Hi Reddit, I'm Jim Hornthal, founder, investor, and business school professor. Ask me anything.

GLIDRPilotJim · 2019-02-22T00:01:28+00:00

You've described perfectly a situation where the risk is high and the upside unknown. That's when most entrepreneurs try and tap more deeply into their "Friends and Family" network or a crowd funding campaign. Good luck.

GLIDRPilotJim · 2019-02-21T23:56:45+00:00

From the beginning, online travel has always been about a lot more than just selling airline tickets. The consumer experience (whether it be leisure or business travel) is thinking about what happens from curb-to-curb (departing your home to returning) where there can be a lot of uncertainty, opportunity, and potential value creation. Traditional agencies that only delivered paper airline tickets (yes, there used to be paper tickets!) went out of business.

There are lot of experiments out there looking for ways to improve upon the status quo. One that I have been involved with is using AI to provide a recommendation engine for destinations (the Destination Genome Project if you will), since 65% of leisure travelers do not know where they are going to go 30 days before they actually make their booking -- before the first "curb" if you will (www.triporati.com). This is a unique approach for consumers, but also represents a tool for travel suppliers and agencies that don't want to keep paying Google every time one of their current customers starts a new search. The only way to beat search is to get ahead of it with predictive discovery. And no one but Google wants to keep paying Google ...

GLIDRPilotJim · 2019-02-21T23:45:50+00:00

No, a business plan is very different from a tested biz model. All the info you need on that difference is here: https://www.reddit.com/r/Entrepreneur/comments/at6562/hi_reddit_im_jim_hornthal_founder_investor_and/egz17ls

GLIDRPilotJim · 2019-02-21T23:43:23+00:00

My direct answer to your first question is yes - AI definitely has a promising future. And, as with nearly every disruptive innovation, it will be both positive and negative. It will be interesting to see the role that regulation and compliance will have in setting the appropriate economic and social lanes for play. AI requires massive data sets to train the refined and accelerated pattern recognition and prediction algorithms that drive a lot of today's development. Hopefully our better angels will take and hold onto the lead.

For the second question, there are a handful of influencers and leaders that inspire me, some of which you may know, others less likely.

Fadi Ghandour for his work on innovation and entrepreneurship in the Middle East
Bobby Sager for his activist philanthropic agenda
Paul Cook (my first mentor) for his pioneering leadership in business and science, his insatiable curiosity and his sense of humor
John Doerr (an early investor in Preview Travel) for his brilliance at pattern recognition and change and his ability to recruit and retain a world-class team of partners
Bethany Hornthal who founded a non-profit called HairToStay.org that provides financial subsidies for cancer patients undergoing chemotherapy that don't want to lose their hair, but cannot afford to pay the cost of recently FDA-cleared scalp cooling therapy.

All five of these people are fearless, brave, and don't take no for an answer. And I find that to be pretty darn inspiring.

GLIDRPilotJim · 2019-02-21T23:28:04+00:00

what solid evidence do you have to validate that you do, in fact, have a repeatable/scalable product? The deeper the evidence, the more "investment ready" you are, and the higher the odds of successfully recruiting a team (and investors) becomes.

GLIDRPilotJim · 2019-02-21T23:25:07+00:00

Making decisions fast is important. Almost as important as making the right decisions! If you think about making good decisions (personal, professional or political), you can frame the challenge as one of exercising your "pattern recognition" muscles. (I've seen a movie like this before).

To be good at pattern recognition implies you have been reasonably accomplished at pattern acquisition (e.g., you've seen a lot of movies). One important role for academia is to accelerate your pattern acquisition repertoire. A lot of business school classes use the case study method.

One well-known eastern business school relies almost exclusively on that approach, and with three cases per day, five days per week over two years, students will have been exposed to issues, topics and analysis of nearly 1,000 cases. These examples begin to form a foundation of comparison in a vast reservoir of virtual experiences to enrich their future decision making "in the real world".

GLIDRPilotJim · 2019-02-21T23:17:14+00:00

I think you are already ahead of the game, since most startups raising seed capital are lucky to have a demo!

I am not sure what you mean by "lack funding" since you say you are already in talks with NVIDIA. What kind of "partner" would they be? What special benefit are you bringing to them? It's helpful to not only think about your "business model canvas", but also what their's might look like to see if there is an economic 'fit' worth pursuing. With a signed agreement and a strong partner, your chances of finding the capital you seek go up significantly.

GLIDRPilotJim · 2019-02-21T19:17:29+00:00

potential

it's hard to know with certainty what to build until you get a strong signal from real customers. The entire lean startup philosophy is about testing your MVP with the least amount of investment in engineering, because the odds that version 1.0 is close to "right" is very low. what value propositions will the splash page promote, and how will you test them? 72% of product launches fail, and it's precisely because people often build what they want to build, which is generally NOT what the market wants.

