Angel Investment Journal – Angel Investing and Entrepreneur Blog



Tom Perkins on Venture Voice

Posted in Funding/Investing by angel on the December 28th, 2007

This week Venture Voice has a great interview with Tom Perkins of Kleiner Perkins.

Most investors generally talk about how they prefer to invest in people over the ideas. Some claim that there are plenty of ideas out there and it is unlikely you will come across a totally unique idea. Execution is generally considered the hard part. And that is why I was surprised to hear Tom say he invests in ideas, not people. He supports his claim because, first of all, people with good ideas are generally good people. He says he is also able to build a good team to help support the company. It is hard to argue with a person with so much success in investing in companies.

He goes on to talk about building a team. He says you don’t need a good team right away. A main reason is because if you are seeking to build the best team that you can, it is unlikely the best people won’t come on right away when company is in its highest risk state. So you need to prove the company has potential and when there is less risk and a proven potential, it is easier to get successful and experienced people to lead the team.

That point does support the idea that the team is very important, but it seems Tom and his team have enough experience building companies that they can provide the assistance necessary to get the company to the point of being able to prove the potential.

The host of Venture Voice, Greg, asked Tom about their “ICU” for failing companies. Tom said they put failing companies in an ICU where the companies will either fail and they shut everything off completely or they make it out. The idea of “killing” the company completely even if there is some potential left is interesting. It reminds me of one of the central ideas behind Seth Godin’s “The Dip”. You don’t want to dedicate resources to things without a great deal of potential. You have limited resources and need to make sure you are focusing them on things with the most potential.

Hopefully you get a chance to check this podcast, I highly recommend Venture Voice and only wish it was done on a more frequent basis.

Easily Validate Your Business Idea

Posted in Entrepreneur Advice,Startups by angel on the December 26th, 2007

Many entrepreneurs spend way too much time planning before they actually take action. Many also spend too much time trying to raise funds too early in the process. It is generally advisable to take some action as soon as you can. This allows you to get feedback regarding whether your idea has potential. You will be able to determine if you are on the right track or if you need to take another path including making some revisions to your idea.

Testing your idea can easily be done through Pay Per Click advertising. You can create an ad campaign in less than 10 minutes. An entire blog could be dedicated to what you can do to optimize your PPC ads so I won’t get into that here (but here are a few good resources). The main things you need to do are make sure you target the right keywords, have a decent ad, and put up a landing page that will help you track interest.

You don’t need to put up an entire site, you just need a teaser on the page and then measure how many people respond to the teaser. When I say “respond”, I simply mean you need a way to judge how interested people actually are in what you are offering. Actually getting traffic is good, but if what you are offering is not what they want, then you can’t accurately judge the need for your business.

For example, we were thinking of selling and ebook on online reputation management. Before we spent the time to actually write the book, create a site, and everything else involved, we ran some PPC ads and got traffic for people looking for related keywords. On the landing page, we had a few tests going at different price points. We listed what would be included in the book and then listed a price. For some people we said “Click here to buy this ebook for $79”, other tests showed lower prices. When people clicked on the link, it took them to a page saying the book was not yet available and they could fill out a form if they wanted to be notified when it was released. We did not collect any information from people unless they said they wanted to be contacted when the book was released because we did not think it would be right, but more importantly, we were not interested in collecting info on them. We simply wanted to how many people would click the link so we could determine if an ebook on reputation management had much potential. In the end, we found out that it did not have as much potential as we thought so we never did anything with it.

Another time we considered pursuing a new type of lead (for our lead generation company). We created a PPC campaign, put info on the landing page and did something similar. In this instance we found out there was enough interest in this type of lead and we would likely be able to convert the visitors at a high enough rate where it would be worthwhile to pursue.

The idea of testing your business model via PPC ads is mostly related to online businesses, but most businesses now need to have some online aspect to them so it is likely applicable to you.

Buying a Domain for your Start Up

Posted in Startups by angel on the December 21st, 2007

I generally recommend that people try to get their business going for as little money as possible. Bringing investors in too early is not the best idea. If start seeking money then you will likely spend too much time working on funding instead of building your company. And getting the funding will be harder since you probably won’t have achieved much progress. Once you see some results from your efforts, it is much easier to convince someone to invest in your idea.

Sometimes it is necessary to get funding for a variety of reasons. One of them is to get a great domain for your company. There are a variety of reasons to spend money on a good domain, one of them is establishing credibility. We started a vacation rental site and would contact people to see if there were interested in listing on our site. Most would reply saying they were already on enough sites, but when they saw our site – lakerentals.com, they were much more likely to list. When we were acquired by the Weather Channel Interactive, this was one of the main reasons they were interested in our company. They really liked the domain names we had. So an investment in a domain is usually not a bad investment anyway (as long as you don’t pay too much) because it will likely have value regardless of what happens to your company.

Building credibility is also extremely important for your conversion rates. For example, without looking at the sites, would you rather buy from SoccerPro.com or soccer-training-info.com If you start out with a bad domain name, that can potentially hurt you as long as you are in business. Having an advantage with your conversion rates is a huge advantage over the long term and is largely undervalued.

A great domain also has other advantages including some help with your online marketing. Aaron Wall has a great write up on the value of domain names for SEO purposes and you should check it out.

On the other hand, you can start your venture and validate your idea without needing the best domain name. You can get a domain that could be considered more of a brandable domain, such as wisecamel.com. And if you validate your idea and decide you would like to try to get funding (as well as a different domain), you can always for a 310 redirect to send all traffic to the new domain.

Getting some funding to help purchase a great domain is one of the reasons where getting some funding early on is not a bad idea, as long as you can find investors that realize the value of a good domain name. But it still may be a better idea to hold out on funding and the domain until you have a validated business concept.