Taking dumb money may only pull you down with those sinking offices. Founder beware. 

Taking dumb money may only pull you down with those sinking offices. Founder beware. 

Incubatees and investees are often surprised by how many terminals I run at each of my desks. At my desk, even at the BPO, I keep terminals up—not to feel like Gordon Gekko, but because when you see story-stacks and news-wire stacks as a collection, sometimes patterns distill. And this is important.

I hold invite-only office hours among startups that are applying for funding, so that we can meet, whiteboard, flesh out ideas, and generally work together on their business—business planning, even setting up their web presences (Angel.co, Linkedin, etc.).

I do this before I even I put any chips down because it’s a way of test driving. And honestly, it’s more of me helping them than me checking them out. It’s a way for me to see if we’ll work well together.

Angel investments have a gestation period of 8 or more years. So if we’re going to get together, we’re going to have to make sure we’re a good fit for each other. Culture is key.

During our last session, I had a group of 20 or so startups that are applying for funding over to my place in Makati. We spent the entire morning crawling premium news services such as Bloomberg (terminal), CB Insights, and The Information on “comps”—comparable startups to theirs. We exhausted the full library of premium informational sources that my actual incubates and investees have full access to.

Comps—not freebies for whales at Solaire: out there, in the startup cosmos, are a billion other startups just like yours. And chances are, somewhere in between premium financial analyst reports, premium news information on your startup’s niches and competitors, is a triangulation that can be done on how much your startup might actually be worth today.

But we dig deep: we stalk founders, hundred pages down through search results; we search Wayback Machines; and if the founder’s been in the States for a while—we check publicly available “vital statistics,” all with the aim of: what’s the difference between you and the rest.

And after crawling all this information, and after the Rockstars start kicking in, the polite coffee shop chit chat quickly digresses into roaring debates along the decibel Chicago commodities trading floor: “How are you going to beat the competition?” “This guy’s got more Ivy League degrees than a thermometer. How’re you going to compete with that kind of social network?” “Oh yeah, you’re a college dropout like Bill Gates and Mark Zuckerberg? But where did you drop out from? STI? Hmmm…”

And then, just before we break for lunch, we flip the lights on/off like they do for kindergarteners to signal them to shut up and fall in line. We get settled back into our seats, and we get to work—refining our slides, our notes on our business approaches, even figuring out who may not end up staying on the team.

These little bull sessions [and this isn’t the only kind of thing we do during these get-togethers] have been fruitful, efficient and productive so far. The follow-up meetings are far more polished, honed, targeted. The number of slides get cut from 50 to 3; founders are able to talk concisely about their businesses because they have that greater insight of where it is their startups are positioned with regards to the rest of the market.

It’s true, we compete and work first and immediately in the Philippine market, but ultimately, this game is international. And at the outset, we have to have international thresholds in mind. Founders don’t have to go out of their way to state the obvious about these “international thresholds” (sales, users, etc.): just talk about your business; highlight real traction and true and real indications that this thing’s going to take off, because everyone’ll be able to tell whether or not you know what it is you know what you’re talking about. [And if you do have to over-explain yourself, your cultures aren’t compatible, and/or you’re likely dealing with dumb money.]

Washington Post: What can go wrong with taking Chinese capital.

Hangzhou, Zhejiang province. // Photo Credit: Washington Post

Hangzhou, Zhejiang province. // Photo Credit: Washington Post

At the heart of the bitter, under-the-radar dispute between China’s online shopping powerhouse and Quixey, whose tech enables users to search within apps, is a culture clash — one that is emblematic of both the promises and the perils involved in Silicon ­Valley’s relationship with China. Experts say that relationship — ­always delicate, always mind-bogglingly complex — has reached a new inflection point, as unprecedented amounts of cash from China have poured into Silicon Valley.
— Washington Post

See also: 

  • Financial blog, Wolfstreet, asserts that Mainland Chinese money's just "desperate" to off-shore "under the motto: the more the better, no questions asked." And that desperation to siphon away liquidity from the mainland, and into investments, has only fueled this idea of "dumb money" coming from China in droves. 

  • Nikkei says Chinese "dumb money" invests in Silicon Valley startups site-unseen, and in startups that American VCs wouldn't ever come close to.

  • Dumb money behavior (hopping from mutual fund to mutual fund on a regular basis) article by the National Bureau of Economic Research.