The Gulf of San Diego
This is a four-part series on San Diego’s Total Package Deals (and why we’re seeing fewer of them these days). It starts here.
There is a gulf in San Diego. The gulf between what the outside world is beginning to know about us — a deserved boost to our esteem — and what we are seeing in terms of deal flow here. We are not seeing very many companies that look like what you see above. Trends don’t become trends until traction takes hold.
We are not spelling gloom and doom here, but we do know that what we see come through Seed also points to where the San Diego startup scene will be in a few years. We want more and we want better. Not more of the following:
Often times we have been presented with this case: a company thinks they have come up with a fantastic product, but truth is they are not solving a real problem. Many times the company will not understand their customer base, which results in low and slow market adoption. Often, these companies could turn their product into something a customer might want with some real market research and an open mind. However, the latter is easier than it sounds.
Nano-hots
In contradiction to ‘The Ice Cream Glove’ this situation is when a company has a good product that addresses a problem, but in a small market, whether it be too local or too specific of a demographic. It is hard to invest in these companies when there is no real opportunity for growth. They just don’t generate enough heat.
A Feature, not a Destination
We have seen many pitches where companies have a technology or software that is easily replicable and replaced by a company such as Google or Amazon. An example of this can be a sales software that aims to increase B2B sales by generating leads at a fee. While these products may be useful, they are not built to last long-term and thus are simply a feature and not a destination.
The Ridiculous
The appeal to run a company and create the next Facebook has become very popular in today’s landscape. Too frequently have we seen first time entrepreneurs who have an idea, but lack the technical experience and so they outsource a tech team and launch a product without receiving any customer feedback. To top it off, these executives hope to retain over 75% of their company after they receive venture funding. This scenario is a recipe for disaster, and hence has been labeled as ‘The Ridiculous’.
Destiny: Garage
The last trend that we have seen too frequently is what we like to call ‘Destiny: Garage’, where an overly technical team has either a limited vision or a broken business model and hopes to become the next hot startup without the proper resources and team to succeed. Usually the product is solid, but the team doesn’t have the perspective to turn it into a business. Companies like this could really benefit by bringing on a business or strategic minded co-founder.
This is a four-part series about total package deals. For the intro, start here.
Part 1: What is a Total Package Deal?
Part 2: The Gulf of San Diego (you are here)
Part 3: Crossing the Chasm
Part 4: Great Companies vs. Good Deals
