The writers should be able to do the same for that big taxi cab company apparently some big VCs believe will be another Google, you know the one, the one, and there can be at most one, that lost nearly $1 billion last year alone and is still in business, Uber.

Uh, guys, GUYS, Uber VC guys, over here, guys! Shut up, sit down, and listen up — it’s for your own good!

First, lots of people have cell phones, and more have ordinary phones. I know; I know; there aren’t many pay phones left, but, did I mention, there are a lot of cell phones? Right, need phones to call cabs. Right, we got that.

Second, the taxi cab business is 99 44/100% local. It’s a local business, like Vito’s Pizza carry-out or Chung’s Chinese carry-out, and, in both cases, along with the taxi business, super tough to make global. The global overhead will sink all the little boats.

Uh, the reason for such local businesses, why they can survive longer than a lot of VC funded businesses, is that they have a solid market (people like pizza and Moo Shu Pork) and a huge barrier to entry, the geographic barrier; that is, no one drives 50+ miles for a pizza or quart of Moo Shu Pork so that such a carry-out is not in competition with anyone or thing more than 100 miles away. So, do well in a radius of 100 miles, usually 25 miles will do, and can do well, well enough to buy a house and support a family, especially if have children running 2-3 more such.

Some US bio-medical VCs may know what they are doing: E.g., there are a lot of bio-medical Ph.D. and MD degrees at such firms.

But the US information technology (IT) VCs are a really goofy bunch: Bluntly for technology, they want to ignore it down to hate it.

They have a really simple approach: An entrepreneur contacts them for funding. Test 1: Did they send a URL or app name of their product? Test 2: Does the product have a user interface (UI) and user experience (UX) that indicates that 1 billion people will “love” (Paul Graham) it right a way, even find it “addictive” (movie, The Social Network about the start of Facebook)? Test 3: From Comscore, etc., does the site have “traction”? Test 4: Does the site have revenue, earnings? Test 5: Are there several founders, each naive about venture funding and desperate for a check under almost any conditions (e.g., all the credit cards are maxed out, and each has a pregnant wife about due). Test 6: Can the VC see a fast exit opportunity, e.g., as an acqui-hire, as an M&A by a big company that would like the startup to disappear, by an old company that wants to start to move into the 21st century? Being “another Google” is considered too rare, really unpredictable, due essentially only to rare luck, and ignored, even if explained in detail by the entrepreneur!

So, the startup has to do relatively well on these tests, or the VC will return to his golf game or yoga exercises.

Nowhere in these tests is any attention to the technology. Is it new, correct, powerful, valuable, proprietary, secret sauce with a big business advantage, with a significant barrier to entry?
The US has (1) the US DoD and (2) the world’s best collection of research universities. For the DoD, back to at least 1942, it is the unique, unchallenged, world-class exploiter of STEM field research from the research universities and getting those results protecting US national security. So, this pair, (1) and (2), are the grand example of how to do research and get it doing powerful things in the real world. And some of those things, e.g., GPS, are, or would be if the USAF charged fees, very valuable. Alas, the IT VC totally ignore (1) and (2).

Congress doesn’t ignore (1), (2) and, instead is overwhelmingly the source of money for both of them and for just the one reason, US national security.

Well, mostly the VCs are investing OPM (other people’s money), typically pension funds, university endowments, funds of wealthy families, investment groups of wealthy countries, etc., called limited partners (LPs). So, really the people to be pleased are the LPs. If the VCs are making money, even if they are just backing push carts in Manhattan selling hot pretzels, the LPs will be happy. But, also, if only to avoid embarrassment, the LPs don’t want to miss out on the next Google.

Well, the IT VCs are being slow to deliver more Googles, and on average the IT VC’s return on investment (ROI) has not been very good. But, what is an analyst, MBA, at a big LP to do? Something new and different, out there all alone, being scowled at by all of his management chain? Nope! Better stay with the herd! So, net, all the IT VCs and all the LPs closely agree, low ROI or not, too few new Googles or not, for better or worse, on the tests above. For anyone with a background in IT in high end US research universities and/or the US DoD, the IT VCs look brain dead — they refuse even to read about the crucial, core technology.

Well, that has been the situation. But, wait, there’s more! It used to be expensive to do an IT startup! Need, e.g., all those shrink wrapped boxes! And/or needed a Web site, and that took an expensive server from Sun Micro Systems with some of the few people who knew how to bring up a good Web site on Sun servers.

But all that has changed! Now for $1500 or so, can buy parts for one heck of a powerful first Web server. For how to bring up a Web site, the Internet and the book stores are awash in tutorials. The infrastructure software is enormous, powerful, and usually available for free. E.g., there is the Microsoft BizSpark program where can get a lot of high end Microsoft server side infrastructure software for free for three years and on good terms later. With a common $100 DVD copy of Windows
7/10 Professional, can install and run that infrastructure software. For software development, there is Microsoft’s .NET Framework with beautifully designed and implemented programming languages and object libraries. So, an entrepreneur just needs to wade through all those goodies and then concentrate on his startup. Yup, can have a one person, sole, solo founder startup. And, why not? In any small business, the CEO very much needs to know just everything about his business.

Then by the time that solo founder is doing well on the tests, especially the part about earnings, he may quit contacting IT VCs!

So, close to true, by the time the IT VCs are ready to write a check, a good solo founder will no longer want it!

So, IT VCs have gotten frustrated with anything technical and have been moving out to low or no tech: Uber, SnapChat, grocery deliveries to homes, …, and that juice machine!

Uh, maybe that juice machine did well on those VC tests! Or, none of those tests had enough in due diligence to find that there was no barrier to entry, that is, that MaryAnn could do as well and so could Whole Foods, etc.

Or, maybe some of the VCs thought: “Sure it’s silly. And I drink juice daily without that contraption. But we can run this up the flag pole of the big publicity machine and have a lot of people buy and let us get a good exit before people catch on! Uh, people with a lot of disposable income like to have shiny things to spend the money on, and we are giving them a chance!”.

Considering all the funding rounds and the number of investors, apparently the CEO was really busy promoting! So,maybe the VCs thought: “For someone with that much hustle, there’s no way they will fail!”.

But it wasn’t just a little bit silly; it was really silly!

Uh, for that big squeeze issue, even if MaryAnn couldn’t do it, still have the shop table top vise Dad had when I was a child. Currently the thing is in my basement workship clamped to a 4 x 8′ sheet of plywood on two sawhorses. That vise can do some big squeezing! For more, I can get a long pipe, get some more leverage, and get much more squeezing. For more, could buy a bigger vise that could do much more! And there could be other cheap DIY opportunities to make a squeezing machine! For the fresh vegies, lots of grocery stores have those all nice and fresh, nicely cut up, in jars, cold, ready to eat!

Net, bottom line, the IT VCs are lacking good means of decision making, in particular project evaluation, and would do about as well smoking funny stuff. But, such failures won’t last because, as elsewhere, Darwin is on the case!

.
Fell for it because they were insular, elitist, self indulgent.

They — Google, Kleiner — wanted to fall for it.

BRC
http://www.themusingsofthebigredcar.com

http://themusingsofthebigredcar.com/juicero-judgment/

Juicero, the story of how $188.5MM of VC money went up in juice.

BRC
http://www.themusingsofthebigredcar.com

#juicero #maryanne