Antler - Day 3

Naman's Founder Journey

• Starts with what travel agents looked like back in the day (low tech, high social-network effects, lots of calls/connections involved)
  • His mom worked for one of these, and took it from B2C to B2B (this is called a "consolidator" in travel, apparently. Sound a lot like acquirers from finance.)
  • He used to help by going door-to-door delivering paper tickets (because that's what we did before the internets)
  • The way that you'd get a flight booked at this point is by calling a bunch of consolidators to find out what a good price is, not all consolidators sell all routes, so this would typically require something like 2 hours of phonecalls

Company #1 - netfares online

• netfares online in 1999 (with a technical cofounder) started to solve this problem. Sold for high eight figures, but took all of it in stock. And then the bust happened :| General valuations went down by 85% or so, his stock went down something like 99%. Yikes.
  • KEY LESSONS:
    • Don't take stock. Or at least, know what your risks are and how they're leveraged.
    • Learn as much as you can about the people acquiring your company

Company #2 - Farematrix

• Solo founder, bootstrapped, basically screen-scraped a bunch of different airline prices (this worked because it was in an airline industry transition where there wasn't yet a central listing of fares)
• Didn't get as much friends+family funding this time around :|
• This was questionably legal in the US (because they're stupid around laws regarding scraping), so an example mitigation strategy: Expedia prices were visible to the entire world except the state of Texas (where their legal team was headquartered)
• Used a lot of google adwords, and assorted other advertising services. Their spend by the time he sold the company was ~$250k per day. Per. Day.
• Pivot: from earning revenue on Flights to Ancillaries (for instance, additional services layered on top of airline experience, things like flexible tickets and baggage insurance. Turns out these are really profitable if you get the pricing and sizing right because people are really risk averse when travelling)
• If you have Founder syndrome, you need to surround yourself with great people and know what you do best

Company #3 - FlightNetwork

• Are you solving a Big Problem or building something to hit the Big Problem
  • Example: A common problem he found among his network was a big worry about buying tickets and then seeing them drop in price afterwards. The company put together a program to give people credit rebates for fares. Turns out this simultaneously gave them an edge on sales (more people would buy tickets, knowing they wouldn't have market regret later) and also gave them better retention (they gave credit rebates rather than cash, so people would be incentivized to come back and spend more here)
• High level lesson: Half of advertising works, you just don't know which half
• High level lesson: Some of the best things you do are the things you don't do (gives examples of two 50/50 mergers that would have been rough AF, but ended up not happening)

Company #4 - TripStack

• He's really passionate about air travel
• Founder, not CEO
• Sounds a lot like Hopper (he mentions Hopper as I'm writing this note)
  • Basic model is putting together connecting flights from different airlines to drastically reduce prices at the cost of some logistics headaches. If you're a frugal traveller, this is awesome. If you're an airline, this is the literal devil.

Why did I join Antler?

• Not keen on doing another company, looking to get into investing and enjoy life after the acquisitions
• Negotiation starts at "Looks cool, I can give you 20 hours a week", turns out it doesn't work that way
• I really believed in the model, think it's a win-win proposition for the founders and the Antler team
• Why did I do this instead of being a regular Angel or old-school investor?
  • Working with brilliant founders.
  • This is an early energy stage, with commensurably less paperwork and bureaucracy than Series A.
  • This is a good way of building the Canadian unicorn) (no not that kind) portfolio, because it helps peel potential founders away from the traditional career track and putting them in position to take big swings

Q&A

• Why was Expedia sending you C&Ds? Weren't you basically free advertising for them?
  • Turns out they invested a lot into the brand of Expedia being associated with low priced airfare. And being easily compared to competitors could show their customers that United was cheaper much of the time. So their business model was based on minimizing how much comparison shopping their customers did, and any "advertising" that came in the form of easier comparison shopping was a net negative for them.
• What did you do right to show your investors value?
  • Well, the funny part is that I really had no investors. All of the businesses I built and exited were fully bootstrapped.

Shambhabi Mishra's Perspective

• Venture scalability is much different than bootstraping
• As a VC you don't make money off the 1x/2x returns. If that's what you're doing, you may as well invest in S&P and make a decent return no matter what
• The power law rules this space; the home runs matter more than any of the other companies (and in fact, more than all of them combined).
• As a funder, I'm looking to get massive returns from you. I've got a laser focus on finding founders that might have a massive return coming out of this company.

What do VCs look for in a startup?

