The pace for venture capital funding has slowed and deals that once took days to close now take months, but two prominent investors told a full house at Street Fight Summit West 2016 on Tuesday that it’s still an exciting time to be involved in local tech.
“I think about it more as what innovations are in the front half of their wave of development versus which things are now maturing, in the back end of the wave of investment,” said Hunter Walk, a partner at Homebrew VC, in conversation with Eric Feng, general partner at Kleiner, Perkins, Caufield & Byers and Street Fight’s David Hirschman.
Feng put a specific focus on millennials, noting the large size of this population with ample buying power, and said that they consume music, media, and services in ways that haven’t been fully addressed. Another trend that Feng has noticed is the rise of new interfaces, like conversational and speech.
“New interfaces are something we have been tracking for quite a while,” he said.
Walk is seeing people gravitate toward the idea that chat interfaces will transform how consumers interact with local businesses, however he cautions entrepreneurs to think long and hard about how they’ll actually get merchants and consumers to use their platforms.
“Part of my interest in local and retail and SMB is watching how transformative technology can be for those businesses,” Walk said.
Rather than focusing on startups that fit into a certain niche or trend, Walk considers what individual entrepreneurs can contribute to the markets they serve. He says the best entrepreneurs have empathy and an understanding of their customers. In the local market, that means successful founders usually have some experience working in the industries they’ve solving problems for.
“We tend to gravitate toward founders who disrupt with love rather than contempt,” he said.
A lot of startups focus on market size when they pitch investors, but Walk and Feng say they are more interested in addressability than market opportunity. Particularly in local, where there is a low value per customer, entrepreneurs have to look beyond potential market size to justify their value. Ultimately, it’s about whether there’s a problem that’s urgent and valuable enough to want to solve.
Distribution through the app store is harder than ever before, and a lot of the most obvious problems have already been solved, but great local startups can still get funding, even in this uncertain climate.
“It does make our jobs interesting, because while it is slow, I think it is more fun than it has been in the last few years,” Feng said.
Stephanie Miles is a senior editor at Street Fight.
Photo Credit: Shana Wittenwyler