, daily. He said the difference is about $200,000 a year in the pre-tax bottom line, at one Wendy's. So, a guy who is running 5 Wendy's can bring in an extra $1,000,000 a year pre-tax just from careful staffing. He's not interested in equity funding. Instead, banks are perfectly willing to loan him money for new restaurants.

In what little time I spent in yacht clubs, I saw people in rental property, several retail dry cleaning shops, independent insurance, etc., but I never saw anyone in IT with equity funding!

Bringing up a Web site will make any auto body repair guy, auto repair guy, pizza shop owner, coin laundry guy, etc. highly jealous because that $1500 server is chump change compared with the equipment they need to be ready to serve their first customer. Heck, on my street, the guys mowing the grass arrive in a truck with a trailer with their gas powered mowers -- truck maybe $40 K, trailer maybe $10 K, and mowers maybe $15 K each. Gee, for just one of their mowers can buy 10 of those 8 core servers at $1500 each.

It is looking to me that bringing up a Web site that runs ads is a much nicer business than nearly any of the millions of successful small businesses in the US. Yes, the Web site needs traffic, and if it is to be really successful, say, $1+ billion market cap, some careful thinking and/or a lot of luck. I do suspect that somehow the guys mowing grass, and speaking poor English, are getting by without a lot of legal expenses! If they can, so should a guy running a Web site.

What I'm describing, has it been done? One example is the Canadian match making site Plenty of Fish. For some years it was one guy, 2-3 old Dell servers, ads just via Google, and $10 million a year in revenue.

For one more, when my cable TV and ISP guys were last at my house, they looked at my software and mentioned that they know of another customer who bought three houses in a row. Why? Just to get the residential price for their upload bandwidth for their Web site.

For now, I'm glad I'm an entrepreneur and not a VC: I get to design my project just from a clean sheet of paper while a VC is essentially forced to wait for something good to arrive in his e-mail inbox. Yes VCs like to try to map out the promising 'spaces' for the future, but to me that is a form of intellectual self-abuse. And nearly no VCs have backgrounds that are exceptionally good as a foundation for picking and executing a good project.

It's true that the VCs can't evaluate my project, and that's beginning to look like good news; that is, the entrepreneurs the VCs fund couldn't understand or compete with my project either.

I'm failing to see much of a future for US IT VCs: Computers are too cheap, and the VCs are insisting on buying a ticket on the planes after they have already left the ground. Besides, as in a Fred Wilson post at his AVC.com a year or so ago, on average US IT VC returns over the past 10 years suck.

[runjake]

You probably should've examined the OP's link at the top of his post so you could've avoided posting this embarrassing comment.

He has extensive execution experience and from his comments on HN, it's fairly easy to track down who he is.

[mathattack]

I am not a VC, so take this with a grain of salt...

I know some VCs who are happy to fund 50 year olds with track records and traction. That said, there is a lot of negativity here.

1 - By stating you age you are already implying defeat by age discrimination.

2 - You mention a lot of things that aren't your fault with the one that did "Really well." All of these things are probably true, but they do sound like excuses.

3 - Saying "I will not move to SV and I will not live on noodles" again oozes negativity. A VC will say, "Why will I suck it up if they won't?" There may be a much more positive way to say what you're trying to say.

4 - "Looking for a low impedance bank account" sounds a lot like "Looking for a sucker."

I may be completely be off base. You probably have great ideas, and are very committed. It's just not coming off that way. Again, this is coming from an observer, and not a VC. I sincerely hope you find a way to pull this off.

[sharemywin]

Start a blog on both your ideas. with a way for people to sign up with email. check out twitter and follow people that might be potential customers. next look at a kickstart campaign for the quadcopter idea. For the mobile here's a way for you to build your app. check out http://www.coronalabs.com/: it's $16/mo. you can build a mvp to field test your assumptions.

[random_user]

Well, I know current SV culture is to put it all out there and let the world see. I have cuts and bruises to prove this is not always the best approach. Business can be war and there are a lot of people out there ready, willing and able to steal from you. I had just that happen to me many years ago. I won't go into the details. I'll just say another business got started with my ideas. Competing against your own business plan is painful.

[sharemywin]

...and/or start finding angel investors at least 100 of them and pitch. if they don't bite find out the one thing that the 1first one is most hesitant about. fix it. my guess is though if you haven't commited any of your own money/time its' going to be harder. also try the same process for potential customers. or find someone that's willing to work with you to sell.

[random_user]

Here's the problem with that approach: It takes a long time and you are invariably going to talk to a lot of people who have money and nothing else to contribute. The only type of money you want as an entrepreneur is smart money. Just because someone is a VC it doesn't automatically mean they have value beyond what they might be able to contribute financially. Not a put-down. It's just a fact.

If I assume that, on average, each of the 100 VC pitches you are suggesting require, say, five hours of work that means 500 hours would be devoted to this effort. The truth is likely a much larger number. If I have to take that approach I would much rather bootstrap by using some of the smaller opportunities I've identified (Kicstarter being an interesting domain for such projects) and work my way up to the larger projects.

I am serious about business. I'd rather talk to five well-qualified people than engage in endless dances with those who will only waste your time. I am not saying this out of an enlarged ego. I am saying this out of experience.

How do you know which category they fall into? Well, experience in business is a big part of that.

[robodale]

Ditto. Send me money.

[random_user]

Money comes with side effects and it also comes in various grades. At the extremes you'll find smart money and dumb money. The latter is the most dangerous.

Not all money is created equal.

[random_user2]

what's the best way to contact you?

[random_user]

Email address now in my profile. Here it is:

[e-mail]

I'd appreciate contact with identifying information such a LinkedIn profile. I'll reply in kind, of course.