I just watched all the episodes of The Big Bang Theory and the conclusion is ineluctable: I was the original Sheldon Cooper! The people who know me today find it hard to believe because they see me as a socially confident extrovert. They don’t realize that this is the result of a deliberate exercise I undertook 10 years ago to foster my extroversion and social skills, followed by 10 years of practice.
Friends, who knew me in my late teens and early twenties, would tell you I had exactly the same delusional sense of self-worth and condescending and arrogant self-centered world view. I could not conceive of why other humans spent time chasing girls, listening to music or watching movies when there were more intellectually stimulating endeavors at hand. Combined with a total lack of social awareness, empathy and understanding of social norms, my human interactions took awkwardness to a whole other level.
Sheldon and I even have similar mannerisms and we kind of look alike! I should be asking the writers for royalties!
On another note The Big Bang Theory is fantastic and I can only encourage you to watch it. The dialogue is witty and sharp and I have been astounded by the inclusion of recent scientific discoveries in the show. In a recent episode Sheldon was commenting on the potential discovery of neutrinos traveling at faster than light speed at CERN, a discovery that had only been made public weeks earlier!
I moved into my new amazing week-end house in Bedford in January, but kept to my nomadic lifestyle as last year’s New Year’s resolution of traveling less came to naught and I found myself on the road more often than ever before. As a result, I decided not to get a new apartment in the city and have essentially lived in hotels for the past 18 months. While cost efficient relative to the insane apartment I had before as you only pay for the nights you spend there, and despite the amazing personalized service at The Mercer which is the hotel I “live” in in New York, I do miss having a home. Moreover, it may not be sustainable for the long term especially as my New Year’s resolution for 2012 is to be on the road for no more than 6 months!
OLX continued to grow slowly but surely, passing the 150 million unique monthly visitor mark. Working with Naspers has actually proven to be a pleasure relative to the horrid experiences I had with the Zingy buyers. They let Alec and me run the show while pushing us and financing us to be ever more aggressive in Brazil and India.
I was given the chance to give a keynote at Leweb this past December where I spoke about everything I learned about operating and angel investing in Brazil, Russia and around the world.
On the personal side, I am glad to report that for the first time in 3 years my knees are starting to hold up after much rehab and I finally was able to restart playing tennis, padel and skiing towards the tail end of the year! I look forward to 2012 bringing lots of sports oriented adventures! Heli-skiing, here I come!
2011 was the year I really improved at kite boarding thanks to an amazing trip to Bonaire in the spring and a trip to Prea in Brazil in the fall. These were the only real vacations of the year, because I tried to spend as many week-ends as possible in Bedford playing padel, paintball, Xbox, racing RC cars and much more! I look forward to 2012 bringing more of the same!
I became an ever more active angel in 2011 making 37 investments and 12 follow on investments. I also sold 5 companies, 2 successes and 3 failures. I still have 74 companies in the portfolio excluding OLX.
My predictions for 2011 were by and large correct:
While I fretted about the looming sovereign debt crisis in the West and global economic imbalances, I suggested the day of reckoning would not occur in 2011.
Despite all its growth, it’s still too early to tell how successful OLX will be given our global war with Schibsted.
2011 was an amazing time to be an Internet entrepreneur as the early stage startup scene became awash with capital while M&A and IPO activity picked up significantly.
2012 has much more risk for the global economy. Europe is going to have a recession given the austerity budgets and the uncertainty around resolving its sovereign debt crisis. Despite the huge structural problems in the US, the US will continue to muddle through given its position as the only safe haven in these difficult economic times.
I am hopeful that at some point in the coming decade a new productivity revolution will spur growth and allow us to put our problems behind us. Things look bleak now, but if we think back to 1979 with raging stagflation and high oil prices, the outlook seemed dire for the West. Yet a period of 30 years of low inflation, stability and growth lay right around the corner. Even though I can imagine countless scenarios for the coming years that end with economic Armageddon and/or war, the rising wealth in South East Asia and Brazil combined with continued technology improvements and eventual structural changes in the West (e.g.; increasing the retirement age to 70, public pension reform, end of life health care rationing, eliminating farm subsidies, etc.) will spur a similar era of growth and stability. Unfortunately, while I suspect this period of growth is coming in the next 10 years, it won’t help us in 2012.
