hello everyone marco montemagno here
digital domination summit 2013 and the
next guest another great amazing guest
Alex Mitchell CEO and co-founder of
founders Club dialects are you going
I doing really well thanks so before to
Magee we were there is some comments
when I’m doing this kind of remote
interviews you know always the lighting
is traje and I’m based in UK and
normally is never sunny and today’s
sunny so I look like white in San
Francisco and today’s our Sun today but
the most important thing is content so
I’m more focus on tips and suggestions
that you could give so let’s start first
of all from from funders club I was fun
from day one and this is you know easy
to say later but it’s true I mean I have
the email of day one when finders call
came out and I wrote to Felicia I think
the name of the person I say I think you
great guys I want to do something
international investor but you still you
you just started so you didn’t figure
out yet the international side and so I
I was following you from day one and as
I told you I’m probably your best
european evangelist unpaid european
evangelist but I’m proud of it and I’m
happy to see that you seriously so and
the first point is let’s try to explain
to people watching this video
why funders club is different from other
venture capitalists and most of all I
think there is still a lot of confusion
when people talk about crowdfunding you
know Kickstarter so thunderscope is a
totally different thing but I like to
explain it in just in one minute just to
give an idea where we could start oil
sure so I mean in as far as the
landscape goes obviously there’s
traditional venture capital traditional
VC and then as you mentioned
crowdfunding as most people know it is
Kickstarter or IndieGoGo that sort of
sort
crowd funding Rather’s like kickstarter
indiegogo and but there is a separate
group equity crowdfunding and
particularly regarding the JOBS Act just
piece of piece of legislation in the
United States that allows for
non-accredited investors to invest
directly in startups
we’re actually neither of the last
bucket of equity crowdfunding or product
route of crowdfunding or project
crowdfunding like Kickstarter we much
more have our roots in venture capital
and so just to back up and explain our
team here most of us are former
entrepreneurs former founders who have
founded and grown and in some cases sold
our companies and even in some cases
become venture investors ourselves and
so our our framework coming to the table
was very much the conventional venture
capital realm but one thing that we
recognized is that the internet had not
really been brought to DC so must be
seized in other words they they discover
entrepreneurs and startups offline they
do due diligence offline and they
support the companies offline it’s a
very traditional business discipline
having funded innovation so what we the
insight we had was that there are a lot
of things within VC that aren’t working
and that’s a whole separate discussion
but when VC works it works quite well I
mean you know we’re probably using five
or six or seven or more probably
technologies just in this interview that
were a VC back you know and that have
become successful companies so we wanted
to take what did work well in VC and
pair it with the power of the Internet
and so we are very much more online
venture capital and what that
specifically means is we aren’t just a
fundraising platform when we support a
company we’re actually creating a
venture fund to obviously fund and fund
to finance the company but also to bring
value ads or a value-added venture
capital to support the company through
to exit or IPO right we our motivations
are our compensation compensation
structure is actually the B
the model meeting we’re not really
motivated to raise lots and lots of
money and to sell investors lots of lots
of investments in startups it’s it’s
we’re not a taking a scattershot
approach to startups we’re really
attempting to screen for the best
startups and to support the best
founders and soon after funding them to
help them be more successful than the
otherwise would be so that was sort of
summary there yeah and it’s very
interesting because it’s a from my point
of view from my perspective is a very
unique proposition is a very unique
value proposition and is also I would
say from a European point of view
another interesting thing that I
immediately
you know I saw founders carbon I thought
wow they really get it is that often in
Europe you are totally out from the
possibility of doing deals with
interesting new startups for instance
coming out from Y Combinator I want to
invest how many times say I thought gosh
ah I see I see I don’t know rueful I
know that we have been successful but I
can’t invest in it you know no one will
ever call me to invest in that startup
so what I like about funders cough is
that you basically
democratize the possibility of people or
investors around the world to invest in
new startups and assess is not so easy
on that startups am I right or wrong
you know that’s it’s it’s completely
accurate that we’re democratizing access
to investing in the best startups I mean
I treated conventionally as an
individual or even a small fund
it’s not been possible to access to to
be able to even speak with let alone
come up with the capital required to
invest in in these types of
opportunities and so just to explain I
guess to the lines a little bit or why
that’s possible funders club is an
institutional investor so we are
actually a venture capital fund firm
we’re part of the NBC a the National
Venture Capital Association
but unlike most VCS our capital rather
than coming from the billion-dollar
hedge funds or pension funds and down
madhan’s the capital is actually being
contributed by accredited individual
investors and what this means is for the
first time people individuals who are
accredited investors are able to gain
access for relatively small check sizes
to deals that normally are reserved for
institutional investors and the reality
that’s how we’re getting them we are an
institutional investor when we invest
funders Club is the VC investing and our
members gain access to that startup
opportunities through through investing
in our venture funds that we created and
it’s a great way for individuals to not
just gain access but also invest across
a number of opportunities because
traditionally even at the seed stage the
earlier stage of a company minimum check
sizes can be twenty five thousand fifty
thousand hundred thousand dollars even
if you were quite wealthy that’s a lot
of capital to put into one specific
startup you know and so that was
something we recognized early on is was
there a model a way to allow individual
investors to develop a portfolio a lot
