"Are You Fundable?" at Ultralight StartUps

We Test the "Rules" of "Are You Fundable?" on Ultralight StartUp Pitches

Ultralight Start-Ups Investor Feedback Forum is one of the leading entrepreneur venues in New York. As founder, Graham Lawlor said to me, it attracted a high quality of pitches. But are they Fundable?

We at the Innovator Evening (iEvening) are friendly competitors and at the Feb 5th event, 3 of their 8 pitches have presented at our iEvening & Startupalooza events in the past.

Since we offer a workshop and a-soon-to-be released book entitled “Are You Fundable?” – it is worth taking a look at what the “rules” are? In other words, what makes a plan fundable (F), what requires a Champion (C), what would appeal to a special interest investor (S) and what needs to bootstrap or rethink its plans (B). This is a distillation of our observation of thousands of business plans and their outcomes. Feel free to disagree – but it will definitely get you thinking.

The winner was an unusual offering that we would not typically see taking the prize at an event like this: a health-related crowdfunding site focusing entirely on giving.

At the same time, the quality of presentations were good. What was missing was the proverbial young engineer with a better, faster, smarter solution to a big tech problem. Oh wait, there was one. He came up quietly to the VCs at the very end, handed out his card and they practically devoured him.

So, while they may have stumbled upon this one breakthrough start-up they had these to really think about. All were good – but were they fundable? (Hint: that’s the name of my upcoming book…..)

1.  Sashka Rothchild - Standbuy

This was the winner – a crowdfunding site for cancer patients to raise money for the unexpected costs of their treatments. Using a very slick site designed by co-founder, Mark Kozlowski who worked at R/GA – a very high end ad design and production company – and citing some critical numbers. she wowed the judges. About a third of all Americans experience cancer and most will find that their insurance just isn’t enough – and they so they wind up owing thousands of dollars. It also helped that a VC happened to have an emotional attachment and was also the first investor in Indiegogo – one of the first and most successful crowdfunding sites.

Sashka had her own cancer experience to relate, which was also compelling.

This is a very interesting proposition on a lot of levels because it is the kind of deal most Angels avoid and  is as much an indictment of our medical system as it is a kind of solution.

Angels have never been fond of crowdfunding sites partly because it depends on the kindness of strangers – a foreign concept for most businesspeople – and because it tends to challenge the Angels’ dominance. But Standbuy won because it was a (C) – a startup that found a champion who happened the first VC to fund IndieGogo and who also cares about cancer. Because of that other VCs will follow.

If you analyze the deal what you get is a site that invites people stricken with cancer bills to hold out their cup. Unlike regular crowdfunding sites there really are no perks – not even a t-shirt or tayband to lure you in. This is about pure compassion for someone you don’t know or really don’t know well. Moreover, the site asks for a 1% premium over the crowdfunding norm of 7% because it is purely focused on cancer.

At the end of the day, what you have then, is an extremely well-designed site that makes asking others to help with your dire needs seem dignified.

You would think that a “misery site” would charge less not more. So, I am hoping that extra 1% would go to promotions which would then attract more potential donors. Otherwise, an enterprising cancer non-profit might be encouraged to go after the same market by charging less - or even more – but then turning the entire donation into a tax deduction.

For that reason this is all about a (C)hampion and not a fundable site in the ordinary sense that investors generally would want to invest if they could. They would want to know how big it could be, how sustainable and what the returns are. Would it have an exit? Who would buy it and why?

We might get some ideas if we went to the biggest issue first. Just how bad is our healthcare system if middle class people who pay their health insurance are reduced to a kind of Hunger Games of sad stories so they can pay for treatment that should have been covered by their premiums?

Very bad. That’s why the Standbuy solution is OK for now but clearly, it isn’t enough. For one thing, I happen to think cancer treatment has become something of a racket. You may not want call it that because of how many people it helps - but if you are reduced to holding out a begging bowl on your way to the clinic then the facts speak for themselves.

For example - a family member was having a mole removed by a plastic surgeon. He saw something that had a slight chance of melanoma. In an abundance of caution we went to the “Big Clinic on the Hill.” After tests, expertly managed patient paranoia, the child turned out to be okay. But, the exploration cuts had made their mark and what a deft plastic surgeon would have gladly done for $1200 was now a $45,000 gouge.

So what exactly did they do for 40x other than dig deeper, take out a couple of lymph nodes and run a slew of tests? (Not to mention, somehow placing me on a number of cancer research Telemarketing lists.)

