What I Learned as an Investor at Dorm Room Fund
Dorm Room Fund is a student-run venture fund backed by First Round Capital, a seed stage venture fund who has invested in companies like Uber and Blue Apron. We are a student-run venture fund that invests into student start-ups. There are four cities where Dorm Room Fund (“DRF”) runs, Boston, New York, Philly, and San Francisco Bay Area. I was an investor in the Boston team, which comprised of students from universities in the greater Boston area, including Harvard, MIT, Boston College, Tufts University, Northeastern, and more. We invest $25,000 into start-ups with at least one student founder or recent graduate. Start-ups we have funded have went on to be funded by Y-combinator, Sequoia Capital, Google Ventures, and more.
Before joining DRF, I had already been an entrepreneur, having founded QuikForce, an on-demand logistics service, worked at WeChat as a Product Manager and started a Thai food restaurant. However, I was curious to learn more about the other side of the table, venture capital. It had always seem like an exclusive and closed network which was hard to break into. At the same time, I was eager to meet a group of like-minded people who were entrepreneurs, hustlers and hackers. I also wanted to take the opportunity to assess the business model and technology of different innovative companies coming out from the student community in the greater Boston area. Here’s what I learned:
1. Investing is more an art than a science
Venture investing is risky and very challenging. Investors tend to look for patterns, rather than actual data points, because early on in a start-up, there are not much data points that one could pin point on. Typically, investors focus on three things: team, market, product. However, early on each of the three factors may not have come together or may be unclear. For example, we have many pitches from Harvard Business School students who lack a CTO, or students from MIT who may not have a clear go to market strategy despite having a cool piece of technology. At the same time, the product or market may be in it initial phases and it’s hard to ascertain how it may evolve. For example, Uber started out as a cool app for Travis to hail a black car, and Twitter started out as a messenger service to improve logistics. Therefore, as an investor, it is important to have the vision, positive thinking and optimism to think what could happen to the product or market, and to have belief in the founding team.
2. Empathy is crucial as an investor
Empathy is the ability to understand and share the feelings of others. I have learned that this is an important characteristic of many successful investors. It is often forgotten, but though investors play an important role in the ecosystem, we are often playing supporting roles to the entrepreneurs. Our role as an investor is to partner and work with great entrepreneurs, to bring out the best in them, and to help them succeed. However, as there the noise to quality ratio is too large, it is often easy for an investor to have a lack of empathy or not understand or share the feelings of the entrepreneur. It is critical to do so, yet it is a trait that is often left behind as investors stay in the career for a longer time.
3. Being in college is a great time to start a business
I was very lucky as an investor at Dorm Room Fund to have played a role in partnering with some of Boston’s up and coming start-ups, including Humon, a wearable that help athletics train smarter, Spyce, an automated cooking machine, Tradr, an app to buy and sell used goods with a swipe, and more. I have been fortunate to work along side these entrepreneurs to have them in defining the problem they are trying to solve, helping them to raise follow-on funding, and building their team with them. Through this process, I learned that being in college is a great time to meet other fellow entrepreneurs, to experiment on new ideas in a conducive environment, and to learn from other fellow entrepreneurs. In Boston, there are great programs like Harvard Innovation Lab, MIT’s Engine, Dorm Room Fund, and other excellent initiatives that are focused on helping students get their business off the ground. At the same time, as Paul Graham of Y-combinator has shared, being in college is the best time for you to find your co-founders and to work with them before committing to start a business together.
3. Being in college is a great time to be an investor
Other than Dorm Room Fund, there are other student-run initiatives that have came out in the past few years including Rough Draft Ventures, Fresh.Fund, and 500 Rookies. Rough Draft Ventures is a fund backed by General Catalyst that is focused on the greater Boston region, while Fresh.Fund, which is based out of Israel, was founded by Zaki, who was a founder of one of our portfolio companies at Dorm Room Fund. At the same time, 500 Rookies is an initiative by 500 Start-ups out of Taiwan and Greater China, in which students in universities have the opportunity to invest into start-ups while they are still in school. Being in college is definitely a great time to be an investor as you are exposed into a ready network of fellow students who may be cooking up a new project, or working on the next big thing. However, I would like caveat that certain universities, regions, or countries may have a stronger entrepreneurial ecosystem and culture relative to others.
4. Investing is a good opportunity to learn a wide spectrum of industries
As an investor at Dorm Room Fund, I have looked at start-ups in healthcare, real estate, retail, sports, food & beverages, finance, logistics and more. I would almost compare the breadth of exposure to that of being at a Management Consultancy firm like McKinsey, Bain & Co or Boston Consulting Group in which you are supposed to ramp up your knowledge based in a short period of time. Unless you are an investor focused on a particular sector such as healthcare, or robotics, chances are the entrepreneur may know a lot more than you as she must have been spending a lot of time learning about a particular sector before she decided to jump into this space. As an investor, I found myself needing to read up voraciously, talking to sector experts (for example, we jumped on a call with an eye doctor as we evaluated a start-up in the same space), and trying out the product as a user.
5. Be a good person, and meet good people
Ultimately, being an investor is a people business. It is important to build a good network of people who are willing to offer introductions, provide support network and help you to find the next opportunity. The way to enter good networks like that is of course through existing relationships in universities, or by joining clubs related to entrepreneurship or start-ups. However, it is also important to pay it forward. I have learned that by being helpful and paying it forward, it often generates good karma that will come back to you down the road. Good people want to be helpful and be with other good people, and hence paying it forward is important.
I have learned a lot as an Investor at Dorm Room Fund, but I know that I am only just starting. At the end of the day, I believe that entrepreneurs should build something people want, and investors should invest in something people want. It is easy to follow in market trends, or be blinded by short-term traction of signals. However, at the end of the day if you are solving a real pain point or building something that will create value for people, it will ultimately be an asset. Please feel free to get in touch with me on Facebook or Twitter if you like to chat more.