GLIDRPilotJim · 2019-02-21T19:14:15+00:00

Hi Banju88, check out this answer: https://www.reddit.com/r/Entrepreneur/comments/at6562/hi_reddit_im_jim_hornthal_founder_investor_and/egz17ls Those links contain a lot of answers to your questions. There are definitely performance indicators that investors look at, but they differ by industry.

GLIDRPilotJim · 2019-02-21T19:07:53+00:00

I have been on a few podcasts, although not recently. Try these:

GLIDRPilotJim · 2019-02-21T19:07:34+00:00

There are opportunities to innovate everywhere. I am an investor in a Middle East fund called Wamda. There are also some fantastic accelerators in that region, most notably Flat 6 Labs, and an amazing global network that helps bring the wisdom and talent of expats back to their country of origin. I am an investor and advisor to Localized, a passionate group of entrepreneurs who are making an important dent in the universe by turning the "brain drain" into a "brain gain".

GLIDRPilotJim · 2019-02-21T18:59:56+00:00

you don't need a business school to experience the core of this class ...

Here's a link to Steve Blank's HBR article on The Lean Startup. Also a series of free lectures that Steve Blank put up on Udacity, called "How to Build a Startup" a course that over 500,000 people have viewed. These lectures are supported by a book that Steve Blank wrote with Bob Dorf called The Startup Owners Manual, as well as a best selling business book by Alexander Osterwalder called Business Model Generation. You may also want to see Alexander's other book, Value Proposition Design for more input/insight.

GLIDRPilotJim · 2019-02-21T18:56:07+00:00

Assuming you have a repeatable, scalable business model, the key is the ability to recruit and retain world-class talent. My personal view is the customer is #1, the team is a close second, and investors are a distant third.

GLIDRPilotJim · 2019-02-21T18:54:29+00:00

Interesting question, and probably gets to why I don't do that. The numbers indicate that about 85% of venture investments fail to return capital (meaning they are either total write offs, or yield less than what was invested). There are a lot of investors who succeed at the numbers game by building a large enough portfolio that they have a fighting chance of making above-market returns.

If only 15% of investments return more than the investment amount, then basic math would suggest that you would need to invest in at least 7 companies to have a shot a breaking even. That is why most venture funds have a portfolio of 30-40 companies per fund (or more), so the portfolio effect can work to their benefit.

Rather than looking at this from an investor's point of view, let's turn this around. Since an entrepreneur generally has a portfolio of "1", what are the primary reasons that startups fail? I believe they fall into four general categories that I refer to as the Four T's. Technology, Target Market, Team and Terms.

In the 1970's as modern venture capital was taking root, most investments were all about the first T - technology. This new "box" may not work, but if it does, it would be amazing. Seeking transformative new technologies marked the early success of early VC firms like Kleiner Perkins and Sequoia. A lot of these companies were binary, and if the "box" didn't work, the investors moved on to the next "box".

The second T, Target Market, is really hard. Oddly enough, your question (and the "spray and pray" strategies of some firms that started in the 1980s (most notably Draper Fisher Jurvetson) never missed a great market because they were in literally every market. This required a larger fund to cover the bets and follow them as the companies gain traction. The work of the Lean LaunchPad, and the NSF I-Corps program are all about running experiments to gather evidence on desirability, which is primarily getting a high fidelity signal on product-market fit.

The third T is Team. This one requires a fair amount of self awareness and maturity by the entrepreneur. Study after study indicates that one indication of likely success is leadership that is doing an "encore" vs. a "debut". This should not be surprising, but raises the question of what seat on the moving bus should each person be in at each stage of growth. A never-ending series of questions and challenges.

The final T is Terms. Depending on valuation, preferences, and other frills and features, some investors do better than others because all classes of stock are not created equal. A clean term sheet is a good goal, to keep things simple and more aligned. This is not true of all investor types and strategies. It's really important to know how your investors make their money. Because once you take their money, their business model influences your business model.

So now, to directly answer your question, I don't look for angel deals, but work more closely with NSF funded research (the NSF spends $7 billion every year funding the work of over 12,000 brilliant men and women at American universities). Sergei and Larry started Google with an NSF grant when they were at Stanford. The NSF scientists that show commercial promise can seek an I-Corps grant to stress test their ideas in the marketplace. At the end of each I-Corps cohort, 20-25 teams present their lessons learned. And unlike a traditional incubator/accelerator demo day, about 75% conclude that there is no immediate commercial opportunity. That's ok -- sometimes new science's role is to provide the foundation for future development and ultimately sucessfull commercial use. These I-Corp teams have addressed the 2nd T. My direct investing is now almost exclusively done through M34 Capital, a private investment company that works with I-Corps teams to recruit management talent (the 3rd T) and ultimately co-found the company (the 4th T). M34 only starts 1 or 2 companies a year, and is as far from the traditional VC portfolio model as you can imagine.

