Three Reasons to Look to the Angels for Start-up Funding

http://www.inc.com/langley-steinert/3-reasons-to-look-to-the-angels-for-start-up-funding.html

VCs can pack a powerful punch. But here's why you should hold that thought.

By Langley Steinert | Aug 7, 2012

You're starting a business. You need capital. All the headlines say that venture capital firms (VCs) are looking for the next great thing, and you've got it.

But at the initial seed financing stage of your start-up, VCs are not always the better option In fact, angel investors often have more to offer. VCs serve a great purpose, but are often better suited for later stage growth funding.

Here are three benefits you'll enjoy from angel investors as you build a foundation for your start-up:

1. Operational Experience

Having investors and board members with operational experience (especially within your industry) can provide invaluable contacts and advice, and angel investors are almost always current or former industry executives themselves. My current company, CarGurus, is an online automotive shopping site, and we benefit from having investors like the former founder of eBay motors, the current CEO of TripAdvisor and one of the first 10 employees from Yahoo! To date these folks have provided connections and guidance that comes from their own operational backgrounds.
While there certainly are venture capitalists with operations experience, the majority of VCs come from finance backgrounds, with experience in areas like investment banking. Let's be clear: VCs play a vital role in helping with growth equity (your second or third round of financing). They can help you build your board, hire great executives and strategize on your business model. However, for your very first seed stage funding, a few angel investors from your specific industry will most likely provide greater input on how to master those first months of operations.

2. Patience, Patience, Patience

Angels invest less money individually than a VC firm, so the amount of capital you can raise from a group of angels will certainly be far less than that of a VC financing. The flip side of that coin is that angels are by definition not professional money managers. Angels don't expect to get their money out within three to five years at some pre-determined rate of return. As long as your company is doing well, most angels are happy to let their investment "ride" for the long haul. For the most part, angels are patient, long-term investors.
At CarGurus, we reached profitability with no VC funding. Our investors are friends and family, and they have never once voiced the topic of "exit strategy" or asked me when they will get their money back. All of them are happy to keep their money invested, growing pre-tax at a nice rate of return. If they were to get the money back, they would have to go find another investment that does as well, and that takes tremendous time and energy. Remember, angels usually have other day jobs and are not professional investors.
Venture capitalists have limited partners (the VC's own investors) and by definition have to return capital to their investors within a fund's lifecycle, usually five years. For venture firms to raise their next fund, they have to show not only that they can invest money but that they can get liquid and exit their investments in a timely manner. During your first year of operation, that's not an ideal mindset, but in your later stages of financing, having such a VC focus on growth and liquidity may be just the boost you need.

3. Valuation and Ownership

Again, angels are not professional money managers and as such will usually give you a better valuation and financing terms, allowing you to retain more of the equity and board control of your company. Angels certainly want to make money, but they are not "in the market" every month and therefore are not as experienced--nor do they care to be--when it comes to valuations or governance issues.
After you have established traction on your product and business model (i.e., shipped a product and generated some revenue), you can and most likely should raise venture capital. But at that point you can do so at much more favorable terms.
I've been involved as a co-founder in two profitable, successful start-ups. One was done with venture capital and one was done without venture capital. Truth be told, I was once a venture partner at a venture capital firm (www.flagshipventures.com) myself. Flagship Ventures provided the seed money when I co-founded TripAdvisor. Flagship did a great job and was a valuable partner in growing TripAdvisor into what it is today.
When I started CarGurus, I decided to forego venture financing and go the angel financing route. I do concede that raising money from angels is not necessarily the easier path. Chasing down ten angel investors to get them to agree on a financing document and actually give you money is a bit like herding cats. However, for CarGurus, the benefits have far outweighed those challenges.
There is no right or wrong answer about taking VC money in your seed round or taking VC money at all. As I mention above it can be done successfully both ways. However, if you can raise money from angel investors in your first seed round, it will allow you to conserve more equity, retain more board control and get more operational input in those first few months. When you do raise venture money it will also allow you to raise that second or third round at more favorable terms.
In those early days of your start-up, look up to the angels and you may receive the blessings that set you on the right path...

The Paradox Of VC Seed Investing

http://techcrunch.com/2012/07/29/the-paradox-of-vc-seed-investing/

Brian Singerman

 

This is the first in a series of articles I am writing to bring more transparency and honesty to the field of venture capital. While many of the themes may be contrarian or controversial, I have two primary goals: First, I want to help entrepreneurs and startup enthusiasts understand what motivates investors.