That’s the solution investors are really looking for – cut the bloated belly of the fear factory and you have an (F) – a fundable proposition that investors anywhere would jump on instead of a (C) – something only a special kind of investor would push.

I am not a big fan of the name, Standbuy because (a) for a very specific site it doesn’t suggest cancer and (b) you really aren’t buying anything. Standby or buy could anything other than cancer.

But since it is staking out a very big issue with disrupting it, it does make you wonder. How about:

i.  CancerBids. Once you break apart the system – each segment can be handled by subspecialist at routine costs. So, you put your care out to bid – and you watch those bills come down. Not all chemo is the same nor is radiation – but that’s what the ratings are for.

ii.  PayitFor.US – in this site I give strangers money but then 5% goes towards an insurance fund that guarantees me a payback if I or my family members get cancer. The best donors also go to the top of the PayitFor.US promotion list if, sadly they are stricken. All donors get an "I gave at the office" pass whenever they get hit up by cancer research charity.

iii.  TreatmentTravel. Get treated for less at places like Costa Rica or the Caribbean. Or the Poconos. There are plenty of fine places that are inconvenient to get to but wind up being affordable. The site guarantees the standards of treatment and helps manage the insurance boondoggle.

iv.  Lab_on_a_Chip. I didn’t make this up but he third world is buzzing over this lowcost device that can run dozens of test in real time. Invent one for cancer and the bloated belly of the cancer beast will be sporting a six-pack in no time and you will be able to afford your longevity.

Rating: (C)hampion

Minteye, one of two runners-up is a cool product that turns those ever annoying Captcha’s into far less frustrating process that also happens to be an advertising opp. Instead copying some bizarrely twisted text, you simply move a slider until a swirling image becomes visible. The now visible image is an ad and you just passed your Captcha test. So why wouldn’t sites want this?

2.  Larry Levine - Minteye

The answer is complicated. Capthcas are a tolerated service not an ad game. So now they are disrupting the model but only if they can sell the ads which is quite a big. As a result Minteye wants to license it to ad networks. Good idea but not for investors. Like affiliate sale systems ad networks  have a way of leaving you with the very short end of the stick. So that model is not too fundable. Then you have the team, which consists of a savvy Ad-seller and some tech execs who are not the primary developers but the US representatives of a distinguished Israeli development team.

Angels always prefer to deal with the primary developers so a significant number of investors will pass on that basis alone. The team is not young and that has consequences. While we can argue all day over whether or not anyone over 50 is Fundable, we can all agree that the older you get the more substance you have to display. In other words, you should  have everything ready to go – the customers, the products and so the capital is just the rocket fuel. At least, that is the case with an product improvement. Their experience and relationships  should have delivered key accounts that are ready to go. Instead they have a great product with no current takers and for that, their veteran status cold actually count against them. Also, the name. Minteye is what? A new flavor of Visine?

Consider this an (S) – for the right Ad Tech specialty investor – which is harder to find than you think.

3.  Amrish Singh - Threadmatcher  

Threadmatcher is the other runner-up, a site that helps men buy and put together outfits. It also helps you find good deals on these ensembles. On a competitive level there are numerous that help men match clothes. There was even pitch along those line on “Shark Tank.” Apparently, all this competition is focused on this one issue: men don’t know how to make outfits and the death of the suit (remember Today’s Man?) has taken them from the simplicity of throwing on a suite and grabbing tie to figuring how to put together a look.

Unfortunately, the men who don’t know how to put an outfit together probably don’t care that much and the ones who do, already know how. And remember men hate asking for directions. So, unless you can find the Zappos of men’s clothing, outfit matching site remains the elusive goal of a many an entrepreneur – a virtual haberdasher’s Holy Grail.

Since the execution looks good this is a (C)hampion – if someone likes them it could happen. Likewise there may be some clothing players that need a matching site so chalk up a lesser (S). But on its own, not generally fundable.

4.  Alden Levy - MyBillRegistry

This is a site that, like Standbuy, uses crowdfunding for a purpose. In this case, it is about funding your loved ones’ education needs and other sundries while at college. Or at least, that is how they started. Their Champion (C) is Scholastic, which has some type of test sponsor relationship. Unlike Standbuy, their original charter was unlikely to have the mass reach that a heartwarming cancer story might, but then again, every student has an extended family that might be willing to throw in a few bucks to help Johnny or Janie get through college.