• Even at Antler, the day you walked into the cohort, we're engaging you in conversations and trying to take your measure
• We invest in people, so we're looking for a strong team
• Just having AI is not a shiny anymore, so the question is: how are you using AI to build a defensible moat?
• Are you building a vitamin or are you building a painkiller? I don't want you to make a product that improves efficiency by 10%; I want you to make the next Ozempic
• How are you building a business for profitability? As in, is your business foundation built for profit? You can pivot, that's fine, but the core of your business needs to be solid, and geared towards making massive profits scalably (or at least, not geared against it in weird, counter-intuitive ways)

Antler's investment considerations

• We're investing in you first. We're investing in the team you're building. If we were just investing in the product, you may as well have sent us a deck and we would have made a call on that basis.
• Is your product built for a VC play? Are you looking to build a cool non-profit that makes the world a better place in small ubiquitous ways? If so, this is probably not the place for you. We're looking to fund focused, high leverage companies. If that happens to also make the world a better place, excellent, but you need to focus on the leverage first, and then do the good you want from within that constraint.

Examples of why Antler invested

• numr
  • Large TAM, unique differentiation in customer experience management
  • Founder product fit - part of the NPS team
  • Demonstrated traction
• Chexy
  • Problem obsession - talking to users on reddit, working with communities
  • Large potential market opportunity
  • Opportunity for scalability in Fintech
  • Strong MoM growth
• Arki
  • strong founder fit, relevant industry experience
  • understand market opportunity in architecture tech space
  • demonstrated progress over perfection

Key lessons:

1. Be customer obsessed. Before you code, or do anything, reach out to customers. Be focused on their needs and experience.
2. Pivot if you need to. You don't need to make consistent, incremental progress. You don't need to get a little better, you need to fail and get up and try a different angle. This is not a school, you're not here to learn, we're not here to teach you
   • NOTE: I think the implicit message whenever something like this is said is something like "You're not at the gym, you're at the tournament. You should know what you know already, and be prepared to hit as hard as you can"
3. Large Markets
4. Disruption
5. Tech/Data
6. Potential for Moats

What are VC funds dreaming about?

• 5-10x return on the fund in a 7-10 year period
• Accounting for high mortality + lack of predictable data at early stages
• Could this investment be a fund returner?
• Solve Problems
• Look for the right problem to solve
• Solve a problem for a niche
• Why you?
• Sense check your idea

Common Mistakes

1. Not understanding your users. Validate your research. Validate. Your. Research.
2. Not having a strategic mindset. A common complaint is "One week you're asking me about the high level vision, and then you're asking me about my micro progress. What's the deal with this approach switch". You need to do all of it. (I'm not transcribing faithfully because a lot of stuff is being thrown at the audience right now, but this sounds like it has a lot to do with cutting the enemy, rationalist style)

Q&A

• What's your advice around B2B vs B2C?
  • We're not against investing in B2C companies. Chexy is an example. When I say that B2C are less likely to be funded, I want to impress upon you how much more work it takes to scale and build those. It's a different ball game; the amount of community building and advertising is extreme. So we'll invest in B2Cs if the play is there, but you need to know what you're getting into.
• Any advice for figuring out how to get into the B2C space specifically?
  • We can probably cover that during office hours. If you're specifically interested in a particular B2C idea, we can have coffee and see
• Chexy is already late to the market. What if your competitors build a big moat? What made you invest in them?
  • So, competition isn't necessarily a bad thing, it ends up building better company in the long term. If I'm being honest, we probably bet on the team in that instance because things that the founder that made us think she could overcome the challenges inherent in a B2C play, and in her competition.
• You mentioned that AI is being commodified and the hype is over. What do you look for in an AI company?
  • A year ago, if you said you were building something with AI, you got an interview and an investment. Today, AI is like the internet was in 2010; it exists and is an enabler. So my mindset on AI companies is going to be looking at what you're enabling using AI models.
• What's your time horizon? When does Antler look to cash out their 10%?
  • We're not a short term play. We have plans and funds set up for the long term; we're in it for the long haul. Our main mindset in on 5-7 year horizons or 7-10 years, but we have longer term investments for companies we think are winners.

• Speed Dating
• Lunch
• Team Building

No specific in-the-moment notes here, but the "Team Building" ended up being an improv exercise. Possibly not for everyone? Almost certainly not introverts. This has been on my list of things to do, so I'm pretty happy about it.

I think we were supposed to do a continuation of speed-dating at this point? But we didn't; we ended up going back to founder fit spreadsheet filling. I think I'm going to join that and maybe nice these notes down a bit.

Pub Time

Breaking with long-standing tradition, and with permission and encouragement from those involved, here's an idea Sia had but isn't running with:

Automated Pho retail. Think cross between a vending machine and those robo cafes you see in a few places around town. There are apparently ramen-robot vending machines in use in Japan that you could source and mod for this, total prototype cost is around $5k (although AliBaba says more like $10k CAD; possibly there are simpler models). It's a food vending unit that requires no human contact, minimal real-estate, and can generate serious ROI depending on what kind of traffic area you get it into. WeWork/111/your-startup-incubator-of-choice might be good early deployment areas?

He's working on a fin-tech onboarding simplifier instead, so this one's up for grabs if anyone like combining hardware and soup.

If anyone has good ideas that they're just not the right person to pick up, or that they're deliberately not using right now, drop 'em here (or message me if you want me to include them in future notes)