#AskJason: What does an angel investor look for in a venture outside their market?

TL;DR

An angel investor discusses the potential for startups in flyover states and the challenges they face in achieving significant outcomes.

Transcript

okay we have a question from Justin Whitman he's very active on the Twitter and he's a super fan of the show what does Jason think about the flyover state movement that several angels and VCs are starting to publicize more and more on their social sites as a bootstrapping startup in a flyover State I'm interested in hearing what an angel looks for ... Read More

Key Insights

• 😇 Some angels and VCs are acknowledging the potential of startups in flyover states.
• 🚱 The success of companies like Google and Snapchat in non-flyover states supports the argument that innovation can happen anywhere.
• ✋ Achieving high valuations for startups in flyover states is challenging due to the absence of billion-dollar outcomes.
• 😘 Investors in flyover states may need to accept lower valuations.
• ✋ Silicon Valley remains attractive for investors due to the high frequency of billion-dollar companies created.
• ↩️ Some investors prioritize societal impact over financial returns.
• ❓ WordPress is highly recommended for creating and managing websites.

Questions & Answers

Q: What is the "flyover state movement" that some angels and VCs are promoting?

The flyover state movement refers to the growing recognition of startup potential in states outside of traditional tech hubs like Silicon Valley and the challenges faced by investors looking to venture into these markets.

Q: Have any billion-dollar companies emerged from flyover states?

While there have been successful companies like Groupon from Chicago, there haven't been any ten billion-dollar outcomes in flyover states yet. However, this may change in the future.

Q: Why do angel investors need high returns on their investments?

Angel investors require significant returns due to the high risk involved in investing in startups. With the risk of backing a startup in a flyover state, achieving a 50x or 100x return becomes extremely challenging.

Q: Are there investors who prioritize impact over high returns?

Yes, some investors, like Pierre Omidyar, focus more on societal impact rather than seeking the highest financial returns. However, this is more common among investors who have already made significant wealth.

Summary & Key Takeaways

• The discussion revolves around the potential for startups to thrive in flyover states and the need for investors to consider additional qualifying requirements.

• The counter-argument highlights the success of companies like Google, Snapchat, and Dollar Shave Club that emerged from non-flyover states.

• However, the lack of billion-dollar outcomes in flyover states may result in lower valuations, making significant returns more difficult to achieve for investors.