Gary Vaynerchuk Chats with Dave McClure, Calls Entrepreneurs a Rare Breed
Angel investor, Wine Library-phenom, and VaynerMedia co-founder Gary Vaynerchuk dropped by last week’s 500 Startups demo day in New York for a brazenly candid talk on investment strategies and deal valuations. “I don’t give a [expletive] about the numbers,” he said. “I don’t understand the math of it well enough. I’m a salesman. I bet on my strengths, and that doesn’t have a science behind it.”
Vaynerchuk is a partner with New York-based brand consulting agency VaynerMedia, and he built up the family business into Wine Library in Springfield, NJ. Until 2011 he also hosted video podcast Wine Library TV, naturally, talking about wine. Dave McClure, the chief troublemaker at the 500 Startups accelerator, brought Vaynerchuk on stage at the New York Institute of Technology auditorium after the demos wrapped up.
Vaynerchuk said he sees startup activity emerging outside some of the obvious hubs for innovation such as Silicon Valley. “The culture is building in this country around entrepreneurship, and the cost that it takes to create value in businesses is lowering,” he said. “People are starting to realize you can start that anywhere.”
The roster of demoing graduates from 500 Startups exemplified that trend. The lineup included digital ad agency for small businesses Privy from Cambridge, MA, commercial real estate data gatherer CompStak in New York, and Argentina’s Wideo, whose platform lets users quickly create their own animated videos. McClure said 500 Startups plans to open an office in New York in a few weeks, to be led by Shai Goldman.
What Vaynerchuk found exciting in the New York entrepreneurship scene is a shift away from the usual blathering about users and upside and on to more tangible matters such as revenue and business models, which tends to be a common theme when financing belts get tightened. “There’s more practicality in New York right now than there was 36 months ago,” he said. “That’s an exciting thing for everybody.”
Startups without revenue are not completely off his radar, though they do warrant closer scrutiny. “You want to look under the hood at who they are and what they’ve done in the past,” he said. Vaynerchuk made it clear he is not easily impressed by academic credentials from big-name schools.
McClure asked whether chatter about startups being too expensive was valid, and if New York angels were making deals at reasonable prices. Vaynerchuk said jokingly, “We did what you West Coast guys did: we got together for dinner and decided to lower all the prices.”
While pricing has improved, according to Vaynerchuk, he said some deals for startups are swayed by the ups and downs at companies such as Facebook and Groupon. “Let’s be honest,” he said. “There’s a bunch of idiots like me who go out, execute, make money, and then we start throwing around $25,000 and $50,000 checks because we can’t help ourselves.” That can be a bad thing, he said, because such investors tend to look at startups with their own plans in mind for growing the business. “I pretend I am running that company and I know exactly what I’m going to do,” he said. “What you learn is that not everybody is like you.”
The market is correcting itself, he said, as more investors grow more cautious. “All those young angels that drove a lot of what was going on, we’ve been burned enough now,” he said. “We’re learning.”
Investment activity coming out of Los Angeles excites Vaynerchuk, as celebrity clout helps drive some buzz for startups. “They know how to make money,” he said, referring to the likes of Troy Carter, CEO of Coalition Media Group and Lady Gaga’s manager. Carter has invested in LaunchRock in Walnut, CA, a platform for launching viral websites, and music-sharing site Turntable.fm in New York.
There were a few other aspects of the investment and innovation landscape Vaynerchuk voiced strong opinions on. He remains bullish on subscription commerce, when done right, in spite of the bad rep it currently gets. “When people buy [stuff], you make money,” he said. “That’s good.” Wannabes and me-too companies that tried to ride the wave of subscription commerce but failed, he said, stoked some fears, but commerce will persist. It comes down to execution.
“We think too much that we have Nostradamuses in this industry,” he said. “We don’t. We have fast followers and then they execute. That’s what a lot of us should be paying attention to.”
He doubts there is a bubble among incubators, which a few industry watchers have hinted at, however he did question the mettle of some would-be founders of startups. “We have more people than ever that aren’t real entrepreneurs thinking they are entrepreneurs,” he said. “I think it’s time we started talking about entrepreneurs more like athletes, singers, and songwriters. It’s a more rare breed than we think.”
In fact, Vaynerchuk believes some founders are better suited to serve in secondary roles at companies. “I’m investing in things now with the thought, ‘I think this person is going to fail, realize it, and then I’m going to hire them to do something for me’,” he said.
A trend Vaynerchuk wants to see end is the rise of impatient, unrealistic expectations among some founders who believe they can sprint to wealth but are not willing to take entry-level jobs to develop their skills at companies that have been successful. “I met a 23-year-old who wants to live this [lofty] dream we’ve been selling in this space that’s nuts,” he said. “Most of this baffles me.”