#SFSNYC: Finding the Next Billion-Dollar Local Startup

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Having a great idea for a new product to launch in the local space is exciting. However, taking an idea and turning it into the next great local company takes money. And sometimes, it takes a lot of money to go from idea to a billion dollar product.

At Street Fight Summit on Tuesday in New York, Betaworks Ventures‘ Matthew Hartman and Revolution Ventures‘ Bobby Ocampo spoke with The Insurrection‘s Elizabeth Spiers about what they look for when making investments and what interests them in the local space right now.

But the two also had different approaches to what they look for.

Hartman explained that his firm specializes in making seed or even pre-seed investments, so they care primarily about the technology aspect. Ocampo, on the other hand, is about bigger money investments, so their focus is on helping to scale out a sales team.

One topic that came up was Groupon, which was one of the most successful local launches in recent years before it hit troubles down the road.

“We had never seen revenue scale so quickly [like in Groupon], but you needed hundreds of millions of dollars to compete. I don’t know how much was put in the category, but there are only two left in the end,” said Ocampo, speaking of Groupon and LivingSocial before cautioning companies by saying: “There should definitely be a focus on capital efficiency.”

But one of the ways that Groupon was able to continue raising money was by suggesting that it was more than just a local company. Hartman cautioned that, for small companies, they shouldn’t try to be more than one thing. “It’s very hard to make the pitch that you’re going to do multiple things very well at the same time,” said Hartman. “They just don’t have the resources to pursue multiples.”

One aspect that both investors agreed on was the balance of collecting data on users and the desire for privacy. Quoting an unnamed Silicon Valley investor, Ocampo said, “I’m sorry, privacy is dead.”

Nevertheless, people still won’t give it up freely. To get around that, Hartman explained that there needs to be some sort of an incentive. “There has to be a trade-off for the consumers. They have to get something if they’re going to give something,” he said.

Ocampo told the story about one of his fund’s investments where the incentive just wasn’t appealing enough. And because of that, it wasn’t able to build up a large enough user base to entice advertisers to spend money on the platform. For services like this, it can be a vicious circle where there’s no money coming in, making the incentive harder to fund.

But for the entrepreneur looking to raise money, both investors shared the primary thing they look for: proof.

“Show me a little kernel of it working. And we like to track data points over time,” said Ocampo. “Show me what you want to do and execute on it over and over again.”

Jacob Donnelly is a Street Fight contributor. Photo by Shana Wittenwyler.