Nicholas Chirls, Seed Investments at betaworks

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Seed Investments at betaworks

Would love to hear thoughts from Andrew Weissman Steve Schlafman and anyone else re: how you look at new things.

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Whenever I look at new things, I often ask myself what's the value of the product on day 1. Can it stand on it's own without a million users. I also try to envision a world where the product has reached critical mass. I'm a pretty positive guy so I try to look at success from both lenses.

On a daily basis, I remind myself and founders I meet with that I'm not a representative sample so I'm always trying to get the perspective of others. Would you use this? Is there value? What's creepy? etc. I also use the product at least once a day for a few weeks if I think there's something compelling. I like to keep a folder on my home screen called "test" so I'm constantly trying new product and asking people what they think.

That said, there are times when you see a product for the first time and you know it's great and will be big. :)

Unstructured Ventures, Foresight

Completely different perspective as a B2B investor, although with the rise of the "consumerisation of the enterprise" there appears to be a bit of convergence in thinking about user adoption and user testing between consumer + enterprise.

It's rare that I'm the end-user or have the same end-problem (as most enterprise investors), so I can't use that lens. I look at ideas from the perspective of the enterprise and the end-user, and the bigger the gap in incentives and cost/benefit of adoption, the less compelling the new thing is. It's incredibly common to see a pitch from an enterprise tech (especially in marketing tech) that makes complete sense for the enterprise or the marketer, but fails to address why people will want to use it.

I talk to people, the people working through the end-problem, the prospective users, and work to understand their real need and adoption triggers. But identifying users and use-cases isn't enough: I'm also looking for an additional layer, a trend (note: not a cycle), an overhanging pressure that will pull or push usage into the proposed use case.

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Partner at USV

When thinking an investment, I try to never ever look at new things from the perspective of me as a user. After all, what the fuck do I know? Also, as a exercise, I try to never ask who has already invested or who may be investing.

Platform at N3TWORK

Out of curiosity, would knowing who else has invested / will invest be more likely to turn you off to an investment or increase your enthusiasm for making it?

Partner at USV

I guess it depends who, but I think that signal is not one that enables better decision investment making (ie, do I have conviction about this opportunity) so I ignore it

Seed Investments at betaworks

That's encouraging to hear, esp. for entrepreneurs. Curious, if you're not viewing from the perspective of the user, how are you looking at it?

Partner at USV

more meta level. What does this represent. What are the behavioral insights. Why does this matter. Is this a network or a marketplace. Thins like that

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Quibb, Uber

IMHO one of the hardest things about products like Twitter, Snapchat, eBay, and Ding Dong is that the "network" is 95% of the value prop but...
1) it's hard to demo the network, when few people are on it yet
2) it's even harder to connect w it if it's not YOUR kind of network
3) the typical # of connections you need with active users to really appreciate a product is something like 10-20, and it's hard to break through that threshold
4) the value of the network rises exponentially, which is hard to comprehend. That means a network can rapidly go from useless to useful very quickly
5) finally, the non-network components seem technically trivial - the 140chars, the snap, the ding dong. This leads to a "WTF" moment for many people

Imagine using Twitter for the first time, but no one's on the network. Or frankly, the internet browser, when the web was only a few thousand pages. The whole thing seems pointless, and while it's easy to grok the mechanics of how it works, it's hard to guess that "oh, one day 200 million people will be using Twitter and then it's really useful to find out news, celeb gossip, articles, and chat w people"

Contrast that with great single-user products like Evernote, an amazing mobile game, or the iPhone. The value is a lot more obvious and it's easier to demo because there's no network component. You don't have to extrapolate.

In fact, extrapolation of network effects is so hard that it probably makes sense to just try to invest in stuff that already has it, even at a small level. And to look at stuff like network density, the activity of cross-network interactions, etc. But even at the end of that, you still need to make a big leap :)

@AndrewChen Regarding your network/single user products, I agree that it can be hard to see the value of a network-focused service that hasn't yet reached some kind of critical mass, but I think that's a product issue that you simply have to address, even if the "real" value you (the creator) see will come with a greater number of users. *

Twitter, to pick a personal example, first became personally useful for me as a way to be more observant. I enjoyed taking a few moments during the day to pare down some observation to 140 characters, which in turn led me to be more mindful in my daily life (because a part of me was watching for those Twitter moments).

As I followed, and was followed by, more people the network side of Twitter clicked for me, but it was the personal utility that kept me using it long enough to get to that point. You can't just ask people to wait for the hockey stick.

And on a related topic, I'm increasingly reluctant to make use of my existing networks when trying out new services. If I find myself immediately surrounded by the usual early adopter suspects, does that social group color my opinions of the service itself? What if my Twitter people aren't the best Quibb people for me, for example? Shouldn't I let Quibb itself guide me to the "right" people for me in this context, rather than blindly pulling in people from another, very different, context?

It's also worth noting: since I'm not evaluating services for possible investment I have the luxury of viewing them entirely through the lens of a user, so I think my perspective on this question is only a small part of what would be necessary in that investment scenario.