Second, I hope to draw attention to some of the fallacies venture capitalists use in their negotiations with entrepreneurs. Aligning the incentives of entrepreneurs and VCs will lead to much stronger relationships and innovation.

Entrepreneurs regularly come to Founders Fund asking us to lead or participate in their seed/angel round. They are often confused or shocked when I try to convince them that with very few exceptions, it is not in entrepreneurs’ best interest to raise seed capital from large venture firms and neither is it beneficial for large firms to invest in seed stage companies. Among the reasons: the structure of VC economics and unavoidable perception issues. Since this conversation happens frequently, I’d like to share my honest thoughts on why large funds should avoid angel investing -­‐ and also why Founders Fund nevertheless does so through its wholly owned FF Angel funds.

The economics of VC explain a lot about why large funds should not do seed investing, so let’s start with a quick review of those dynamics. VCs raise money from a pool of capital known as limited partners (the fund is the general partner), which include accredited individuals and large financial institutions . The VCs usually charge 2% of this capital annually for operating expenses (the management fee) and 20% of the profits (the carry). This is known in the industry as a 2-­‐and-­‐20 structure but varies from fund to fund. While the management fees from a large fund can be an important source of revenue, the real incentive is (or anyway, should be) the carry. For of every dollar committed to a fund, the firm will take home approximately $.15-­20 of management fees (which ratchet down over the life of a fund), but $.40 in carry if the fund triples. And good VC managers aim to get a return of at least 3-­5x committed capital. Established firms have been raising more capital lately and this has important consequences for the kinds of investments they make. For the remainder of this article, when I refer to “VCs,” I am referring top tier funds in the range of $400 million to $1 billion+. As I am a partner at Founders Fund, I will use our latest $625 million fund as
the example.

There are many reasons to work in venture capital. Founders Fund, for instance, has remained steadfast in its mission to transform our world for the better, as presented in our manifesto. At the same time, venture capitalists are capitalists, with a duty to provide returns. With a 2-­‐and-­‐20 structure, we and every other VC in the world are incentivized to make money for LPs and ourselves. In order to achieve meaningful carry, we need to return several multiples of the fund, or multiples of $625 million in our case. Consider the basic implications here: we make a traditional seed investment in a company of $250k, and that investment returns. 20x, which by anyone’s standards is a home run. The problem is that it only returns $5 million and we need to make another 124 “home-­‐run” seed investments to return our fund. In a more extreme example, take Andreessen Horowitz’s $250K seed investment in Instagram. This was one of the most successful seed investments of all time and netted its fund $78 million. In our case, we would need eight Instagrams to get to $625 million—a feat that no single fund has ever achieved in the history of venture capital. The case would be very different if we were a smaller early-­‐stage firm where the Instagram investment may have returned its fund multiple times over.

This begs the question: why do VCs do seed investing at all? The standard reason is “option value”, or the ability to put in more money later as the company scales and gains traction. That’s a terrible answer.. Example: You are the founder of Acme Computing Technologies (ACT), and raise $250K in your seed round from a moderately successful venture firm. That firm has not been bad to you in any way, and may have even been helpful. Six months later, ACT is doing well so you are thinking about a $5 million Series A to scale the business. Your original VC would love to do this deal, but you get a call one day from a legendary Silicon Valley firm. Are you really not going to take that call? Of course you will! And if she offers you competitive terms, are you not going to strongly consider taking the money? Of course you will! Top tier firms almost ALWAYS have an option on a company, even if they did not participate in the seed round. Firms with great reputations bring many benefits, from branding and signaling to good advice and great connections. For good companies, this scenario happens frequently.

On the flip side, entrepreneurs should be cautious of taking seed money from top tier VCs because of this “option value.” Let’s change the story and say that a top tier made a seed investment in ACT from the start. We will ignore the subset of companies that die or “crush it” and focus on the large majority of companies in the grey area. If the top tier fund skips the next round for whatever reason, ACT would have a serious problem on its hand. The most common question other firms will ask is “Why didn’t the fund take this round”? Passing sends a negative signal to the market, and in some cases, may actually kill the company. The perceived option value comes at a potential huge cost to company, and is the main reason entrepreneurs need to strongly consider this downside.

Those are the structural problems with VCs doing seed investing – it’s challenging for a seed investment to have an impact on the fund’s total returns and there can be all sorts of signaling problems. So why would an entrepreneur take money from a top VC, and why would the VC itself ever make seed investments?

