App Idea Awards Launch Party
& Fireside Chat with Venture Capitalist, Nnamdi Okike
The App Idea Awards launched with a party on Thursday, February 4th. The night began with a fireside chat with Nnamdi Okike, CEO and co-founder of 645 Ventures, and judge of the App Idea Awards. Over 130 people attended the event. We had live Q&A and took applications. Below is an excerpt of some of the Q&A that happened during the fireside chat.
Q: What’s your view on accelerators?
Nnamdi: We think very highly of accelerators. We’ll look to accelerators to see up-and-coming companies. Aaron, my partner is a Cornell Alum and also works with Cornell Tech. Cornell Tech is building a large tech campus here in New York. We believe Cornell Tech is going to be the source of a lot of great engineering talent, here in New York over the next decade.
Q: What are you looking at now in apps? What are the trends that are exciting you? Artificial Intelligence? Internet of Things? Virtual Reality?
Nnamdi: When we think about apps, we think about, “What pain point that the app is solving?” And, “Is there a market opportunity there?” So, I always check to see if a problem exists that the app is solving. An example of app company that we are excited about: Alice. Alice is an app that is sold to hotels. Alice solves 2 problems: 1.) A software platform for managing hotels—manage guest requests and different service issues that come up in the hotel every day, and 2.) they also have an app that hotel guests can use to see all the services that you can find at the hotel and handle service request issues. It improves the hotel experience. The app enables the hotel to run more efficiently.
…For us, it’s a matter of what’s the use case, and also, “Is there a revenue model?” I’m very old school about that. It’s really important for me to see how an app makes money. It’s great if a million people use your app. And while you can build an interesting company that way, at the end of the day, if you make money you’re able to control your destiny.
Q: When you’re looking at a typical funding path for an app start-up during the early seed and accelerator stage, what are you and other investors like to see?
Nnamdi: That’s a great question. The things that people look at will change during each stage, however if you’re looking to get into an accelerator, you’ll often think about building an early prototype and building a team that can execute on the opportunity.
…At the seed stage, the stakes are raised. Lots of investors will require a product, but they’ll be looking for early evidence of traction. 645 is a seed stage fund, so we’ll often look for early user growth, and evidence of implementation. As you grow, people will ask for more and more.
…At Series A, and it will depend on the fund, it could be multiple hundreds of thousands of users. Oftentimes, there is a revenue threshold.
Q: What questions should entrepreneurs be asking investors to know whether they are the right fit?
Nnamdi: I think when you’re raising money, it’s a two-way due diligence process. As the fund is doing due diligence on you, you should be doing due diligence on them. If I was an entrepreneur, I would ask if they have experience.
“Have they invested in a similar company before?”
“Have they worked a company to an exit?”
“Do they have the ability to help you?”
That could be everything from recruiting (both technology and marketing folks), and a network—potential investors they could introduce you to later.
At later stages, such as Series A, you should be asking yourself whether you want that person on your board. Do you want to work with that person regularly? When you partner with a venture fund, it’s a very long-term relationship---a marriage in a sense.
Q: I’m going to ask you a question, you might not want to answer, which is: Has there been a company that you passed on that then became HUGE?
Q: Please tell us more…
Nnamdi: Yeah, there have been a couple. One is actually an interesting story. I started at Insight Ventures in 2002. In 2003 and 2004, voice over IP was becoming really big. We started to look at the industry at Insight, but keep in mind, Insight’s focus is on later stage companies—they do Series B, C-type rounds.
…We were working in a fund in Europe called Mangrove Ventures. At the time one of the investors said, “We’ve just invested in a company, you should look very closely at.” I said, “That’s interesting, what’s the company called?” He said, “It’s called Skype.”
I didn’t know anything about it. This was when I had just started, probably in 2004? We took a look at it and spoke with the founders. We thought it was cool, but they didn’t have a revenue model at the time, and it was growing really rapidly.
But what I recall, the investor, his name was Gerard Lopez, at Mangrove Capital, ended up making near 500 times their money, I believe.
Q: So it hurts a lot?
Nnamdi: Yeah, I remember Gerard left venture to buy a Formula One team.
Q: What attracted you to the App Idea Awards?
Nnamdi: There's a couple of things about the awards that excite me.
...Obviously we invest in app companies, so in a sense there’s a selfish interest in wanting to see the companies that come out of the awards.
...One of the things you talked about, the impetus, the rationale for starting the awards, was the idea of democratizing the process of starting a company. I think building an app company is one of the most democratic types of businesses that you can build, in the sense that it doesn’t require a lot of capital to do it. Also, you have the potential to build a really big company and impact a lot of people through mobile distribution.”
...It fits with our underlying thesis in concept of being able to invest in great founders. And often times, founders who may be coming from different disciplines. People from all different professions and walks of life.”
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