quite frankly a lot like B C’s do you
rarely see a VC only investing in in one
company it’s typically and once he and
there’s there’s good reason for that so
we also democratize that ability to not
just access deals but also invest and
create a portfolio across not so so
basically Alex C it’s correct if I say
that on one side you discover the best
deals the best is the most interesting
startups that you think they need
funding and you think that they could be
good and on the other side you create a
specific fund for each startup you
collect the money from several investors
around the world who can invest I don’t
know from thousand dollar up in that
fund and then that fund
part of the company will have an
inequity of the company and your job is
to follow the company till the exit or
until that company is successful is this
the right flow that’s that’s correct
and the interesting thing is is so our
platform itself is is powered by a
couple different phenomena
so we have our members and I’m bringing
this up just because it’s it’s almost
integral to the flow of things so okay I
think any not just us but any venture
capital investor needs to be excellent
at three basic activity they need to be
really good at deal flow so discovering
startups all of them ideally they need
to be very good at due diligence and
vetting so identifying an investment
worthy startups most promising
entrepreneurs and then lastly they need
to be very very good at value add so at
supporting companies to be more
successful than they might otherwise be
through their ultimate exeter IPO we’re
able to do that
not just in the conventional traditional
sense so in other words we have a team
of former entrepreneurs of operators of
investors we’re backed by a number of
major VCS ourselves non capitals are
Capital Intel Capital
andreessen horowitz and a number of
other funds but on top of that we have
our membership which is again it’s
that’s one of the insights we had is if
you could use the internet to connect
these you know thousands actually
millions of people around the world who
are what are called accredited investors
people who have relatively high net
worth they tend to be fairly
accomplished professionally and
therefore they’re very connected very
experienced they can actually very much
help with their knowledge young deal
flow due diligence and and value add and
so that’s at our core that’s what we’re
about is leveraging that network for the
betterment of startup investing right I
did an old song andreessen horowitz
was one of the fun so you also have a
small farms in this
boarding you I’m joking it’s probably
either one of the biggest and most
successful funder just read the other
day an interview to Marc Andreessen and
unbelievable I mean well you did
everything so what can I say okay good
Alex no totally off topic but it’s true
that a meteor has got your name because
I read it summer and I you thought I
want my name on a greater – yeah
why y’all like says got it how did you
get it alright I in another life so when
I was much much younger I was in a very
active in science research and so I was
you know in many respects that was a
normal high schooler but in other
respects I totally wasn’t one of the
things that I did was university
research so I would actually take the
train a couple times a week to a
university I I had come up with a
nanotechnology-based idea and was
actually doing it experiments and you
know test tubes and gloves and all that
and basically the long story short I
published some papers gotten some
recognition for that work and was lucky
enough to be awarded it’s some some
awards for for young scientists in
America and because of that a word okay
ya know not a planet but it’s an
asteroid yeah it’s a minor okay that’s
interesting I mean I was thinking how
many people I know that they have the
name or on an asteroid actually you’re
the only one I know now is so
interesting very interesting maybe
they’re just not telling you everyone’s
got a name except me alright alright
let’s go to the point I imagine the
people watching this video think okay
interesting this founders club happy for
the investors but Morton most of us we
have a start-up or we have a company and
we want to raise money and the questions
always the same how can I get the money
were investors invest and so on so I
would like to
your your help to answer on this topic
because you are in a in an excellent
position to see a lot of deal flow
ambassadors on one side entrepreneurs so
step number one if you stop the ball in
2013 now and you should say okay in this
moment investors mainly invest in these
topics in these areas in these themes
which which would you pick I mean what
are the most important trend that you
see in investing in this moment you say
you’re basically asking what what
sectors or industries are considered
conventionally to be hot right now
essentially yeah yeah like the that
investor thing always super cool to
invest I don’t know in Big Data or on
Oni tele I’m joking because no one is
investing in Italy or you know where is
hot now so I guess before I answer that
question I should I should point out
that you know I think that there are
there’s opportunity in every industry
and and there is almost too much
emphasis on tracking trends and trying
to you know you should never especially
the way that you presented the question
I think it was from the founder point of
view yeah so Sounders I would say
actually more than contemplating what is
hot right now to investors it
contemplate what what you’re most
passionate about and most connected to
and the problem that you genuinely want
to address and see opportunity is really
what you should be doing irrespective of
what um some investors say in Silicon
Valley think is really really awesome
right now it’s it’s it’s almost
irrelevant because if if you if you and
your position see an opportunity you do
your own due diligence and and it checks
out it’s it’s valid according to your or
again you’re talking to customers users
that sort of thing and iterating I would
say go for it all right you know and
people will come investors with don’t
you know they try to seek out nice
opportunities it might become the next
trend so with that disclaimer yeah you
know I just want I like I like the
disclaimer perfectly real I know it’s
it’s not yeah it’s it’s probably from a
founder point of view it’s it’s it’s
almost disingenuous to be like oh like
EdTech which by the way is really hot
right now in this in Silicon Valley is
hot so I’m gonna I’m gonna start an
EdTech you don’t you know company like
that’s maybe not the right approach but
so I mean I get it we’ll start there I
mean that’s certainly something that in
the last year or so you start hearing
