I caught up with Hillel Fuld, a tech marketer, social media maven and startup mentor, to learn what makes a great startup and get his take on equity crowdfunding. Hillel is Chief Marketing Officer at Zula, a company taking on the pain of team communication. He also blogs for many influential sites including Mashable, The Next Web, Business Insider, The Huffington Post, Venturebeat, and others. Additionally, Hillel mentors startups across Israel in different accelerators including The Google Launchpad, the Microsoft Ventures accelerator, The Junction, and more. You can find and talk to Hillel on Twitter. He is @Hilzfuld.
What makes a great startup?
One home run. A startup has to have one thing so awesome it makes my mouth drop. It can be the product, traction, team, investors or target market. In the case of product, it has to be something that I just automatically fall in love with. An example of a home run product is Any.do. It's just a to-do list but the app is so beautiful. The home run can also be traction. If the user base is growing off the charts, obviously that makes me pay attention. A team of rock star founders, especially those who have previous exits under their belts is a huge plus. If a startup has notable investors from a previous round that also signals that the company is worth looking at more closely. Lastly, if they are attacking a huge target market that is ripe for disruption that can be a big draw. Think of Uber attacking the taxi market, a big market that hasn't seen any innovation since the transistor radio. At least one of these factors needs to knock me off my feet. If everything is just OK, but no home run, I won't invest.
What red flags signal that a startup is doomed?
Lack of market research. That is a serious red flag that negates everything else. Startups must know their markets intimately. They should know their competition well and keep track of them on an ongoing basis. At Zula we use Flipboard to compile up to date information about everything that is going on in our market. The first thing you need to do is learn your market and do a competitive analysis. If I hear a pitch for a product whose market is already highly saturated, but the founders aren't aware of, there is no way I'm going near it. The worst words to hear from founders are "We have no competition". This issue is so crucial; I wrote a post about it on my TechnMarketing blog.
What kinds of investments excite you?
I like companies that are trying to attack a market that has barely been struck; primitive industries that haven't evolved in a long time. If the startup is trying to bring a real, scalable solution to a big, dinosaur market, the potential is huge. Great recent examples are Uber and AirBnB. Some markets that are ripe for innovation are medicine, human resources and law.
Zula raised its last round of funding via OurCrowd, a leading Israeli equity crowdfunding platform. Why did you choose this platform and what was the experience like?
We raised from several sources including: Microsoft, 2M and OurCrowd. Jonathan Medved is a very close friend of the Zula team. It was a pretty painless and seamless experience. We raised $350K via OurCrowd in just a few days. If I recall correctly, the campaign went live on a Wednesday and by Monday the full amount had been raised. If you can raise money the old school way, that's great. Zula did a hybrid of both. Anyway you can get good money from strategic investors that are a good fit is great. The one big advantage of crowdfunding is how fast it was.
Do you think the speed of an equity crowdfunding raise is an indication of how successful the company will be?
Partially agree. Speed of the round is largely a reflection of the startup's clarity of mission. It means they know what they are doing and have a clear, compelling pitch, which is a good sign.
What's your take on equity crowdfunding? Will it live up to expectations?
I don't think it's even speculation at this point. OurCrowd and other platforms are already very successful and are scaling fast. The ability to truly democratize early equity investment is interesting. Its another big market, ripe for innovation. I am definitely interested to see how the market will change as more people are able to invest.
If you were going to build an equity crowdfunding investment portfolio today, what would be your high-level strategy?
I would look for companies that have clear traction and a well-defined product. Drones are the next big thing, so I would absolutely invest in drones. Consumer mobile is risky and hard to monetize, but B2B mobile with a subscription based business model is another interesting area. I am a big fan of social media, but don't like companies trying to do different types of paid promotion for social influencers. The foundation of social media is its authenticity. Any paid promotion damages that trust.
How do you spot home run investments?