Deepak Goel is a mentor with 500 Startups and an individual angel investor. Please note that the opinions expressed here are his personal opinions and don’t reflect the opinions of the organizations he is affiliated with.
CT. What is your experience in evaluating startups and angel investing?
I am a Mentor at 500 Startups. I am also an Executive-in-Residence for Plug & Play Tech Center and an advisor to Khosla Impact Fund. I have judged several business plan competitions and have performed due diligence for a couple of VC firms. Over the last year, I have evaluated more than 300 business plans and advised almost 100 companies on their pitches, product strategy, and online marketing. I have also invested in couple of those companies.
CT. What is your investment philosophy?
I follow the advise-assess-invest model. First, I advise the startup for a couple of months. Then, I assess the team/progress and decide if I want to invest in it. I don’t invest more than $10,000 per company and I don’t invest in companies for whom I can’t provide meaningful advice. My sweet spot is consumer internet but I keep an eye on other deals too.
CT. What are some of the trends that you are bullish on?
I am very bullish on the “organized” long-tail phenomenon, some call it Airbnb. We have experienced it in hotels and cabs domain but there is room for several startups in a variety of verticals such as airbnb for dinners, airbnb for classes, airbnb for delivery, airbnb for commercial real estate, etc.
I am also very excited about the mobile advertising space. No one has figured it yet and the best is yet to come. I believe the real opportunity lies in forming a context on mobile phones and serving targeted ads on destop and tablets. Google’s acquisition of Waze underscores the point. If they connect Waze accounts with Google accounts, they can serve much more relevant ads on desktop.
I am also keeping a close eye on the smart wear-ables space. I feel that Pebble will do to watches what Apple did to phones. I see many big companies jumping on the bandwagon but I am yet to see interesting startups in that space.
CT. What are some of the common issues you’ve faced with entrepreneurs?
Based on my experience, many entrepreneurs lack the courage to accept that their baby is ugly. These entrepreneurs often agree that there are basic flaws with their model or business, but won’t take the necessary steps to fix them. So, there’s a knowing-doing gap.
You want to build companies which are “built to last” and not “built to flip”.
Though many claim that they’ve read “The Lean Startup,” they clearly don’t understand its core values. They’re still tracking vanity metrics and are convinced that those are the right metrics to assess their progress. They also have “big-name” advisors when it’s obvious that they don’t get more than 15 minutes a month from those advisors. If you’d really read “The Lean Startup,” you’d know that it’s better to have “junior” advisors who spend time with you than “senior” advisors who don’t have the time to get into the inner-workings of your business.
Many entrepreneurs claim that they are lean, scrappy, and follow agile development philosophy, but they still want to raise enough money so that they don’t have to think about raising money for another 2 years. If you truly believe in agility, you would never raise money for more than a year.
CT. Do you have any advice for entrepreneurs who wish to pitch to you or other investors?
Just answer five things in a pitch: “what is the problem,” “how is it getting solved today,” “how is your solution superior,” “how big is the opportunity,” and “why are you the right team to solve the problem?”
CT. What should entrepreneurs look for when applying to an accelerator?
Accelerators provide you with mentoring, network/ecosystem and little money. 50K or 100K doesn’t matter in the long run, what really matters is the network and mentoring. Don’t be impressed by the long lists of advisors associated with the accelerator. Figure out how much time and money these advisors have actually invested in the companies that came out of the accelerator.
If you are looking for best-in-class mentoring and a large global VC/entrepreneur ecosystem, consider applying to 500S. http://500.co/accelerator/
Disclaimer – I am a mentor at 500 Startups.
CT. Any other advice for entrepreneurs.
Have your advisors invest in you. If you tell me that you have XYZ as an investor (even if it is as small as $5K), it is much more powerful than just having him/her as an advisor.
Read “The Lean Startup” by Eric Ries cover-to-cover at least couple of times. Don’t raise money for more than a year unless you absolutely have to.