more about education technology and that
cuts across all you know from actually
teaching students who are in school to
help them learn better to people who are
who never went to school to people who
are older and continuing education to
nothing related to education
specifically but the finance of
education it’s really all encompassing
this area and I definitely see a shift
to thinking more favorably about these
opportunities and for me it’s very
fulfilling because I’ve always been one
who likes to I mean clearly you have to
submit you you’re running a business you
have to make money but it’s nice to also
have a positive impact on the world and
certainly EdTech is one of those types
of industries where that’s more
transparent look looking beyond that I
mean there there are everybody will have
their own opinion on what else’s as a
hot and I I’ll reserve judgment on that
I think that’s that’s one of the clear
consensus opportunities that seems to be
yeah so ed tech code could be one area I
mean udemy Udacity Coursera Khan Academy
so there are plenty of startups and
companies that are doing great things in
that area
but if you should invest today in any
startup what do you
watch you look for the founders you look
for the idea you look for the numbers
and attraction you what do you look for
actually it’s almost simple in some
respects but obviously in others it’s
quite complicated because if there was a
magic formula then there would not be a
need for the entire venture industry so
Envy the basic features that we looked
for and I would argue that this is not
necessarily unique to us our three basic
pillars and those are first its it’s the
market so is is the addressable market
for this company
sufficiently large enough to justify
pursuing this opportunity and and that’s
that’s you know either either in Israel
or isn’t and that’s sort of a
complicated question too because
sometimes the very presence of company
can expand its own marketplace yeah in
other words yes it so that’s one the
other is the team you know people are
essential to start and it’s probably not
a secret to anybody that startups change
over time they pivot there they respond
very one of the beautiful things about
startups is a are agile they have the
opportunity well when they’re working
they’re agile they have the opportunity
to be responsive to market forces and
demands and and and therefore it really
is important that the team is a team
that has what it takes a team members
complement each other are the right
people for the market opportunity yeah
and that’s and it’s again that’s an area
where it’s maybe not always obvious
because you have somebody who’s like
who’s never started a company before and
and understand find it a number of
first-time Islanders who have
subsequently seen great great success
you just think back to other examples a
team does not immediately mean that
they’re a serial entrepreneur obviously
that makes it no right to mates yeah
yeah so and then the last piece and this
is actually for us this is maybe a
little bit more specific for funders
club I mean the last piece that we look
for is traction and growth and the
reason I say that’s somewhat may be
unique for us is some some investors
will actually invest in just the the
market the team yeah we’re actually
looking for founders who have already
launched their concepts have already
spoken with users and customers and
started actually providing them with the
product or service and you’re seeing
growth you’re actually seeing much
traction and that’s that’s the toughest
part to to meet four four hundred so
that we actually see that ninety-five
percent or so of startup you don’t
actually yet when when when which
speaking with them have that traction
now what’s interesting is when you speak
to the same founders you know three
months later six months later things can
be things can change of course so which
which also comes back to a question Anna
you can asses earlier for from the
founder point of view looking at
fundraising you know how you do it yeah
one one interesting point that’s not
discussed often enough is a like most
startups probably don’t need venture
financing and probably shouldn’t raise
it and in fact trying to go out and
raise venture capital might kill your
startup and yeah in my district building
services and serving your customers your
users and that’s just something that I
think as long as you’re aware of it it’s
justa calibrates like just cuz you’re
starting a company
it doesn’t mean you have to
right absolutely no it’s interesting
obviously Alex I’m I have to ask you
these questions because I totally agree
by the way on your point and if I think
in my experience I got experience where
I got I was funded and it was the worst
day of my life because then you know I
was totally locked and the company was
no mine anymore a nightmare you know and
in other situation was a was a great
relationship and we both were successful
and in another situation again I say why
should I need some funding I mean I go
my way and so it really depends of by
the situation and also who is the
investor and but you know we try to find
some kind of common pattern and this
kind of trend another topic that I’m
interested in just a couple of minutes
more than I let you go to to your job
but in this moment 2013 tell me a little
bit about valuations because I mean
obviously there is a difference between
European valuation and US valuation in
the startup world but if you should say
in this moment when a start-up begin and
try to raise a first seed you know the
first round is there an average
valuation because a common question I
get every day is how much what was the
valuation of my starter when I go to an
investor the first time ok me about the
team I have the right market some
traction but what’s the valuation of no
idea I don’t know where to start from do
you have any take on this point
absolutely I think it’s pretty simple
actually I’m trying to there’s two
comments I want to make one is speaking
to founders and myself I love to share
this point of view which is start a
start-up outcomes are our binary in some
respects you know you want to optimize
for success as opposed to failure you
want you you want your company to grow
and become a be useful and clothes
frequently you see startups actually
imploding and in failing and so the
important thing is
founders to have a successful outcome
you in other words you want to optimize
for outcome
optimizing for deal terms not
necessarily that important in the end
ultimately I’m not clearly you know it’s
it’s something to consider our day to
day but in the scheme of your company
the terms of the deal aren’t really that
important and just to support that with
actual dates there are today very
successful startups that’s I won’t help
