

Ask HN: Friend is genius, needs cash (VC), doesn't think he can get it - moneyquestion

I am posting this in a throwaway on the off chance he sees this.<p>Without going into details as much as I can here is the situation.  I am a lazy hacker myself, pull in 50-60k a year working part time making things for people and they are happy.<p>My friend is post PHD from a top school; rock solid mathematics/compsci background.  A genius by any measure and hard working.  Bound to be rich.<p>He is working and has been working on an unsolved problem of great commercial value in the machine learning world.  I say unsolved meaning that no one has decided how to do it and its only happening in research circles.<p>So, taking for granted that this person is solving these problems as well or better than anyone in the world and sees a plan to turn it into a commerical product; how do I get VC attention to him.<p>He is still at a school doing research and plans on staying in academia for a couple years because he is somewhat fearful of making the leap.<p>What I would like to to see happen is some people with money to talk to him, because he would drop what he was doing if the cash was there (and the deal was right).  He estimated he would need 750k and two years; the vast majority of that going to processor time.<p>Who do I talk to to say, "hey this person is living off 35k a year, is one of the smartest people you will ever meet and is absolutely going to make a business worth 100M+ in the next 4-5 years"<p>Of course I recognize the possibility that I have no idea what I am talking about, but for the sake of argument lets assume I am right.  Any VC/other hacker could look at/talk to this person and see what I am saying is true.<p>He has turned down many 150k+ positions in finance because his vision is bigger; but I think VC is too hot right now for him to do his research for 2 more years when it seems like investors with a clue would be falling over themselves trying to give him cash.
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patio11
Smart with a good pedigree is a nice start. He'll also need some other source
of social proof: people who are respected saying that they respect him,
ideally enough to trust him with money. If he does not have the social
connections to pull that off yet, he'd have high ROI on making those
connections. One way to bootstrap those is by going to an incubator whose
founding team everyone knows and trusts (hint hint).

 _somewhat fearful of making the leap_

That's a red flag. Rightly or wrongly, VCs expect people likely to create
$100M businesses in the next 3-4 years act like they're intending to create
$100M businesses in the next 3-4 years. Your friend is acting like he is
intending to have a secure academic job in 3-4 years. There's nothing wrong
with that but it is not maximally compelling in terms of convincing people to
give him money. (H'd ironically be better off poor because you were hustling
in SV than poor because he was an academic. Poor hustlers can fairly easily
create the illusion of forward progress. Poor academics suggest that forward
progress will be deeper into academia and probably mostly lateral with respect
to poverty.)

 _750k and two years; the vast majority of that going to processor time._

YMMV depending on who you talk to, but a software company which doesn't budget
for any engineers is likely to be a hard sell.

Also: the most common outcome for commercialization of academic research is
that the research has wonderful ideas with no commercial potential whatsoever.
Investors are very aware of this. One sales challenge is convincing them that
your friend is, unlike the other 100 PhDs with no real world experience they
have talked to, actually on to something that can create money.

~~~
moneyquestion
He has no interest in continuing academia. His stated reasons for staying
there rather than taking offered positions at google etc is that he can work
on exactly what he wants and bill it out to the school.

I get what you are saying about VC's expecting people to act like they are
intending to create businesses. I think someone smart will be able to see the
difference here between something like what he wants to do and what something
like facebook or kickstarter is doing. He is pushing the edge of knowledge and
literally couldn't do it without the tools that he has gained in research. I
honestly believe if someone talked to him they would see everything he has
done for the last 10 years has been with this type of thinking in mind.

The social proof would not be a problem, top professors in compsci and
mathematics know him; and he has code to back up his claims.

750k includes 70k a year for he and another engineer. I don't think he is
confident he will find another engineer capable (other than the one he has in
mind) that is capable of the work he is trying to do. Its too specific of a
niche and literally cutting edge in the field.

The commercial value of the research would be the easiest sell of all; the
first person/company to do it right will have immediate customers from
everywhere.

He has interned at google (i fear if he sees this this line will be the proof
of who I am and who I am talking about) and presumably has some connection
there.

The main thing he needs is cash at this point; the number crunching is CPU
intensive and he wants 20k/month for sending it out to amazon.

~~~
tptacek
Top professors in CS and math are not good social proof to investors unless
they have a track record of involvement with successful companies and make
specific representations about your friend. Some professors are good
references. Most aren't. The ones that are good are unlikely to give the
reference (& intro) your friend needs unless your friend has enough hustle to
extract it from them.

Your friend really doesn't seem to need an investor so much as he needs a
patron.