The site is well designed – not as slick or evocative as Standbuy - but still very professional. Now they have extended their plan to encompass medical bills and eldercare. While their name was decent to begin with - registry is associated with great beginnings as in wedding registries - but it withers when applied to the exigencies of healthcare. They need a name that is more evocative of caring.

For now, they suffer the double-edged sword of a single sponsor. It’s great having them but now investors want to see to two or three otherwise they will think of it as a specialty product that won’t grow on its own even though they have extended their reach. Educational products are usually a specialty investment product to begin with so unless they can find a way to break out with an equivalent of Scholastic in the healthcare field they are an (S) for specialty investment.

5.  Igor Kirtchakov - LienLog

LienLog happens to be my favorite just because they are opening up an arcane area of investment that supposedly smart investors like Robert Kiyosaski tout as a way to sell their expensive training programs. Apparently, you can make some pretty spectacular gains by guying up tax obligations backed by real property. But only specialists have this game figured out. LienLog hopes so open that up, make these investment opportunities easier to discover and manage. Most of all, they hope to attract enough of these investors to create a liquid market. This is a very big promise and not easily done. The name is also too specialized – compare with SecondMarket – they need a much broader title like – LienMarket or TaxTrader. As a result, this is another (S)pecialty investment for which only a hedge fund owner or property tycoon who loves this space would put up his money.

6.  Viktoria Ruubel - Merocrat

 Generally, I like sites that take apart the mysterious and make it affordable. Merocrat does this with the Fashion World where the magic is locked up in overpriced Fashion Ad Agency boxes. So they open up the process for creative bidding by individual creative talents and hope to make a killing off the historically fat referral fees. Maybe, but fashion is not awell-understood industry by the predominantly male investment business and at the end of the day this is another Ad or Fashion Specialty product that needs a (C)hampion or will have to settle for a (S)pecialty investor in the Ad tech/Fashion marketing space which is crowded with deals and not that many investors.

They also have a chicken an egg problem of finding enough creatives to keep enough potential customers happy and vice versa. As anyone who has worked in the ad world knows, it is all about finding clients who are unhappy with their current agency enough that they are willing take the pain of firing them. Or, they have this great new product that needs a great new agency. Either way, it is all about finding those people at exactly the right time otherwise inertia just keeps them where they are. The fundability problem is that Ad Specialty people investors tend to want to enhance the market not disrupt it and non-ad people need to see a provably disruptive idea. This needs significant sales figures to attract a (C)hampion but is not generally Fundable as it stands. Also the name Merocrat says neither Fashion, nor ad sizzle – but something administrative.

7.  Joe Blewitt - Epion Health

What happens when you have  patients sitting about in a doctors office in the age of relatively cheap tablets? In theory, you have 30 or 40 minutes of captive attention of millions of patients. Epion Health hopes to integrate functionality with Electronic Health records and big pharma to create a high value medium. As industry vets they have relationships in place with major healthcare providers and their cloud-based software integrates it all.   

So, they should be Fundable, shouldn’t they?

They are - until you spend a half hour in  doctor’s office where you quickly realize that no is one reading those doctor magazines any more. They are glued to their smartphones, Gameboys or iPads. And while you’re waiting to see the Doctor do you really want to suck up medical information or would rather be distracted until the moment of reckoning arrives.

Generally, investors hate deals that require you to invest in a third party platform just to seed the market. Either you make the platform or it already exists and you build on it free of charge. Since they need to raise money in order to give out the devices, they have a challenge.

Recommendation – go with an app that lets you check in, make your copay and manage your doctor’s appointments. That means they can interact on their own device. Once the doctors like the service they can buy their own tablets or have the pharma pay directly. I could be wrong, but the tablet remains the barrier between (F)undability and (S)pecialty investor.

8. Oisin Hanrahan - Handybook

Handybook is a very slickly presented site that enables the harried homemaker to book a house handyman just easily as they order Lincoln and a driver with Uber. 

Perhaps. 

Who wouldn’t want to be the next Angie’s List? This might even be better because homeowners are always hiring a fixer and they don’t have to pay to join. On the other hand, what homeowners really prize is a friend’s referral. So these sites tend to do well with newer homeowners and less so with people who have settled in. In any event, this is hardly new ground and so it rates low on the Fundability scale but the right (C)hampion or a (S)pecialty investor who has reason to could well invest in it because the execution looks so slick.