them here but they are IPO candidates
and they rate their seiran’s at
valuations that are one fifth one you
know one tenth of what some of the
startups and in Silicon Valley are
raising their sea grounds at today
amazing and and yet those companies are
successful the founders are doing well
and it’s sort of a moot point
what matters is success and having an
outcome less so specific arms but
actually answering your question just
how do you know what’s the right price
company the reason it is simple is it’s
really it is simple its market
determined it’s whatever the market will
bear right ultimately if you think about
it you’re your startup stock or you’re
writing convertible notes you climb up
the terms that’s a type of product and
investors are a type of customer and in
this specific instance in this
discussion and so really it just comes
down to okay they’re looking at you and
your team in your market and your
services everything just saying I think
this is what you know this is what and
you collect enough data points I’m
speaking with the different people and
you come up that’s sort of how it
arrives it’s it’s you can certainly try
to to say hey like we think based on
comparables because you know your friend
raised at whatever know what terms that
you should also have this as a starting
point for a discussion
what I just said in another it’s what
the market is willing to air what what
it will pay is the ultimate answer okay
so it’s not an average valuation that
you see around in this moment like I
don’t know two million is the average
valuation for the citron or something
like that
I mean I think like I you’ll see a
variance based on the features of the
startup the a-team the market the
traction in some cases the industry the
business model it’s it is dependent on
going you know and obviously if Steve
Jobs would come back today and I arrive
and say I’m gonna launch a new startup
what’s the valuation I mean just you
know you just say I want to launch an
you started without any anything the
valuation would be one trillion so that
that’s very very important or I know
Paul Graham or say I want to start up
now even if it has no traction nothing
but the valuation would be me
immediately I mean and just I mean so
there if that’s if that actually did
happen you know I guess that would be an
indication that the investors have a lot
of confidence in him as a person based
on his track record his actual
performance and you know so it’s very
dependent on situation alright last
question um how do you see now the
future of this funding ecosystem because
its founders club there is AngelList
that didn’t exist I mean two years ago I
think exists all right there are these
kids like it start our indiegogo for a
different kind of job and you have the
traditional VCS and then you have angels
so you have a lot of people now going
around what do you think will happen in
the next couple of years
sure so I mean one one broad trend that
I foresee and it’s already happening
what you just said speaks to this is
there there’s efficiency is coming to
this area of
of holid investing or just private
company financing for a while there was
an asymmetry of information there
they’re in substantial and efficient
time just to give you a quick example
trying to invest in the types of
opportunities that hunter Spock was
funded previously would have required an
individual to you get on an airplane you
know fly to meet with some CEO of some
startup which by the way they somehow
had to know about in the first place did
you do substantial due diligence I write
a check size that could be you know
quite quite substantial
maybe irrationally so in the context of
their net worth and then and then
continue to to support the company hands
on through exit and we’ve we’ve
understood we’ve shifted that dynamic to
be a little bit more substantially more
efficient and these things such as like
Kickstarter for example they have freed
up creatives I mean the Kickstarter
specifically was intended for Kratos but
you see that platform as well as others
being used by actual startups and
businesses to pre sell products and I
know there have been issues with bats
and delivering on those things but I
think that over time you’ll see those
issues to be resolved but sort of
harming startups with the ability to tap
into capital in that case creep free
selling capital for a product and that
was not possible before in a way that
was not possible before okay and so what
does this mean in the end it’s it’s
actually a very big positive force for
the world and there will be a period of
noise period where there’s lots and lots
of these platforms and it’ll be
important for people who are the ones
writing the checks whether it’s for a
Kickstarter style platform or whether
it’s for investing in equity or equity
life structure to to pick a platform
that has a track record that has
credibility that sort of thing but but
over time I think we will certainly see
certain platforms emerge
sort of leaders in their space and and
that’s that’s sort of the immediate next
let’s say 12 years 12 months rather or
so that I I see but ultimately it’s is a
very positive course that they’re always
different things happening and I also
think it’s in response to recognition
from people in general hey you know what
there’s there’s a lot of opportunity
here to to try to support companies ok
the overall the overall BC industry for
the last 12 years has underperformed the
public markets now there are certain
very very successful funds venture funds
within the industry but they’re far and
few in between and and I think because
of that in part because of that you see
a lot of people recognizing hey look
there are other ways that this could
work Alex do you have three apps or
three websites or three platforms that
you particularly love and you would say
I would recommend you know this tree of
mobile app or or these three tools for
doing business better or in a more
efficient way or do you have any
particular Alex metal top chart well I
think for for me part addressing me
personally a little boring I gotta say
but I’ll just share with you anyway
obviously cannot live without my my
email and serve them you know that’s if
you look at my phone like what are the
most used apps on my Google Google you
know Gmail okay Google Apps you know
which here and I’ll explain why that’s
so important is I’m having all these
meetings and all these venues I have no
idea where they are and it turns out
okay very standard button efficient apps
I would say great
excellent all right Alex Mitchell CEO
and co-founder of the thunderscope Alex
thank you so much and good luck for
everything keep up the great job that
you did till this moment thanks a lot mark