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tptacek
Most VCs invest in businesses, not technologies. Your friend does not have a
business. He doesn't need investment; he needs a team and a plan.

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steventruong
Base on the responses others have given and your reaction to them, I'd say
there is a bit of defensiveness in there. I don't know your friend personally
so take what I say with a grain of salt but smarts (aka the genius) does not
make a brilliant entrepreneur. Someone else said he's more of a employee #1
than a founder and I tend to agree base on how you've describe him even if he
is the kind of person who refuses to be employee #1 of which there is nothing
wrong with that. You can learn A LOT being an early stage employee rather than
always having the narrow mindset of having make the leap immediately and doing
it yourself.

In regards to why I think he isn't suited as an entrepreneur (at this time;
important to note this distinction for now) is because he has reservations and
requires someone like you to push him to make the leap. Entrepreneurs are
driven to make things happen, not be convinced. That behavior will only make
things more difficult if he doesn't have the conviction to try himself now,
regardless of what anyone says (good or bad). And there are folks out there
that no amount of convincing would they ever change. Not saying your friend is
like that but as others have said, it's coming out as a red flag.

In response to another response you made, social proof is not like a letter of
recommendation. It's not his professors that will grant him social proof.
Social proof is validation from people that matter to the VC's in their social
circle.

~~~
moneyquestion
gotcha. I am not pushing him; to be clear. Otherwise I wouldn't be making this
post, I would be pushing him.

If he follows on his path he will exit academia in the next year or two and
push full steam ahead and and raise his cash and you will all know his name in
the next couple years after that. I would literally bet a body part on this.

Of course you take what I say with a grain of salt; I could (and am
statistically likely to be) in a pipe dream.

My assumption is basically this: if someone with a lot of cash:

\- Saw the accomplishments of this person

\- New the 4 year plan of this person

and

\- Talked to this person for 20 minutes

They would eagerly give him money. I know there is no way to prove or disprove
my assumptions. So my question is how can i drop a hint to someone?

I would be happy to hear what you think is defensive. I am fully aware than I
am an anonymous schmoe on the internet. If I am defensive it's because I am
looking for the answer to the question I seek just assuming that what i am
saying is true.

No need to convince me I am wrong in my assesment or my friend isn't
entrepenurial material. It doesn't matter. Just assuming he is, and that it is
clear as glass to anyone who talks with him that he is; how do I nudge someone
to talk to him.

~~~
steventruong
Couple of bullet points. Most experience entrepreneurs will say this too.

1\. Accomplishments in academics or otherwise hold very low bearings in
success as an entrepreneur. After all, most people don't have any problems
building their prototype. It's getting people to actually use their prototype.
He may be a genius at what he can do and by no means am I discounting that in
any way, but definitely keep in mind that that alone does not account for
success or failure. Its a mixture of other things. It certainly is helpful
however.

2\. 4 year plans should be thrown out the window. No entrepreneur should have
a plan more than 6 months out. Maybe 12 at most. And potentially a grand
vision down the road. A 4 year plan is bound to fail, change, and all sorts of
other things. You don't know what is going to happen with the rest of the
world, changes in tech, etc etc etc... 4 years is a lifetime and planning that
far ahead and bound to guarantee none of the plans will come out as you
envision them. Make shorter immediate plans and adjust as things progress.

3\. Now for your actual question. If he truly is interested, have him network
in the Valley (assuming he's located here) and get some introductions. If
people will think he's brilliant as you say, they shouldn't have any issues
making the introduction. If they do, there is a clear signal. Alternatively,
have him post what he's doing on AngelList. Certainly if what he is doing is
that important, it will garner some attention.

~~~
moneyquestion
Thanks. Angellist is the diamond in all of this rough that I was looking for.

Really appreciate your taking the time to respond

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jordhy
This problem is fairly common. I've runned into many Math Olympiad winners
whose accomplishments and technical drive are without par but hesitate to
start companies even after having good ideas/plans. The problem with these
people (and I should know because I was one of them) is that they're so smart
that they rationalize why NOT to start a company. And being so smart they find
many things that should go wrong and, in turn, they never start any
entrepreneurial endeavor out of fear of failure.

I'll give you a couple of tips to try to make the next "Mini-Bill-Gates" out
of this genius:

\- Build his confidence by engaging in a basic business with him using a
smaller idea (the people often have many).

\- Persuade him that business is easier than academia and that he can learn to
be a far better businessman than he is a scientist.

\- Point to the failures on his industry and show him that even the
entrepreneurial failures ended up making more money than the 9to5ers.

\- Have him patent his idea(s) as a starting point. Then he'll gain momentum
on his own after he has clarified his plans.

\- Give him some books about entrepreneurship and just wait it over.
Analytical people often learn more thru books than people.

\- If you really believe in his idea, join him. Maybe he ends up being your
Wozniak.

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hugo31370
The idea that fundraising now is easy is a myth. I'll give you that it's as
easy as it's ever been but it's not easy. It requires a lot of prep work,
time, and full time dedication. And unlike 10 years ago, it now requires a
prototype of some sort.

If he was going around with an idea asking for money, that would be a tough
sell. If you're going around asking for him, that's an impossible sell.

Here are some red flags for investors: \- Do I want to invest in someone who's
risk averse and will likely give up when things get tough? (and things will
get tough) \- What's his track record for product execution and how can he
prove he can build a product in a reasonable amount of time? (i.e. not two
years) \- What's his team or reference that can confirm the genius behind the
man?

It sounds like your friend is more of an employee #1 person than a founder,
which is fine. Maybe instead of looking for money you should be looking for
someone who can kick off the prototype and can later help with the fundraising
process. In any case, your friend needs to be the one speaking.

Good luck!