Given the interconnectedness of the global financial system, there is a greater risk that the euro crisis will trigger another round of financial Armageddon in 2012, possibly worse than the one in 2008-2009 given that the state finances have significantly deteriorated since then, than there is a probability of a positive upside.
Until a new financial crisis happens, the Internet will remain the place to be. As the engine of productivity growth and hence economic growth, it will continue to attract a disproportionate share of talent and capital. 2012 will see the IPO of Facebook, the creation of countless new startups and hence the introduction of many amazing new ideas. I look forward to witnessing all of that and hopefully investing in a few of them!
I had the great pleasure of being invited to give a keynote at LeWeb 2011 on angel investing in Brazil, Russia and around the world! I really enjoyed the fireside chat I had with Loic Lemeur at LeWeb in 2009 and was really looking forward to the opportunity to share all the lessons learned over the course of the past few years and explain why Brazil and Russia have been such an important part of my professional life in the recent past.
I hope you enjoy it and avoid all the mistakes I made!
For the past few weeks I was pondering what could explain the viscerally emotional response I felt when I heard Steve Jobs died. I felt a profound feeling of loss and cried as I would have had close friend, family member or beloved dog passed away. Somehow, Steve Jobs, whom I had unfortunately never met, elicited a similar emotional response.
Upon reflection, I suspect that in a way I felt that he was part of the family. His unique understanding of the human psyche and of what we truly wanted, even if we did not voice our needs, allowed him to build products which we welcomed into our homes and transformed our lives. Through our connection with his delightful products, we felt we had a connection with Steve. In that sense, even though he was exceptional, he was one of us.
Padel is a racquet sport played extensively in Spain and Argentina. I have been obsessed with the sport ever since I was first exposed to it as a kid. It’s easier to pick up than tennis and the points are spectacular. In many ways over the past few years the main reason I would go home to Nice on vacation was just to play with my family and friends.
As I mentioned a few years ago, I always wanted to play in New York, and knew there were enough Argentine, Spanish and French practitioners to organize games, but there were no courts. I am happy to report that New York is now complete! I decided to take matters in my own hand and built a padel court at my house in Bedford just outside of the city.
Reach out to me if you want to play whether you are an old hand at padel or a good tennis or squash player looking for something new!
As you can see below, the court is ready for some action!
In the meantime enjoy this video of some great padel points.
Over the years I have tried out various distribution channels in order to find potential dates, be they offline (introductions from friends, parties, etc.) or online. Online, I have tried pretty much every single site there is to try: eHarmony, Meetic, Lavalife, Matchmaker, Craigslist, OkCupid, Match, Adult Friendfinder and many more, with varying success.
Some online sites have proven to be too much work to be worth it (e.g. Craigslist or Adult Friendfinder), while others just made introductions to grossly incompatible people (eHarmony). I did meet fantastic girls on Match which led to some of my longest and most successful relationships, but even there the process is overly arduous.
Somehow on a flight back from a conference with my friend John Myers we hit upon the topic of our respective frustrations with online dating and decided to break down the issues we observed:
Attractive girls receive way too many emails, most of which are from bad matches
Most personal essays are generic and do not capture the real depth of someone (e.g.; in New York everyone seemingly “works hard and plays hard”), and descriptions are not objective: everyone describes themselves as being smart and attractive – so the software can’t do the work of separating the wheat from the chaff because it doesn’t have enough real world data to be able to do so
Filling profiles out takes too long
There is no effective way to introduce friends to each other the way people have done since Jane Austen
We started wondering if there was a way to address those issues and here is what we came up with:
Let users define what they are looking for in a match and the importance of each of the criteria (granted it assumes you know what you are looking for; later on we could always add a more sophisticated layer which learns what you unconsciously want)
Crowd source the ratings of various users by having friends recommend/rate each other anonymously (to prevent the incentive to lie to flatter your friends) and without anyone ever knowing the ratings, which are all kept hidden inside the app so no-one can ever be upset
Have an algorithm match people based on what each other is looking for based on their average rating from their friends (without disclosing those ratings), which should give a much more objective/accurate match
Only allow users to contact each other if they both say they are interested in each other (and they are not told the other person is interested until they also say they are interested)
Allow users to introduce their friends to each other – which, we think, is the most successful way that people have met each other for thousands of years
In other words, give people very few, high quality matches with the need to go to the site only if there is a match so it does not feel like work.