digital domination summit 2013 and the
next guest another great amazing guest
Alex Mitchell CEO and co-founder of
founders Club dialects are you going
I doing really well thanks so before to
Magee we were there is some comments
when I’m doing this kind of remote
interviews you know always the lighting
is traje and I’m based in UK and
normally is never sunny and today’s
sunny so I look like white in San
Francisco and today’s our Sun today but
the most important thing is content so
I’m more focus on tips and suggestions
that you could give so let’s start first
of all from from funders club I was fun
from day one and this is you know easy
to say later but it’s true I mean I have
the email of day one when finders call
came out and I wrote to Felicia I think
the name of the person I say I think you
great guys I want to do something
international investor but you still you
you just started so you didn’t figure
out yet the international side and so I
I was following you from day one and as
I told you I’m probably your best
european evangelist unpaid european
evangelist but I’m proud of it and I’m
happy to see that you seriously so and
the first point is let’s try to explain
to people watching this video
why funders club is different from other
venture capitalists and most of all I
think there is still a lot of confusion
when people talk about crowdfunding you
know Kickstarter so thunderscope is a
totally different thing but I like to
explain it in just in one minute just to
give an idea where we could start oil
sure so I mean in as far as the
landscape goes obviously there’s
traditional venture capital traditional
VC and then as you mentioned
crowdfunding as most people know it is
Kickstarter or IndieGoGo that sort of
sort
crowd funding Rather’s like kickstarter
indiegogo and but there is a separate
group equity crowdfunding and
particularly regarding the JOBS Act just
piece of piece of legislation in the
United States that allows for
non-accredited investors to invest
directly in startups
we’re actually neither of the last
bucket of equity crowdfunding or product
route of crowdfunding or project
crowdfunding like Kickstarter we much
more have our roots in venture capital
and so just to back up and explain our
team here most of us are former
entrepreneurs former founders who have
founded and grown and in some cases sold
our companies and even in some cases
become venture investors ourselves and
so our our framework coming to the table
was very much the conventional venture
capital realm but one thing that we
recognized is that the internet had not
really been brought to DC so must be
seized in other words they they discover
entrepreneurs and startups offline they
do due diligence offline and they
support the companies offline it’s a
very traditional business discipline
having funded innovation so what we the
insight we had was that there are a lot
of things within VC that aren’t working
and that’s a whole separate discussion
but when VC works it works quite well I
mean you know we’re probably using five
or six or seven or more probably
technologies just in this interview that
were a VC back you know and that have
become successful companies so we wanted
to take what did work well in VC and
pair it with the power of the Internet
and so we are very much more online
venture capital and what that
specifically means is we aren’t just a
fundraising platform when we support a
company we’re actually creating a
venture fund to obviously fund and fund
to finance the company but also to bring
value ads or a value-added venture
capital to support the company through
to exit or IPO right we our motivations
are our compensation compensation
structure is actually the B
the model meeting we’re not really
motivated to raise lots and lots of
money and to sell investors lots of lots
of investments in startups it’s it’s
we’re not a taking a scattershot
approach to startups we’re really
attempting to screen for the best
startups and to support the best
founders and soon after funding them to
help them be more successful than the
otherwise would be so that was sort of
summary there yeah and it’s very
interesting because it’s a from my point
of view from my perspective is a very
unique proposition is a very unique
value proposition and is also I would
say from a European point of view
another interesting thing that I
immediately
you know I saw founders carbon I thought
wow they really get it is that often in
Europe you are totally out from the
possibility of doing deals with
interesting new startups for instance
coming out from Y Combinator I want to
invest how many times say I thought gosh
ah I see I see I don’t know rueful I
know that we have been successful but I
can’t invest in it you know no one will
ever call me to invest in that startup
so what I like about funders cough is
that you basically
democratize the possibility of people or
investors around the world to invest in
new startups and assess is not so easy
on that startups am I right or wrong
you know that’s it’s it’s completely
accurate that we’re democratizing access
to investing in the best startups I mean
I treated conventionally as an
individual or even a small fund
it’s not been possible to access to to
be able to even speak with let alone
come up with the capital required to
invest in in these types of
opportunities and so just to explain I
guess to the lines a little bit or why
that’s possible funders club is an
institutional investor so we are
actually a venture capital fund firm
we’re part of the NBC a the National
Venture Capital Association
but unlike most VCS our capital rather
than coming from the billion-dollar
hedge funds or pension funds and down
madhan’s the capital is actually being
contributed by accredited individual
investors and what this means is for the
first time people individuals who are
accredited investors are able to gain
access for relatively small check sizes
to deals that normally are reserved for
institutional investors and the reality
that’s how we’re getting them we are an
institutional investor when we invest
funders Club is the VC investing and our
members gain access to that startup
opportunities through through investing
in our venture funds that we created and
it’s a great way for individuals to not
just gain access but also invest across
a number of opportunities because
traditionally even at the seed stage the
earlier stage of a company minimum check
sizes can be twenty five thousand fifty
thousand hundred thousand dollars even
if you were quite wealthy that’s a lot
of capital to put into one specific
startup you know and so that was
something we recognized early on is was
there a model a way to allow individual
investors to develop a portfolio a lot
quite frankly a lot like B C’s do you
