Paul Singh Talks Venture Funding at Challenge Cup DC

October 29, 2013

3:00 pm

It was an exciting day in Washington DC yesterday where the regional competition for the international Challenge Cup, produced by 1776 , kicked off at their DC campus, with the majority of the day dedicated to helping the competing startups work on their pitches. Later that evening, Paul Singh, founder of and a venture partner at 500 Startups, spoke about the already-changed landscape of venture funding and what startups could and should be doing to secure some of that.

Singh’s presentation spanned a variety of topics, from the available resources that startups could be using to help them in the funding process, to the necessitation of scalability behind every idea. Here’s a general outline of the points that he covered at last night’s presentation:

Risk and Uncertainty Are NOT the Same

Uncertainty is a factor that involves the stuff that you can’t control – this can include the uncertainty of America’s economic trajectory. Risk, however, and taking that risk, is something that you have complete control of. For instance, there are things you can control in order to make things more or less likely to happen when taking a risk.

Traction is the New Intellectual Property: Distribution is What Matters

According to Singh, we no longer have an environment wherein startups can simply say “we have the smartest people” or “we have cool tech” because literally everyone purports to have (and actually does have) the same things. Nowadays, distribution is all that matters – how are you going to get that traction and make your idea catch on? “You can’t possibly build the next Facebook unless you know something that they don’t; that you know something about distribution that they don’t?” says Singh. He asserts that the new reality is that money will follow founders – once you get that traction, then the funding will find its way to you.

Early-Stage Startups Have Already Changed: Startups on a Global Stage

“I did a little research, and it turns out that 95 percent of the world isn’t America.” Obviously that’s meant to be a hyperbole; nevertheless, Singh emphasized that the Internet has enabled startups from across the globe to make any impact anywhere – that as the Web gets bigger, the world gets smaller. Ten years ago, you had to be in the US in order to target people in the US; nowadays, startups in Berlin or Hong Kong can very easily target problems or consumers in the US.

Venture Capital Has Already Changed

Traditional venture funding is no longer the norm. In the past, venture capital used to be all about capital, deal flow, and judgment – that a VC with the money would have deals flowing in from startups, and then they judge whether or not startups are worthy. The reality today, however, is that there is now this unbundling of advice, control, and money, giving startups more freedom and control over a deal. Nowadays, the focus has shifted to how can VCs become more likable so that people will come to them?

Signals are Everywhere: Utilize All Available Data

With the rise of big data and open source analytics, VCs are provided with new techniques to help valuate your startup. “Data is used against you in any decision where risk is involved, so what you can do is to minimize that risk.” According to Singh, you can’t afford to build a startup going into it blind. You need to fully research everything about what everyone else in your field is doing. Use or AngelList and look at all of the available data on your competitors – what have they achieved? Look at their traction numbers – where are they heading?

Do What You’re Good At; It’s Not About Revolutionary Ideas

“I think doing what you love is an awful idea,” exclaims Singh. When it comes to business pursuits, you should do what you’re good at – even if that something isn’t exactly groundbreaking or hip. “Optimize what you’re good at first, and then do what you love – they often end up overlapping.” In addition to this, you should be willing to pivot or completely drop an idea if and when an idea simply isn’t scaling. He asserts that “the business of [VC] is choosing the least-worst business opportunity” and that it’s not about having this new, revolutionary idea.

Singh shares the 500 Startups checklist for startup investments.

The slideshow for Singh’s presentation can be found here.

The Challenge Cup is produced by 1776 in partnership with Tech Cocktail and iStrategy Labs.

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Ronald Barba was the previous managing editor of Tech.Co. His primary story interests include industry trends, consumer-facing apps/products, the startup lifestyle, business ethics, diversity in tech, and what-is-this-bullsh*t things. Aside from writing about startups and entrepreneurship, Ronald is interested in 'Doctor Who', Murakami, 'The Mindy Project', and fried chicken. He is currently based in New York because he mistakenly studied philosophy in college and is now a "writer". Tweet @RonaldPBarba.

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