Gov 2.0? What to Do About Aaron Swartz & the Officials You Don’t Get to Vote On

Aaron Swartz: RIP

I never met Aaron nor do I use Reddit. Once in a while I ran into JSTOR online – the database he is accused of hacking - and I do appreciate his involvement in RSS. In other words, I am an indirect beneficiary of the people like him who shaped the Internet. I am part of the Internet “crowd.”

To us this story matters – but much more profoundly than your average politician understands. I say this because politicians want to amend the law they used to go after him - a felony with a 35 year sentence for a relatively harmless computer crime. That’s a good start but not what this is about.

Aaron ran afoul of the one group where the crowd couldn’t matter less - political appointees. The US Attorney General had every legal right in the world to go after him. There are always more pressing issues but if you want to make a name in a tech town like Boston you go after a highly visible tech crime. They had a specific law on their side but with their unchecked discretion they can always find some law and unless you a rich and powerful you’re in trouble. 

Homeland Security might call this asymmetrical warfare. The Feds have unlimited resources and you have your piggy bank.

This is the gray area of politics where the real work is done. The feedback loop of the Internet has yet to penetrate this world. Both Democrats and Republicans use this and it is really part of the PermaGov – a combination of unreachable Civil Servants and government appointees that do the real work of government outside the easy reach of the voting public.

This is why bankers responsible for the housing crash never wind up in jail. Yet, I sat in a jury where 4 Federal agents and a prominent Federal judge put a street corner hustler away for conning $18,000 out of the mortgage system. The bank that made millions selling its junk to Lehman actually got to testify against him. This is why Henry Paulson earmarked $60+ billion of TARP money to AIG just so it could pay its debt obligation to his alma mater, Goldman Sachs.

You didn’t get to vote on any of that. 

So the real issue is, when will the “crowd” get to penetrate those sacred enclaves of government?

This is part of a Social Contract drawn up before there was mass media, let alone the Internet. Smart politicians who know how to work this system know this is where democracy can be sidestepped. It is part of what allowed politicians like Nancy Pelosi to make a fortune through legalized insider trading.

So, if Aaron is to count and you are willing to confront real power, this is where it starts. You petition every government agency to be exposed, open to public review and approval. 

Think of what happened when the Journal News published the names and addresses of every gun owner in the lower Hudson Valley. Now imagine what would happen if the public got to vote on the prosecutorial discretion of the DOJ?  Or that the function and decisions along with the salary and performance of government officials were part of the public feedback loop?

That would just be the beginning and it would make Occupy Wall Street look like a picnic. It would also be a fitting response to the sad demise of this pioneer.

If Aaron Swartz is a martyr - it is to Government 2.0.

Why we need to rethink our fears of Crowdfunding.

Is fraud really the big issue in equity crowdfunding? According to this article, the SEC thinks so. As a result JOBS Act regulations allowing equity crowdfunding is being delayed by as much as a year.

NY Times: Equity Crowdfunding Delayed

Yet it exists – quite successfully, apparently – in Europe.

The problem is culture clash – regulators can’t imagine a crowd regulating itself.

They are not alone. Having sat on a panel with certain VCs I have found that some influential investors - including one facing a lawsuit for allegedly stealing an entrepreneur’s business plan – feel exactly the same way.

Yet none of these players have any idea how hard it is to get money out of the public when you don’t have the implied endorsement of a major brokerage house. So entrepreneurs have to go a long way to prove their bona fides, which is part of what makes them honest. Also, the amounts of money are laughably small – around $2,000. Besides which, people who invest in crowdfunding aren’t looking to make a killing so much as they are looking to be part of something they identify with. It’s a very different mentality. If on the other hand, they do want to make a killing they will be forced to diversify across deals, which is not a bad thing either.  

The SEC and the public should be more concerned about the return of implied endorsements that organizations like Fannie Mae or Moodies gave the mortgage industry that sank our entire economy. Or the $500 million of worthless stock Goldman Sachs for which sold the Dragon Systems (and now, arguably the basis of Siri). And let’s not get started on the amazing rip-off of the Mutual Fund and 401K system where you are being handcuffed on investing and hammered with fees.

Clearly, there will be problems with equity crowdfunding but far fewer and far less devastating than they think.

Unfortunately, these are bureaucrats and they probably don’t “get it” at the core. Also, there is regulators bias against the small and the relatively helpless. They tend to respect giants and lash out against the small. We all know that none of the scammers who undermined the economy ever went to jail. But as someone who sat on one the very few Federal juries for mortgage crime – I can tell you it was the little guy who “stole” $18,000 that got convicted while the bank that was clearly in cahoots and ripped off millions got to testify against him as if they had been victimized.