rarely see a VC only investing in in one
company it’s typically and once he and
there’s there’s good reason for that so
we also democratize that ability to not
just access deals but also invest and
create a portfolio across not so so
basically Alex C it’s correct if I say
that on one side you discover the best
deals the best is the most interesting
startups that you think they need
funding and you think that they could be
good and on the other side you create a
specific fund for each startup you
collect the money from several investors
around the world who can invest I don’t
know from thousand dollar up in that
fund and then that fund
part of the company will have an
inequity of the company and your job is
to follow the company till the exit or
until that company is successful is this
the right flow that’s that’s correct
and the interesting thing is is so our
platform itself is is powered by a
couple different phenomena
so we have our members and I’m bringing
this up just because it’s it’s almost
integral to the flow of things so okay I
think any not just us but any venture
capital investor needs to be excellent
at three basic activity they need to be
really good at deal flow so discovering
startups all of them ideally they need
to be very good at due diligence and
vetting so identifying an investment
worthy startups most promising
entrepreneurs and then lastly they need
to be very very good at value add so at
supporting companies to be more
successful than they might otherwise be
through their ultimate exeter IPO we’re
able to do that
not just in the conventional traditional
sense so in other words we have a team
of former entrepreneurs of operators of
investors we’re backed by a number of
major VCS ourselves non capitals are
Capital Intel Capital
andreessen horowitz and a number of
other funds but on top of that we have
our membership which is again it’s
that’s one of the insights we had is if
you could use the internet to connect
these you know thousands actually
millions of people around the world who
are what are called accredited investors
people who have relatively high net
worth they tend to be fairly
accomplished professionally and
therefore they’re very connected very
experienced they can actually very much
help with their knowledge young deal
flow due diligence and and value add and
so that’s at our core that’s what we’re
about is leveraging that network for the
betterment of startup investing right I
did an old song andreessen horowitz
was one of the fun so you also have a
small farms in this
boarding you I’m joking it’s probably
either one of the biggest and most
successful funder just read the other
day an interview to Marc Andreessen and
unbelievable I mean well you did
everything so what can I say okay good
Alex no totally off topic but it’s true
that a meteor has got your name because
I read it summer and I you thought I
want my name on a greater – yeah
why y’all like says got it how did you
get it alright I in another life so when
I was much much younger I was in a very
active in science research and so I was
you know in many respects that was a
normal high schooler but in other
respects I totally wasn’t one of the
things that I did was university
research so I would actually take the
train a couple times a week to a
university I I had come up with a
nanotechnology-based idea and was
actually doing it experiments and you
know test tubes and gloves and all that
and basically the long story short I
published some papers gotten some
recognition for that work and was lucky
enough to be awarded it’s some some
awards for for young scientists in
America and because of that a word okay
ya know not a planet but it’s an
asteroid yeah it’s a minor okay that’s
interesting I mean I was thinking how
many people I know that they have the
name or on an asteroid actually you’re
the only one I know now is so
interesting very interesting maybe
they’re just not telling you everyone’s
got a name except me alright alright
let’s go to the point I imagine the
people watching this video think okay
interesting this founders club happy for
the investors but Morton most of us we
have a start-up or we have a company and
we want to raise money and the questions
always the same how can I get the money
were investors invest and so on so I
would like to
your your help to answer on this topic
because you are in a in an excellent
position to see a lot of deal flow
ambassadors on one side entrepreneurs so
step number one if you stop the ball in
2013 now and you should say okay in this
moment investors mainly invest in these
topics in these areas in these themes
which which would you pick I mean what
are the most important trend that you
see in investing in this moment you say
you’re basically asking what what
sectors or industries are considered
conventionally to be hot right now
essentially yeah yeah like the that
investor thing always super cool to
invest I don’t know in Big Data or on
Oni tele I’m joking because no one is
investing in Italy or you know where is
hot now so I guess before I answer that
question I should I should point out
that you know I think that there are
there’s opportunity in every industry
and and there is almost too much
emphasis on tracking trends and trying
to you know you should never especially
the way that you presented the question
I think it was from the founder point of
view yeah so Sounders I would say
actually more than contemplating what is
hot right now to investors it
contemplate what what you’re most
passionate about and most connected to
and the problem that you genuinely want
to address and see opportunity is really
what you should be doing irrespective of
what um some investors say in Silicon
Valley think is really really awesome
right now it’s it’s it’s almost
irrelevant because if if you if you and
your position see an opportunity you do
your own due diligence and and it checks
out it’s it’s valid according to your or
again you’re talking to customers users
that sort of thing and iterating I would
say go for it all right you know and
people will come investors with don’t
you know they try to seek out nice
opportunities it might become the next
trend so with that disclaimer yeah you
know I just want I like I like the
disclaimer perfectly real I know it’s
it’s not yeah it’s it’s probably from a
founder point of view it’s it’s it’s
almost disingenuous to be like oh like
EdTech which by the way is really hot
right now in this in Silicon Valley is
hot so I’m gonna I’m gonna start an
EdTech you don’t you know company like
that’s maybe not the right approach but
so I mean I get it we’ll start there I
mean that’s certainly something that in
the last year or so you start hearing
more about education technology and that
