Startup Investor School Day 2

Buchheit says startups often need ideas that established companies would dismiss as too small, strange, or risky. He points to Google, which Larry Page and Sergey Brin tried to sell for $1 million before its potential was clear. He also describes joining Google because he used its search product and was excited about its Linux infrastructure, not because he expected a big return.

Buchheit says he looks for founders who are better than he is and can explain their ideas clearly. Meraki built and sold mesh Wi-Fi hardware without raising money, while Kyle Vogt built a streaming server over a weekend that helped Justin.tv survive. He also highlights Blake Scholl’s clear explanation of how his supersonic jet company would address problems that doomed the Concorde.

Buchheit missed an opportunity to invest in Dropbox after canceling a meeting with Drew Houston, and moved too slowly on Airbnb before it signed a term sheet with Sequoia. He says investors should make deliberate decisions, since promising companies may not wait. He also warns that a low valuation, sympathy for founders, cynical ideas, or impressive numbers alone have not led to good returns for him.

Buchheit looks for clear communication, fast execution, resourcefulness, ambitious or playful ideas, the ability to attract talent, a product people want, and determination. He suggests asking what founders accomplished in the past month and looking for a rising trajectory, even when current numbers are small. He also advises probing for commitment and learning how founders respond to setbacks.

Buchheit says seed investing involves substantial luck, so investors should not build elaborate theories from every win or loss. He relies on founders’ expertise when evaluating unfamiliar fields, including deep technology and biotech, where demand may be clear but technical success is uncertain. He warns that abundant funding can shield founders from customers and reality, and says investors need to balance learning from past mistakes with staying open to new opportunities.