As much as I hate to see another bureaucracy emerge, Crowdfunding needs to be regulated by a new breed of or not at all for the same reason that Clayton Christensen wrote the “Innovator’s Dilemma”: you have to be willing to kill your own in order to innovate.

Bureaucrats don’t do that and so we need something that does.

Season's Greetings from your Fundable Friends at Convean: iBreakfast/iEvening.

We wish you all the best for the New Year.

Keep your ideas brewing - we will be back with Funding opportunities on January 17 at Loeb & Loeb.


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How We Weathered the Storm - and the Coming Energy Policy Battle.

Thanks to a generator and a smartphone-turned hot spot, we got back on the road again. This is the new survival!

Note the covering. Not pretty, but it allowed us to use this in the rain. Who knew that generators are not supposed to run in the rain or heavy snow?

The drama began during the storm when the high winds of Superstorm Sandy knocked down trees like this.

So we stopped by at Home Depot to see what our options were and saw this line of anxious people with carts. The were waiting for a truck full of generators to unload

Seeing an opportunity, we joined the line.

These could have been the last generators ever!

As it happens, the next day you couldn't get gas and so generators magically appeared on the market again.

What's Next?

As talk turns to recovery - the big question in the non-flood areas with will be what to do and can we afford it?

Guess what - the Energy business has been raking billions off unsuspecting consumers for years.  Neither the media nor the public watchdogs have done a thing to protect them. This is money that could have been used for infrastrucure.

Expect to see sparks fly in the coming months.

Energy's Maginot Line

While Governor Cuomo's Energy Highway plan addresses issues of renewable energy and wholesale generation of power - the inability to deliver it reliably to millions of consumers puts us in a 3rd World category.

What we still need are innovative technology solutions for producing, delivering and safeguarding energy. The Everything we have so far from generators to powerlines strung from poles is completely out of date. If you read the Energy Highway plan, you'll be amazed to find that billions are about to be spent that really don't address these issues.

The old is new again!

Why Netanyahu's Bomb Image Matters - Regardless of Your Politics

 Just when I thought everything that could be written about Netanyahu’s “Bomb” graphic at the U.N. had been written, a local pundit had to apologize for discussing this topic to his audience. Talk about PC gone awry!

Netanyahu at the UN

Whatever you think of Middle Eastern politics, the fact remains that the image made a point and got picked up worldwide. It stole the limelight from his opponents as well virtually every other speaker at the UN. 

From a presenter’s perspective there is something to be learned here.

It is arguably the most significant use of an infographic since the infamous witness "rap" chart that earned mobster John Gotti an acquittal on murder charges in the 90's. That bare bones chart, which simply listed the convictions of all the witnesses against Gotti, made the point that none of their testimony could be trusted and so he got off. 

This chart has been a staple of the infographic case studies. Does it mean that murder or organized crime is being endorsed?

The look of Acquittal 

Whatever that tells you about Middle Eastern politics and the anti-Israel lobby - and it says a lot! -  from a presentation perspective there is a real dilemma here. The bomb made a point, got picked picked up worldwide and the message was embedded in the headlines. Any presenter should be so lucky. 

On the other hand, the image was also criticized as cartoonish - thereby undermining credibility. Some experts claim it was an inaccurate representation of the data but the rationale is almost certainly above the heads of the general public. Because it was so crude - it is arguably an issue that speaks to the unconscious. 

This addresses the kind of real challenges a business presenter faces. Primal images - like this simplified bomb - really work, but they can have negative residual value, and once its out there you really can't retract it. So, finding the visual that truly represents you is very big challenge. 

As for the unconscious resonance, studies that test subliminal response tend to use crude graphics because they are most easily picked up by subjects in tests. How this was interpreted is worthy of a separate discussion, but you can be pretty sure that it was there for a reason. My guess is that the history of anti-semitic imagery from the Protocols of Zion to Nazi propaganda all the way up to cartoons in the Arab press are equally crude and they were making a parity statement - "as in we can match you."

It is quite common for a company's logo to create an unintended negative resonance. I have a client whose logo, while seemingly good, also screams "emergency!" It is not always a image - it could be a name like Oldsmobile (could it ever win the youth market?) or even a color (many shades of green suggest poison in foods). Much of this is cultural but there known core elements that are universal such as facial expressions - so be wary if your logo has a fake smile.

The only way you really know - aside from experience - is through testing. The problem however, is that very few people can articulate their responses and so the researcher has to be able to interpret indirect statements. It is easy to be wrong, misled or just defensive. 