cuts across all you know from actually
teaching students who are in school to
help them learn better to people who are
who never went to school to people who
are older and continuing education to
nothing related to education
specifically but the finance of
education it’s really all encompassing
this area and I definitely see a shift
to thinking more favorably about these
opportunities and for me it’s very
fulfilling because I’ve always been one
who likes to I mean clearly you have to
submit you you’re running a business you
have to make money but it’s nice to also
have a positive impact on the world and
certainly EdTech is one of those types
of industries where that’s more
transparent look looking beyond that I
mean there there are everybody will have
their own opinion on what else’s as a
hot and I I’ll reserve judgment on that
I think that’s that’s one of the clear
consensus opportunities that seems to be
yeah so ed tech code could be one area I
mean udemy Udacity Coursera Khan Academy
so there are plenty of startups and
companies that are doing great things in
that area
but if you should invest today in any
startup what do you
watch you look for the founders you look
for the idea you look for the numbers
and attraction you what do you look for
actually it’s almost simple in some
respects but obviously in others it’s
quite complicated because if there was a
magic formula then there would not be a
need for the entire venture industry so
Envy the basic features that we looked
for and I would argue that this is not
necessarily unique to us our three basic
pillars and those are first its it’s the
market so is is the addressable market
for this company
sufficiently large enough to justify
pursuing this opportunity and and that’s
that’s you know either either in Israel
or isn’t and that’s sort of a
complicated question too because
sometimes the very presence of company
can expand its own marketplace yeah in
other words yes it so that’s one the
other is the team you know people are
essential to start and it’s probably not
a secret to anybody that startups change
over time they pivot there they respond
very one of the beautiful things about
startups is a are agile they have the
opportunity well when they’re working
they’re agile they have the opportunity
to be responsive to market forces and
demands and and and therefore it really
is important that the team is a team
that has what it takes a team members
complement each other are the right
people for the market opportunity yeah
and that’s and it’s again that’s an area
where it’s maybe not always obvious
because you have somebody who’s like
who’s never started a company before and
and understand find it a number of
first-time Islanders who have
subsequently seen great great success
you just think back to other examples a
team does not immediately mean that
they’re a serial entrepreneur obviously
that makes it no right to mates yeah
yeah so and then the last piece and this
is actually for us this is maybe a
little bit more specific for funders
club I mean the last piece that we look
for is traction and growth and the
reason I say that’s somewhat may be
unique for us is some some investors
will actually invest in just the the
market the team yeah we’re actually
looking for founders who have already
launched their concepts have already
spoken with users and customers and
started actually providing them with the
product or service and you’re seeing
growth you’re actually seeing much
traction and that’s that’s the toughest
part to to meet four four hundred so
that we actually see that ninety-five
percent or so of startup you don’t
actually yet when when when which
speaking with them have that traction
now what’s interesting is when you speak
to the same founders you know three
months later six months later things can
be things can change of course so which
which also comes back to a question Anna
you can asses earlier for from the
founder point of view looking at
fundraising you know how you do it yeah
one one interesting point that’s not
discussed often enough is a like most
startups probably don’t need venture
financing and probably shouldn’t raise
it and in fact trying to go out and
raise venture capital might kill your
startup and yeah in my district building
services and serving your customers your
users and that’s just something that I
think as long as you’re aware of it it’s
justa calibrates like just cuz you’re
starting a company
it doesn’t mean you have to
right absolutely no it’s interesting
obviously Alex I’m I have to ask you
these questions because I totally agree
by the way on your point and if I think
in my experience I got experience where
I got I was funded and it was the worst
day of my life because then you know I
was totally locked and the company was
no mine anymore a nightmare you know and
in other situation was a was a great
relationship and we both were successful
and in another situation again I say why
should I need some funding I mean I go
my way and so it really depends of by
the situation and also who is the
investor and but you know we try to find
some kind of common pattern and this
kind of trend another topic that I’m
interested in just a couple of minutes
more than I let you go to to your job
but in this moment 2013 tell me a little
bit about valuations because I mean
obviously there is a difference between
European valuation and US valuation in
the startup world but if you should say
in this moment when a start-up begin and
try to raise a first seed you know the
first round is there an average
valuation because a common question I
get every day is how much what was the
valuation of my starter when I go to an
investor the first time ok me about the
team I have the right market some
traction but what’s the valuation of no
idea I don’t know where to start from do
you have any take on this point
absolutely I think it’s pretty simple
actually I’m trying to there’s two
comments I want to make one is speaking
to founders and myself I love to share
this point of view which is start a
start-up outcomes are our binary in some
respects you know you want to optimize
for success as opposed to failure you
want you you want your company to grow
and become a be useful and clothes
frequently you see startups actually
imploding and in failing and so the
important thing is
founders to have a successful outcome
you in other words you want to optimize
for outcome
optimizing for deal terms not
necessarily that important in the end
ultimately I’m not clearly you know it’s
it’s something to consider our day to
day but in the scheme of your company
the terms of the deal aren’t really that
important and just to support that with
actual dates there are today very
successful startups that’s I won’t help
them here but they are IPO candidates
