Lunchroom Investing: Beauty and the Geek

Home » Angel Investing » Lunchroom Investing: Beauty and the Geek
Last Updated: November 19, 2010

First Posted: July 9, 2009 by Carl Filbrich

Categories

Remember back in high school? The cool kids sat together in the front of the lunchroom where all the actions and eyeballs are. They were chic, popular, and good looking. Everyone just wanted a piece of them. In the back of the lunchroom were the nerds, geeks, and losers, who only wished to take a glimpse of the “real charmers.” What neither of the groups knew was that their popularity, or the lack of, in high school meant nothing, and the nerds will probably be the boss sooner than they think.

Today’s hot investments sit in the front of the lunchroom. They’re the darlings of investors everywhere. The less popular opportunities are sitting in the same room, overlooked by investors who just want to hang out with the cool startups. These “nerds” are ripe for the picking by savvy investors who are willing to take a risk on something that isn’t the whiz-bang fad everyone’s talking about.

In my previous post, I summarized Mercury News’ interview with Sequoia’s Mike Moritz, who seems to have a thing for frugal founders and “unfundable” startups. While everyone was whispering about the new-fangled “world wide web”, Moritz was investing in a manufacturing-services company called Flextronics. Today, while everyone is swooning over social media, Moritz is putting money into a contact center called 24/7 Customer.

Of course, Moritz has made numerous investments in the social web. But he’s also keeping tap on less popular trends and investing in “boring” startups that fill market needs. These startups just might emerge as the “boss” one day, just like the nerds who sat in the back of the lunchroom back in the high school days.

With the media frenzy about popular startups, it can be quite a challenge to find people who aren’t talking about them. So, if you want to keep up with emerging trends to guide your investing but don’t want to throw your money at “cool” startups that are likely overrated and overvalued, what do you do?

A good place to start is to go through Paul Graham’s “Startup Ideas We’d Like to Fund.” Some ideas are less exciting than others; nonetheless, they address market needs/flaws. Have you come across any startups that are homing in similar issues? If so, you might want to look into them.

You’d also check out futurists, and consumer and market trends at The Trends Research Institute, TrendHunter, and TrendWatching. These sites could help you spot those back-of-the-lunchroom emerging trends that other investors have overlooked.

What other sites would you add to the list?

Links:

* For series, references are published in the last installment of the series.

Angel Investing, Picking Winners

angel investing

Ricardo

I remember the TV ads from the booming Internet markets of a few years ago, and not knowing exactly to what they referred. Was it IBM that had one that asked something like “Where do you want to go today?”

I think maybe the most notable success from that era was by the ad agencies that sold the concepts.
http://venturehype.com The Hyper Team @ Venture Hype

Ah, it was Microsoft's first global ad campaign. It's so successful that it's stuck in our minds ever since '94. The power of ads — provided you have the dough to run the campaigns, of course.
Ricardo

Yes, I remember the ads pretty well. And at the same time I remember thinking that the technology and possibilities for using online resources were changing quickly, but I wasn't 100% clear on exactly what they were advertising at the time.

I'm sure plenty of entrepreneurs saw the ads and immediately became excited at the possibilities that were then available.
jamesb

This is certainly a very interesting article. In my experience it has also been that it is better to invest into somewhat geeky projects then what is currently cool or trend setting. We should not forget that Bill Gates or the guys behind Google were also at one time uber Geeks and what an investment that has been!
tongyun

I've read several books by Peter Lynch of Fidelity Investments said to look at the “boring” stocks if you want to make money in a very safe manner. It appears that this concept will also work very well in the world of venture capitalism. Boring may not make you rich overnight, but it sure won't cause you to lose your money overnight either.
http://venturehype.com The Hyper Team @ Venture Hype

There are many cool and trendsetting 'geeky' startups. What we’re saying is – those who only follow what's hot in the market may have overlooked the less glamorous startups that actually fill market gaps in 'boring' industries. But no matter which industry you choose to invest in, be sure you understand the field enough before parting your angel dollars.
http://venturehype.com/dont-follow-the-leader/ DON’T Follow the Leader | Venture Hype

[...] “If they can do it, we can do it just a little better… and monetize it!” Instead, start by looking at the problems that exist in the marketplace and solving those. So an angel who is pitched yet another clone might consider how (or if) that startup can be [...]
http://venturehype.com/whom-to-back-gen-y-vs-old-guys-entrepreneurs/ Whom to Back: Gen Y vs. Old Guys Entrepreneurs | Venture Hype

[...] In its annual 30 under 30 look at upcoming superstars, Inc. calls these young guns a “dynamic group of self-starters that has managed to raise money, launch new products, build new technologies, and tap into underserved markets.” [...]
antoreen

The reference of the good-looking cool kids in front of the lunchroom and the nerds-geeks-losers at the back is a matter of consideration. Yes, fewers are those hunters with bows and arrows in hand whose eyes are exactly fixed on the particular bird. They can identify the courses of events although in most of the time they manifest enough of courage to move with a risk. An entrepreneur who seems to represent the 'nerds' at present may shine one day.
antoreen

The reference of the good-looking cool kids in front of the lunchroom and the nerds-geeks-losers at the back is a matter of consideration. Yes, fewers are those hunters with bows and arrows in hand whose eyes are exactly fixed on the particular bird. They can identify the courses of events although in most of the time they manifest enough of courage to move with a risk. An entrepreneur who seems to represent the 'nerds' at present may shine one day.
http://venturehype.com The Hyper Team @ Venture Hype

If we'd jump into a time machine and go back to high school days, we'd make friends with every nerd in the school!
http://venturehype.com The Hyper Team @ Venture Hype

If we'd jump into a time machine and go back to high school days, we'd make friends with every nerd in the school!