Given the social components, John & I decided to build a Facebook application: Find The One. It actually does everything we described above and we even spend a few thousand dollars marketing it, but it’s not taking off.
Given the current Facebook restrictions on virality, we don’t seem to be able to ignite usage (though we might have missed obvious strategies Facebook experts might be more familiar with). Maybe we limited user interactions too much and did not build enough of a gaming or fun component into the application.
In other words, this is a cry for help to all of you. We would love to get your thoughts, feedback and contribution!
At this point we are doing this out of intellectual curiosity – we would be satisfied to create something that makes a difference and have no expectation of monetizing the application.
Earlier this year, I wrote a relatively thorough blog post on how my partner Jose Marin and I make angel investments: A SuperAngel’s Investment Guide. While revisiting the topic, I realized a few elements were worth clarifying.
In the article I mentioned how we only focus on consumer facing companies and how we invest in a wide variety of geographies. It’s worth pointing out that our geographic focus is bounded by the nature of the idea, that our investments fall into three categories, that we never join the board of the companies we invest in, and typically don’t do follow-ons.
1. Geographic Specificity:
We invest in innovative ideas in the US market.
If we are going to take concept risk, we don’t want to take market risk. To the extent an idea is unproven; we’ll place a bet on the US market. Should the market prove to be a niche, the US market might be large enough for the company to be a success. Getaround which recently won Techcrunch Disrupt is such an example (and hopefully won’t be a small niche :)
We invest in proven models in Brazil, Russia and Germany and to a lesser extent in Turkey, China, the UK and the rest of the world.
If we are going to take market risk, we expect the model to be proven. We don’t have absolutes in terms of what “proven” means, but for the most part we expect the original concept to have reached $100 million in revenues and to be either profitable or have a clear path to profitability given its gross margins and potential net margins. Viajanet falls into this category.
2. Investment Types:
Traditional Angel Investing
For up to 40 companies a year, we are small investors in projects where the funding is led by others. Typically the funding is led by our VC friends (Redpoint, General Catalyst, Bessemer, DN Capital) or our angel friends and friendly early stage funds such as Oleg Tscheltzoff, Team Europe, and Xavier Niel and Jeremie Berrebi of Kima Ventures. In those deals we mostly play a passive role. We involve ourselves only to the extent the entrepreneur wants an introduction to a VC or potential partner, or quick feedback on the product or deck.
Projects we Advise and Accompany
For up to 6 companies per year, we lead the round. We do the full screening of the project. We help the entrepreneur with his presentation. We bridge the entrepreneur if necessary. We raise the funds from our angel network (200 first tier angels). We do monthly follow-up calls and 3 yearly meetings in person. We are typically very involved during the first 12-24 months – basically until the startup gets a VC on board who takes over from us.
Projects we Initiate
For up to 2 companies per year, we start the companies. This is Jose Marin’s and Carlos Martin’s day job at IG Expansion and I help out a little. We identify the model, bring in amazing co-founders with 20-30% of equity, invest the first $2-3 million and raise the first VC round after that. In 2010, we started Viajanet, an Expedia for Latin America. In 2011, we launched Lofty, a next generation HomeAway / Airbnb. Later this year we will help launch a new ecommerce project in Brazil headed by my brother Olivier.
3. We don’t join the board of companies we invest in
When I started angel investing in 2005, I invested a lot of money in very few companies and typically joined the board, organized regular meetings and was very involved. This early batch of companies mostly failed, and I realized that most of the time spent was not productive and definitely not scalable given my day job as Co-CEO of OLX and my desire not to spend more than 5 hours a week (or 10 hours in a crazy week) on angel investing.
An email update or a 5-10 minute phone call once in a while is more than enough to get a sense of how the business is doing. Moreover, rather than having structured times to talk, it’s much better to be available punctually when the entrepreneur needs help. This works better for the entrepreneurs because they get the help they need when they need it and don’t have to spend nearly as much time on reporting.
We sometimes don’t talk to the entrepreneurs for 6 months or more, but then end up spending a lot of time with them discussing a term sheet they might have received if they are fund raising, etc.
