

Scoble: Sequoia's investment in Color is a "Super Bowl ad for VCs." - _pius
http://www.quora.com/Color-Labs-startup/As-a-VC-how-is-a-41-million-investment-in-an-unproven-social-media-application-like-Color-justified/answer/Robert-Scoble-1

======
jgershen
"Plus, now every entrepreneur who has a good idea will make sure they add
Sequoia to their Sand Hill Road tours."

Really? How many entrepreneurs do you think there are who wanted to pitch
other Sand Hill Road VC firms, but not Sequoia?

~~~
OoTheNigerian
_How many entrepreneurs do you think there are who wanted to pitch other Sand
Hill Road VC firms, but not Sequoia?_

Not those with no traction. Now there is a precedent, I expect their traffic
will be much more.

Edid: Repling down voters.

I said I expect the traffic (applications) to Sequoia to be much more than it
is now Would you as an entrepreneur tried to pitch Sequoia if you had not even
launched in the app store?

------
jasonlbaptiste
Reasonable theory, but Sequoia doesn't need a superbowl ad, they're Sequoia.

~~~
sks
Coca cola doesn't need a superbowl ad too but they still do it.

Though I share your skepticism in accepting this argument. Since Sequoia is
already on the list of most startups looking for VC funding this kind of
advertisement can only attract many worthless startups just to try their luck,
making the process of identifying the next big thing even harder.

------
NY_USA_Hacker
I've heard of Robert Scoble and didn't know much about him. Now with this
article, I do: Startups and venture capital are serious subjects, and he's
just tossing out air-headed, cotton candy content.

Let's look at three quotes:

(1) "As a VC, how is a $41 million investment in an unproven social media
application like Color justified?"

Okay, he says "unproven". Right, Dr. Obvious.

But: Just what would he mean by "proven"?

We can't take this as a trivial issue: Instead, and indeed, "proven" is a big
deal, maybe the main issue in evaluating any startup.

Really, for venture capital, "proven" has essentially just one solid meaning:
There has been an 'exit', and the cash is in the bank. Before that event,
'proven' is not very well known or even very well defined.

So, before an exit, what constitutes 'proof' is a big question; how to find an
answer is a big deal, again, the main issue in evaluating any startup. Yes,
there might be 'social proof' (other investors are eager to sign checks),
ComScore numbers, revenue, earnings, growth rates in these, etc., but these
are all a long way in every sense from proof as an exit with the money in the
bank.

Roughly W. Buffett's idea of 'proven' is, for maybe 10 years or more it has
both been a leader in it's industry and been making good earnings. Further,
it's fairly easy to see that this situation stands to hold for at least
another 20 years. Or Buffett would look at Facebook and ask, "Where will it be
in the year 2031?", and without a solid answer he wouldn't invest. Again,
before an exit, 'proven' is a TOUGH criterion both to define and to meet.

Does Scoble have on a sheet of paper folded in his shirt pocket a solid but
too-obvious even to mention definition and criterion for 'proven'? Flatly, no.

So, without much more, all startups are 'unproven' and his statement has said
nothing particular about Color.

What did Scoble do? He 'felt' uncertain about Color, 'unproven' jumped into
his mind and out his fingers into his article title. Cotton candy content?
Yes. Meaningful content? No.

(2) "So, you're a VC, sitting on Sand Hill Road, and a team you trust and like
comes in and says that they have a way to build a new kind of graph: one that
mixes people and locations."

Could we have a clear, solid, precise, and accepted definition of 'graph'
please? Warning: I've studied a reasonable amount of some of the best in graph
theory in applied math in grad school.

Are we talking directed, acyclic, bipartite, or connected? What are the nodes?
What are the arcs? Are there flows, costs, or capacities on the arcs? Is there
flow conservation at the nodes? Are there sources or sinks? The data
manipulations we want to do with the graph are, what? Do we have algorithms
for these manipulations? Are the algorithms NP-complete, polynomial, fast in
practice? Why do we care about the graph?

Without answers, with 'graph' we're looking at more cotton candy content.

(3) "Plus, now every entrepreneur who has a good idea will make sure they add
Sequoia to their Sand Hill Road tours."

Just what is meant by "a good idea"? Would this be something in the spirit of
the USPTO? Would it excite a lawyer as 'intellectual property' to be protected
with NDAs, employee confidentiality agreements, trade secret legal precedents?
Would stealing the idea make one subject to legal prosecution? Would the idea
qualify for "Top Secret" in the US DoD or pass peer-review as "new, correct,
and significant" at a good journal of original research? Apparently none of
these.

So, by "a good idea" he just means a one sentence description of the problem
to be solved as seen by the users.

In other words, his "a good idea" is intended to be made public quickly with
no indication of how the product or service might be provided. So, his "idea"
is next to worthless and nothing to be taken seriously by Sand Hill Road or
us. So, again, Scoble has written cotton candy content.

As in baseball, that's three strikes, Scoble.

~~~
schultzi
I'm glad that the author's use of "unproven" irked someone else. Something
proven is something without doubt. VC and startups would be pretty boring if
every investment was a sure thing.