~~~
moneyquestion
There is a prototype; its more than an idea.

I should have made this clear. The chance that this man will ever be employee
#1 is zero.

The genius is clear enough. Flawless marks through the hardest programs, and
working code pushing the boundary of human capability is all already existing.

I have no intention of going around asking. I more want to do something like
say, "here is his github, here are his results, here is his published papers,
and this is his idea on how to commercialize it"-- to someone who is investing
money.

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jsmartonly
Few thoughts.

1) A real genius can figure out things, including how to get cash. If he can
not get cash/investment, he is not genius enough.

2) PhD from top school gives a person good foundation to be a professor or
some positions that require PhD. But that does not mean too much in business
world. Education is important for any success, but please note education and
schooling are different things.

3) PhD making 150K+ in finance is not news.

4) Money is always available for good investment for every single year,
regardless the market.

5) If his machine learning is really working, he can train the machine to make
money (including initial capital) for him.

6) Real academic research is usually years ahead of its time. Success in
business usually needs massive adoption which means right at the time. That is
one of reasons that a lot of smart people are not rich.

Overall, all you are talking about is "your friend is kinda smart and plan to
stay in research (for some years)". Nothing more, nothing less.

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ig1
Firstly he probably doesn't own any IP for the work he's done at the
university, PhDs and post-docs normally assign rights to their university as
part of their contracts.

However this also has it's upside, any top-tier science/engineering university
is going to have a department whose sole job it is to commercialize research.
And they'll not only be able to sort out the IP side and help with the
productization, but they'll also have the contacts with investors who
understand about investing in this type of company. Find out who these guys
are at his university and put him in touch with them!

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joelmaat
He needs to learn how to make money himself to fund his vision. This is key.
Is he a good market trader? Can he do little things to setup his life and fund
his big vision? Can he use up Amazon's AW3 service? Can he make more efficient
algorithms? Can he make better guesses to not need so much capital and time?

I think the VCs are not a good fit for him at this stage. Maybe when his ideas
are further along (giving him enough leverage to hold on to most of the
company) then he'll be ready for venture capital.

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paulsutter
It's much more important for you to help your friend come up with a real world
problem that he can solve (whether or not it uses his technology), and for him
to start solving that real world problem for customers. Dont bother thinking
about VCs until he has a proven scalable business opportunity.

I'd be happy to help brainstorm that (sutter at gmail)

Arcane machine learning challenges, by themselves, aren't very interesting to
VCs or customers. But solutions to real world problems are.

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vannevar
I'm sorry, but this post boils down to: "I have a friend who's invented anti-
gravity. He's reluctant to start an anti-gravity company right now. What is
your advice?"

Your friend's reluctance might mean he's a lot less confident in his
technology than you are. The two years of processing time it would take to
come to fruition suggests to me he's right to have reservations.

~~~
moneyquestion
I think it's closer to 'my friend has invented anti gravity; but its big and
huge and clunky and extremely expensive and he is going to spend a couple
years in a lab working on it before he tries to raise money. i think he could
raise money instantly; how do i get people with money to look at the
antigravity thing'

but maybe you are right that he is right to have reservations.

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Codhisattva
VC isn't the answer. It's a different set of problems. Bootstrap, bootstrap,
bootstrap!

~~~
moneyquestion
He doesn't have the capital to bootstrap. He needs 500k in number crunching
time. One of the main reasons he is staying in the school is he is billing all
that out to them and using their servers