4. We typically don’t do follow-ons
Jose and I typically invest $10 – $250k each in companies we decide to invest in, with an average of $50k for me and $25k for Jose. We typically get a few percentage points of the company and our investment is typically part of a $500k – $1 million round. Pre money valuations vary dramatically based on the product development stage, capital requirements, team experience and company traction, but range from $300k – $3 million with an average around $1.5 million.
The reason we typically don’t do follow-ons is that the VC round tends to happen before the model is really proven and at a high enough price that our pro-rata would represent a significant amount of capital which just does not fit our model (though it makes sense for VCs which have more capital to deploy). This is all the more true in these frothy times as the duration between an angel round and a VC round has compressed while valuations have increased. We would rather invest the money in new startups.
We follow-on only when it’s a no brainer and we would look like idiots if we did not given the company’s traction and the terms of the fund raising.
Angel Investing Update
As mentioned in the prior angel investing post, 2010 was a year for the record books. We invested in 22 companies, followed on in 4 others and had 5 exits. At the end of last year, we decided to slow down the pace of our angel investing due to the frothiness of the market and the trend, especially in the US, towards convertible notes, either uncapped or with high caps, instead of priced rounds.
We never invest in convertible loans unless they have a low valuation cap. We feel that the 15-25% discount to the series A they typically offer is not enough compensation for the much greater risk of investing at a very early stage, especially since a series A round is far from guaranteed to happen. If the entrepreneur insists on the convertible structure, we will just wait to invest in the series A.
Moreover, we feel that convertible loans are a bad idea for a startup. They typically are due in 18 months. They work out better for the entrepreneur from a dilution perspective if a VC round happens during that time period. However, should a round not happen, it guarantees a failure as the company will not have the money to repay the loan. In these frothy times, it’s easy to assume that a company will raise a VC round, but people forget how rapidly investment conditions can change and should focus on building companies that have staying power instead. Even in these times, many companies will not, and many should not, raise VC money given the market size they are going after, the market dynamics, etc.
It’s not inconceivable that a technical default by the US or a real default by Greece, or worse Italy or Spain, could send the credit markets and all investment markets in a deep freeze. If this was the case most of the companies which raised convertibles would fail. In 2000-2001, I invested in 7 companies. One went under immediately. If you had asked me how much the 6 remaining ones were worth in 2002, I would have told you zero. Yet over the course of the next 6 years most of them ended up doing incredibly well with 1 IPO and 4 very successful exits, despite the fact most failed to raise venture money for many years. Had they raised money through convertible loans, they probably would not have had the same staying power.
Somehow, despite the frothiness of the current environment, we ended up finding many great entrepreneurs to invest in and are on track to invest in twice as many companies as in 2010, which was by far our most prolific year. In 2011, we have already invested in 23 companies, followed on in 5 companies and had 4 exits with many more investments pending.
We had a partial exit in Viajanet and full exits in Dineromail, Phanfare and FamilyBuilder. The first two were huge wins: Dineromail was my largest angel exit in absolute dollars and Viajanet my highest return on investment ever with a 50x return in a year. Phanfare was the only loss with a 90% write-off.
Here are the companies we invested in so far this year:
January 2011: eVenues.com, an Airbnb for meeting spaces
June 2011: Gezlong, we helped structure the round for the Jetsetter of Turkey
June 2011: Newpeaks Invest, stealth Brazilian ecommerce project
June 2011: Follow-on investment in Martingale which runs a hobbies marketplace
July 2011: Falcon, stealth German ecommerce project
July 2011: Visual Revenue, front page performance improvement for online media
July 2011: DeporVillage, online Spanish ecommerce site for sporting goods
Excluding the companies I ran (Aucland, Zingy and OLX), I have now made a total of 77 investments ($10 million invested), had 16 exits or closures (11 gains, 5 losses, $9 million recouped) and still have 62 companies in the portfolio.
We’ll see what the rest of 2011 has in store for us. We would actually like to slow down the pace of our investing, but we keep running into fantastic entrepreneurs we feel compelled to back.
In the meantime, you can watch my keynote at La Red Innova which summarizes everything we learned about angel investing:
I am also including the post keynote interview for your viewing pleasure:
Welcome! I am an Internet entrepreneur, angel investor, student and lover of life, aspiring Renaissance man and co-CEO of OLX, one of the largest free classifieds sites in the world.
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