There are two schools of thought in this field, Edward Tufte’s precise data representation vs Nigel Holmes’ eye-catching visuality. What Netanyahu had was early Holmes. Highly visual, primary image and imprecise but nevertheless convincing data. Had it been Tuftean, it would have been pure chart and may never have made the headlines. Since the impact of these images can be so powerful the rhetorical battle between the two schools can get mightt heated.

Tufte: Beauty to a Broker

Compare an example of Edward Tufte’s precise data representation to Nigel Holmes’ eye-catching visuality. Tufte's work is so precise that if you use his tables and charts you can only love the elegant utility he brings to them.

Holmes at Work

However, to the casual viewer, it is dry and even forbidding. Worse, it does not inspire the imagination. On the other hand, the very selection of an image invites bias, opinion or even propaganda. Some of Holmes' earlier work like the notorious "Uncle Sam over an oil barrel" is very hard to find on the internet probably because it became highly politically incorrect.  Some, like the Diamonds Were a Girl's Best Friend are still out there but probably not going to discussed at the Harvard Business School. 

For technologist, the implications of this battleground become really clear when you apply it to the limited space of a SmartPhone. Images really matter. But other media matter too: Voice mail is an informational nightmare. If you try to buy a train ticket at an MTA kiosk you will know how critical that interface is if you are stuck behind a newbie while your chances of catching the next train slip away..

I’d be glad to hear your thoughts about the proper use and the misuse of graphics, images, apps, logos and user interfaces.

Two Visions of Disaster: Tufte's Fave "Napoleon's March into Russia" vs. Holmes "Monster"

I also hope to share some of the case studies I had done for clients and companies I work with.

  

For those who don’t know, marketing semiotics is my background and I have a book on tobacco industry semiotics, Cigarette Seduction and a couple of graphic novels under my belt. As a journalist I had the rare pleasure of interviewing the heads of the two basic thought categories in this space, Edward Tufte and Nigel Holmes. My next book, Are You Fundable? is a really a kind of semiotic explanation of the Entrepreneur/VC space.

Why Pixable is Worth $26.5 Million vs. Pinterest's $1.5 Billion

It is not often that you get an inside look at the critical moment of a company’s development - and then a chance to see the outcome. Now that Pixable has been sold for 26 million while an arguably similar company, Pinterest, is now valued at around $1.5bn - we have a rare moment to make a comparison.

Back in 2010 we developed a unique program called “Job Generation.” It was a kind of “Shark Tank” in reverse, where we invited senior executives to pitch Start-Ups for the job of running their companies.

Pixable was one of our first participants. Andres Blank, one of the founders, sat in the catbird seat as a former Kodak executive, Harry Falber, pitched him on running the company.

At that point, Pixable was far less evolved and presented itself as a company that helped you gather pictures from Facebook to create albums. Falber did not profess to have great knowledge of the technology but he did make this one point: as a Kodak exec, he knew from research that the customer in this business is overwhelmingly female and so the product should follow their interests.

In theory, Harry was a winner who got a “job” with Pixable. In practice, nothing like that happened. There was some follow up but no relationship actually formed. Pixable went about its own way, as a company run by some really smart guys who kept thinking up newer and cooler features. They raised $6.6 million and then sold out for $26 million. This will enable the founders to pay off their student loans, buy Teslas and enjoy lives as minor millionaires. The investors made some money but not the kind they were looking for – think of scratching off a $2 win on your lottery ticket. It keeps you in the game but that’s not why you bought the ticket.

So what really happened?

These were guys whose board of advisors were other guys and they had no inherent sense of their true marketplace: females. They did find a marketplace, guys who want to stay in touch with the coolest pictures but not the females who live by the images that illuminate their live's interests. That is what Pinterest does.

Whether Pinterest got lucky and stumbled upon that or had it planned, who knows. To quote Bo Peabody of Tripod, lucky is often better than smart. What does matter, is that companies usually take on the groupthink of a few key people and they will tend to follow what they care about rather than what the market wants. Granted, being authentic as a company is good - it is just worth 1/60th less than finding and serving an authentic market. At least, it appears so, in this case. 

As for Job Generation, we learned that one of the reasons young people start companies is because they really don’t want to listen to older guys. Maybe they should. Or maybe the older folks should be their own start-ups. They won’t get any Angel money (another controversy we'll discuss) but at east we know that in theory – and in the right context – their input can be worth as much as 60x.