The Revenue Problem

Seed stage investing is so hard.  Needle in a haystack hard.  I was thinking about what floats a person’s boat when it comes to the first round of investing.  In the Midwest, it’s all about revenue.  It might be the first question an entrepreneur gets.  

In the Bay Area, sometimes it’s not a question.

Who’s right?  Not an easy answer.  With what we invest in revenue is a proof point.  Usually an entrepreneur is solving a pain point.  People are willing to pay to solve it.  I was involved with one business and we asked the entrepreneur if they were getting price as an objection to making a sale.  The company wasn’t so the advice was to raise their price.  With other businesses it is not that simple.

I do think that when you get older, you tend to look at businesses a lot differently than when you were younger.  I don’t think when Twitter was pitching initial investors it had any revenue.  Yet, it was pretty lucrative.  Uber probably had a modicum of revenue, hugely lucrative.

You had to buy into the idea, and more importantly you had to buy into the team as a seed stage investor.

Great leaps forward are not linear.  They jump lines.  Pattern matching is great to see what is, what was but it’s often an impediment to seeing what could be.  Unless you recognize that this business is busting up the pattern.

Experience helps you ascertain that.