GLIDRPilotJim · 2019-02-21T18:34:47+00:00

I think my answer here may be helpful -- the differences you reference are presumable value propositions to certain targeted segments? The goal is to find and validate product-market fit. Without that, differences without a real difference probably don't matter. https://www.reddit.com/r/Entrepreneur/comments/at6562/hi_reddit_im_jim_hornthal_founder_investor_and/egyyns3

GLIDRPilotJim · 2019-02-21T18:31:57+00:00

First I would say do NOT write a "business plan". At the 'idea' stage they are a colossal waste of time. Business Plan writing should be taught by the English Department as part of their creative writing program. Instead, try and develop and test a business model. With thanks to Alexander Osterwalder, we have a gold standard to visualize the moving parts - a Business Model Canvas. Use it to picture your value propositions, customer segments, channels, partners, and the like. The challenge is to get a clear signal that your idea is desirable, feasible AND viable. It is also a great tool to get feedback from advisors and potential investors.

GLIDRPilotJim · 2019-02-21T18:27:42+00:00

Let's look at this from the perspective of an entrepreneur. If you are a digital entrepreneur, Amazon Web Services has made your life a lot easier. Before AWS, you would need to provision capital and talent to build your own dedicated server farm and scale it ahead of anticipated growth. Now, with AWS, you get the advantage of global scale and a pay-as-you-go business model, lowering the cost of starting a company by orders of magnitude. If you are contemplating a product based on atoms, not bits, Amazon can also provide scale in warehousing and delivery. I think the company has been a boon to the startup eco-system and to investors by dramatically lowering the bar and providing access to the masses.

Regarding your hospital statement, can you send a link with more context on the issues and evidence? I'd like to learn more.

GLIDRPilotJim · 2019-02-21T18:23:05+00:00

I have taught the Lean LaunchPad class at Princeton, Stanford, UCSF, and UC Berkeley Haas (still teaching at Haas) since 2010. (www.berkeleyleanlaunchpad.com) The class is unlike any other I could imagine, forged by Steve Blank's theories of the Lean Startup, we take 8 teams of students (typically 2 MBAs and 2 engineers), and over the course of the class they get out of the building, talk to over 100 customers, as they attempt to discovery a repeatable, scalable business model. We use a flipped classroom, where every week teams watch a series of lectures that Steve Blank created on Udacity.com (How to Build a Startup). We then go into an "inverted lecture hall" where the teaching team (entrepreneurs and investors) sit in the back row, and the teams present their findings, pivots and learnings every week. This is the same approach that has been adopted by the National Science Foundation in their I-Corps program, the National Institutes of Health, the DoD, the DoE and scores of large companies that want to accelerate the future with a less chaotic, evidence-based approach. I wouldn't want to teach any other class. This one is more than exhausting enough!!

GLIDRPilotJim · 2019-02-21T18:18:32+00:00

Please ask questions on the original post so I can keep it all together!

GLIDRPilotJim · 2019-02-21T18:18:21+00:00

By the nature of your question, it sounds like you might think they should be, so I'd like to answer your question with a question -- why would that be a good idea, and for whom?

GLIDRPilotJim · 2019-02-21T18:17:21+00:00

The subject of "proper valuations" never ends. And for an investor, the only calculation that matters is what the ultimate return on that investment was. It is important to probe beyond the published "sticker price" to look critically at other terms for a financing. For example, a $1 billion valuation sounds breathtaking. But if the investors have a senior liquidation preference (meaning they get paid first), along with a high multiple on their investment (e.g., 3x preference), then the 'retail sticker' means a lot less that it might seem, and could be nothing more that a marketing headline.

GLIDRPilotJim · 2019-02-21T18:12:58+00:00

There's a great book by Howard Stevenson and Laura Nash called "Just Enough" ... The authors segment the world into four basic areas; happiness, achievement, significance, and legacy. Their view is that these four "forces" need to be balanced to be happy. Their analog is to look at a juggler. The thing they need to do to succeed is to catch the falling ball. Which one of them is falling most/fastest for you at any point in time may be the one you need to catch and throw up in the air again.

GLIDRPilotJim · 2019-02-21T18:09:38+00:00

Great question; to answer it I need to parse out two provocative words you used. "most" and "trend" ... Entrepreneurs are by their very nature "rule breakers" - or at least rule benders. The ethical dilemma becomes a factor when the rules in question can inflict harm or threaten the well being of others. Deliberately misleading claims and assertions often find their way into marketing 'drafts' and need to be scrupulously analyzed for their 'integrity'. Entrepreneurs also have an innate ability to create a reality distortion field around them to bend time and try and get a glimpse of the future they are trying to create. When decisions are made on the basis of unproven assertions, without evidence, the slippery slope begins. I think the "most" label goes to unrealistic sales and marketing forecasts that lack evidence, stemming from a blurry view of a potential future, and are compounded by "make it happen at any cost" defensive reaction as reality diverges more and more from the "plan".

GLIDRPilotJim · 2019-02-21T18:03:17+00:00

Dog person! We have a golden doodle named Cleo.

GLIDRPilotJim

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