![[y2mate.com - Startup2Startup Interview with Naval Ravikant.mp3]]


I am Leonard Speiser. I work at Yahoo, but I am here today at startup to startup and I have with me Neval, uh, I manage the hip forges, an angel fund for seed stage investing in social networking and e-commerce, and I'm also a coauthor of venture hacks. And I started a couple of companies, including epinions.com investor.

Great. And today's topic is all about novel. Novel is the expert. When it comes to the financing of young fledgling startups with great opportunity, Laval, what do you look for in a startup team? What is it take to start a company in today? Environment. Well, there's no silver bullet or magic answer, but I actually do have a set of criteria that we've come up with, uh, based on my own startups that I did not initially as an investor, but looking back on what I thought worked.

Um, I usually look for two things that are paramount above all. You gotta have a great team. It's obvious it's a totology it's everyone says it, but you really, really do have to be working with some of the best people in the, in whatever industry you're in. Um, you have to pick a huge market niche markets just don't work because the first idea never worked.

You always have to change it. So you just need room to maneuver. Um, and then there are three more factors that I look at. Not all three of them are required, but I prefer a company to have at least two of them. One is difficult technology or proprietary technology that is building and compounding over time.

A second would be a proprietary distribution channel. Come up with some clever viral marketing or search engine optimization or partnership strategy that gives them a leg up over the competitors. And the third is a direct monetization model. Something more than just throwing up 10 cent banner ad CPMs.

Now you mentioned a little bit about viral, viral marketing and, uh, oftentimes people will think about viral marketing and think about social networks. Uh, what's your thoughts about social networks today versus maybe where they were previously? Well, the social networks are still going through a big experiment.

Uh, I think the earlier incarnations, they thought that they were the new media companies, which is still a very well might be, but this only don't monetize, uh, grow in the way that the old media companies did. Uh, they don't grow through a proprietary, locked up geographic distribution. They don't monetize for classified ads.

Um, instead the way that the social networks seem to be working is they're essentially address books. They're large passive communication channels. Um, there are great areas for social games. Uh, and they seemed to be monetizing through very targeted offers and, and connecting people to each other. So let's say that we have a company we found that has all of these elements for success, and now it's time for them to raise them.

What are your thoughts on that process? Well, it's a, the same. It's always been in that. There's a small number of companies that are very good and very qualified and they get an embarrassingly large number of offers. And there's a large number of companies that, uh, miss on one or two dimensions. And they're always pounding the pavement and not getting it.

And it actually makes sense when you think about it, because the nature of this business is a hit-driven business, a small, small number of companies account for all the returns. So when people recognize what they think is a winning company, they will pay almost anything and do almost anything to invest in that company and everything else.

They just kind of look at and go buy. Um, it's very similar to Hollywood where there's a few similar blockbusters and there's a lot of indie films made. Uh, so everyone's got a camera. Odds are, if you're out there playing, you got an indie film and everyone's shooting for the blockbuster. So I say, go back to those five criteria and think about your book Buster.

The 120 entrepreneurs that are coming tonight are going to hear more about this from Laval. And hopefully next time, you'll see us here at startup to startup. See you later.