* A few years ago, in a post on user inactivity, I designated this the "selfish bastard syndrome." Unfortunately, nobody else has ever really picked up on the term: http://smr.absono.us/2009/07/user-inactivity-one-reason-and-another/

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Partner at USV

fwiw back in the dog days of twitter - 06? 07? - is how I met Whitney ;-)

That seems to really surprise people these days -- when I say that I first met people through Twitter or Tumblr, they have a hard time believing it.

I really love everything you said but another way to look at it is that it's probably working in some small way - that the future, as William Gibson said, is already here it's just unevenly distributed.

I think even with the high probability of a terrible user experience with Twitter in the beginning, I am sure there were some sub groups who the team could point to that had the experience they were hoping hundreds of millions of people would have in the future.

So yes, all your points are valid but often times there are small sets of evidence of the future even in early network effect startups.

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Seed Investor at Scout Ventures

I know I'm going off on a tangent here but yeah, I feel the difficulty of achieving critical mass in a network is so underestimated today. Same goes for standards-- e.g. DVD, Blu-ray, jpg, qwerty. Same goes for tech stacks / platforms-- e.g. Wintel.

So when people ask me about open vs. closed networks, my answer is that both are really hard so I like whichever one can achieve critical mass! :P

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Principal, Business Development, Games at Amazon

Like Nicholas communicating this and his candor. We’ll see more of the ‘new type’ approach in investing, green-lighting, hiring, etc.

But this brings me to one question- how could one possibly become right on future hits?
I’m not talking about things that require huge network effects until you get it. Even for gaming apps, what could you imagine as next big thing when Rovio pitched you their 22nd product after series of busts (Angry Birds was their 52nd)? Could anyone confidently invest in the Minecraft/ Mojang guy following the near-death of Second Life and PC downloadable on the wane?

I think it’s all about Little Bets: http://www.amazon.com/Little-Bets-Breakthrough-Emerge-Discoveries/dp/1439170428 Like collaborative minds from YC or 500s funding teams. Like Supercell embracing min viable experiments with just 5-person team aka ‘Cell.’ Like Kickstarter disrupting how pilots get green-lighted.. The list goes on and on.

I doubt any individual could win the market going forward. That said, newly-minded investors like Nicholas @betaworks will surely help stand out.

Partner at USV

that (YC, 500) is one approach. The other is to have a very specific point of view about the . . . world, and then invest around that. That is what USV does http://www.usv.com/2012/05/investment-thesis-usv.php

Scout Ventures, Dozen Digital

Certainly becoming somewhat of a platitude at this point, but I'd imagine the common thread for good investors is the team. If I was an investor, I'd be less interested in a person/team's last failure than how they approached their failures, what they learned, and how they ran the company. Likewise I'd be less interested in the specific product/idea they're pursuing currently than the vision/worldview they have in mind and how they can iterate on a few ideas/products to get to that final vision.

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Platform at N3TWORK

Interesting app, I hadn't heard of it. I think the fact that I communicate frequently with many people in Berlin (on a professional level) yet am only now being introduced to this app (which, after doing some reading about it, is apparently huge in Berlin) speaks to the challenges of exploiting virality when it is limited by the perimeters of geography and real-world social circles.

Social apps are about reasons and excuses to reach out and communicate with existing or new contacts.
In the end, they are different in how they go about:
a) providing context for new conversation/interaction
b) Being top of the memory/default option for certain scenarios fo communication

My take on Ding Dong:
* I like the concept of "All it takes is one tap to communicate". Whether its just to say "I'm alive" or to say "I've reached our meeting spot" or anything of the sort. Its novel and fun.
* I see people using this in its current form for the novelty of it, but that would just make it a fad.

The killer use case to me is really the one where one tap lets your friends know you reached the spot and are waiting, or that you're on the way. If I've used this once, and I know my friends are on it, Ding Dong would be a top of mind app for the next time I reach the coffee shop before my friend and wait. Ding Dong could become the default option for the scenario.

If I were an investor looking at a messaging app, I'd think along the lines:
* Is this a feature that an existing app can grab? Or does this feature have its own brand/identity? (think snapchat, maybe even Ding Dong! vs Stickers in LINE[temporary advantage that others can copy])
* Is the killer use case for this app strong enough for it to be top of memory and be used often? (if you are going to use it once in 2 months, you wouldn't keep the app)

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Andrew Weissman, Partner at USV Andrew Weissman
Partner at USV
Toby Padilla, Product at betaworks Toby Padilla
Product at betaworks
Sam Mandel, Partner at betaworks Sam Mandel
Partner at betaworks
Sar Haribhakti, Product Intern at Assist Sar Haribhakti
Product Intern at Assist
Jonathan Chin, copy / paster at betaworks Jonathan Chin
copy / paster at betaworks
Lynn Maharas, Sr Front End Developer at betaworks Lynn Maharas
Sr Front End Developer at betaworks
Michael Rothman, Director at betaworks Michael Rothman
Director at betaworks
Lisa Zhang, Finance and Operations Associate at betaworks Lisa Zhang
Finance and Operations Associate at betaworks
Jason Morrow, Design Partner at betaworks Jason Morrow
Design Partner at betaworks
Peter Rojas, EIR at betaworks Peter Rojas
EIR at betaworks