and they rate their seiran’s at
valuations that are one fifth one you
know one tenth of what some of the
startups and in Silicon Valley are
raising their sea grounds at today
amazing and and yet those companies are
successful the founders are doing well
and it’s sort of a moot point
what matters is success and having an
outcome less so specific arms but
actually answering your question just
how do you know what’s the right price
company the reason it is simple is it’s
really it is simple its market
determined it’s whatever the market will
bear right ultimately if you think about
it you’re your startup stock or you’re
writing convertible notes you climb up
the terms that’s a type of product and
investors are a type of customer and in
this specific instance in this
discussion and so really it just comes
down to okay they’re looking at you and
your team in your market and your
services everything just saying I think
this is what you know this is what and
you collect enough data points I’m
speaking with the different people and
you come up that’s sort of how it
arrives it’s it’s you can certainly try
to to say hey like we think based on
comparables because you know your friend
raised at whatever know what terms that
you should also have this as a starting
point for a discussion
what I just said in another it’s what
the market is willing to air what what
it will pay is the ultimate answer okay
so it’s not an average valuation that
you see around in this moment like I
don’t know two million is the average
valuation for the citron or something
like that
I mean I think like I you’ll see a
variance based on the features of the
startup the a-team the market the
traction in some cases the industry the
business model it’s it is dependent on
going you know and obviously if Steve
Jobs would come back today and I arrive
and say I’m gonna launch a new startup
what’s the valuation I mean just you
know you just say I want to launch an
you started without any anything the
valuation would be one trillion so that
that’s very very important or I know
Paul Graham or say I want to start up
now even if it has no traction nothing
but the valuation would be me
immediately I mean and just I mean so
there if that’s if that actually did
happen you know I guess that would be an
indication that the investors have a lot
of confidence in him as a person based
on his track record his actual
performance and you know so it’s very
dependent on situation alright last
question um how do you see now the
future of this funding ecosystem because
its founders club there is AngelList
that didn’t exist I mean two years ago I
think exists all right there are these
kids like it start our indiegogo for a
different kind of job and you have the
traditional VCS and then you have angels
so you have a lot of people now going
around what do you think will happen in
the next couple of years
sure so I mean one one broad trend that
I foresee and it’s already happening
what you just said speaks to this is
there there’s efficiency is coming to
this area of
of holid investing or just private
company financing for a while there was
an asymmetry of information there
they’re in substantial and efficient
time just to give you a quick example
trying to invest in the types of
opportunities that hunter Spock was
funded previously would have required an
individual to you get on an airplane you
know fly to meet with some CEO of some
startup which by the way they somehow
had to know about in the first place did
you do substantial due diligence I write
a check size that could be you know
quite quite substantial
maybe irrationally so in the context of
their net worth and then and then
continue to to support the company hands
on through exit and we’ve we’ve
understood we’ve shifted that dynamic to
be a little bit more substantially more
efficient and these things such as like
Kickstarter for example they have freed
up creatives I mean the Kickstarter
specifically was intended for Kratos but
you see that platform as well as others
being used by actual startups and
businesses to pre sell products and I
know there have been issues with bats
and delivering on those things but I
think that over time you’ll see those
issues to be resolved but sort of
harming startups with the ability to tap
into capital in that case creep free
selling capital for a product and that
was not possible before in a way that
was not possible before okay and so what
does this mean in the end it’s it’s
actually a very big positive force for
the world and there will be a period of
noise period where there’s lots and lots
of these platforms and it’ll be
important for people who are the ones
writing the checks whether it’s for a
Kickstarter style platform or whether
it’s for investing in equity or equity
life structure to to pick a platform
that has a track record that has
credibility that sort of thing but but
over time I think we will certainly see
certain platforms emerge
sort of leaders in their space and and
that’s that’s sort of the immediate next
let’s say 12 years 12 months rather or
so that I I see but ultimately it’s is a
very positive course that they’re always
different things happening and I also
think it’s in response to recognition
from people in general hey you know what
there’s there’s a lot of opportunity
here to to try to support companies ok
the overall the overall BC industry for
the last 12 years has underperformed the
public markets now there are certain
very very successful funds venture funds
within the industry but they’re far and
few in between and and I think because
of that in part because of that you see
a lot of people recognizing hey look
there are other ways that this could
work Alex do you have three apps or
three websites or three platforms that
you particularly love and you would say
I would recommend you know this tree of
mobile app or or these three tools for
doing business better or in a more
efficient way or do you have any
particular Alex metal top chart well I
think for for me part addressing me
personally a little boring I gotta say
but I’ll just share with you anyway
obviously cannot live without my my
email and serve them you know that’s if
you look at my phone like what are the
most used apps on my Google Google you
know Gmail okay Google Apps you know
which here and I’ll explain why that’s
so important is I’m having all these
meetings and all these venues I have no
idea where they are and it turns out
okay very standard button efficient apps
I would say great
excellent all right Alex Mitchell CEO
and co-founder of the thunderscope Alex
thank you so much and good luck for
everything keep up the great job that
you did till this moment thanks a lot mark
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