Playing the lotto versus the lifetime

Phin Barnes had a good post up last week about playing the lotto vs building businesses and how the odds of success are similar. Because the odds are stacked against us, founders who approach startup formation from a "me too" perspective, chasing hot sectors for the wrong reasons, will encounter even lower odds of success. One of the things we regularly discuss and think about at SoftBank Capital is founders who have been thinking about solving a given problem for a long time. We like to partner with founders who are uniquely positioned and skilled to address the issue they've targeted. At my previous company, Outbrain, Yaron had founded Quigo (acquired by Aol for $360m in 2007) in roughly the same category so understood many of the opportuniites and pitfalls that would come with launching Outbrain. To fortify that position even further, he recruited many of his former Quigo colleagues to run the business. And when Outbrain acquired Surphace in 2010, I added 5 years of experience in content recommendation to the team, having helped launch the concept at Sphere, which strengthened Outbrain's position even more. That made for an experienced team with deep domain knowledge.

Today, looking across our portfolio, I see many of these same situations playing themeselves out. Sherpaa Health represents Jay Parkinson's third attempt at addressing a similar problem. He's a trained MD who studied public health at Johns Hopkins and is uniquely equipped to make a dent in the world of delivering more efficient and effective health care. Charlie Oshman has been playing around with real estate data sets for more than four years. Reonomy is a testament to his persistance and Rich Sarkis is the perfect partner to help him bring that vision to life. Paul Berry learned a lifetime of online publishing skills at Huffington Post making him the perfect guy to launch Rebel Mouse. Doug Chambers managed large scale building projects, including construction of the NY Times building, before committing to launch Field Lens.

Unlike playing the lotto, some startups have unfair advantages that skew their odds of success. One of those advantages is deep domain knowledge gained from industry experience and/or lots of time invested thinking about a given problem e.g. the Malcolm Gladwell 10,000 hours. We continue to look for opportunities where the odds are skewed towards creating an unfair advantage like these.

By Josh Guttman

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