A potential reason to take money from large VCs is because of their size and ability to move quickly on a small seed investment. In general, if any $400mm+ fund VC takes more than 24 hours to decide on a $250k seed investment, the entrepreneur should run away, fast. Rapid access to capital allows entrepreneurs to waste less time fundraising and spend more time on product or business development. Furthermore, since the fund is so large, and the investment a small fraction of committed capital, the VC will likely leave the entrepreneur alone to run her company with no interference. VC meddling is potentially very detrimental to a company’s early success. Convenience and autonomy seem like great reasons to take money from a large fund, but the negative signaling potential to kill the company in the future outweighs these.

Despite these reasons, there are some cases where it does make sense for us (and indeed, any VC firm) to invest in seed stage companies. First, we invest in very high risk tech companies that otherwise would have a difficult time raising funds. We do this because we believe that IF these companies achieve their technical milestones, they open up huge new markets. This is usually a big IF, and also mitigates any signaling risk since other firms might not be willing to invest in the first place. Second, we invest in our network, who are typically amazing entrepreneurs or visionaries (e.g., the PayPal mafia, Facebook mafia, etc.). Investing in our network means we do not need to exert much incremental effort sourcing and helping out on deals because we already know the entrepreneurs and what they are working on. That kind of investing is a process that is almost infinitely scalable and thus incredibly efficient. These companies often do not fall under our manifesto criteria which we apply to our large main fund investments, so there is very little signaling risk if we do not participate in the Series A round. At Founders Fund, we do these seed investments through FF Angel to signal one of these cases, both to other VC firms as well as our own investors.

At the end of the day, we are venture capitalists. We strongly believe in stimulating innovation through capitalism. We are in this profession not simply to make money, but to help fund some of the most important technology the world has ever seen. Making our industry more transparent is an important part of what we do, as it can help cut through all the myths of venture capital, and empower founders to focus on the most important thing: progress.

Accelerators Try to Get Startups to Stick Around

http://www.businessweek.com/articles/2012-07-06/accelerators-try-to-get-startups-to-stick-around

A few years ago, when Bryan Jowers and Justin Stanislaw were dreaming up an app to help friends pool money to give gifts, they felt they needed to leave Houston to improve their chances of finding investors and forging connections. Instead of relocating to a Silicon Valley hotspot, they moved to Cincinnati, lured by a startup accelerator called The Brandery. As one of six startups participating in the summer of 2010, they got 12 weeks of intensive help building their product, called Giftiki.

Startup accelerators, which give fledgling ventures seed money, office space, and mentoring through boot camps that typically last a few months, were born in tech hubs such as Silicon Valley and Boulder, Colo. The federal government and economic development groups around the country are banking on accelerators to create jobs and revive local economies in cities like Nashville, Tenn., and Greenville, S.C. The challenge in those places is whether the new crop of accelerators can get more companies like Giftiki—which left for San Francisco after raising more than $1 million in venture capital—to stick around.

Officials in Fayetteville, Ark., think they can. In August, 15 startups will arrive at ARK Challenge, a new accelerator with mentors from prominent Arkansas companies including Wal-Mart (WMT) and Tyson Foods (TSN). It’s partially funded by a $2.1 million federal grant. The ARK Challenge received 83 applications, including some from startups in Australia and Croatia, for its 15 spots. Director Jeannette Balleza hopes the graduates will move permanently to the region. “There’s a model in the Valley that we’re emphasizing to figure out: How do we spur innovation and create jobs but keep it specific to Northwest Arkansas?” she says.

ARK is one of 20 projects to receive a chunk of $37 million in federal money as part of the Obama administration’s strategy of using accelerator and incubator programs to create jobs in different regions. “If you really look at how America is going to be competitive, we need all of our entrepreneurs to be successful,” says Karen Mills, head of the U.S. Small Business Administration.

“We need to make sure they have access and opportunity, not just in Silicon Valley, but in Iowa, in West Virginia, in Arkansas.”

Keeping accelerator participants rooted in an area after a program ends requires the right combination of seasoned mentors, investors, and nearby research institutions, says Aziz Gilani, a Houston-based venture capitalist at DFJ Mercury. While many programs are too new to judge, Gilani found that in nearly half of the 29 accelerators he researched for a ranking, none of the graduating companies went on to raise more money. TechStars in Boulder and Y Combinator, located in Mountain View, Calif., were at the top of the chart. The Brandery ranked 10th. Gilani says the most successful ones are “directly tied to what the region is best in the world at.” Houston won’t become a consumer Internet hub, Gilani says, “but an energy-company accelerator would be a slam dunk.”

Two-year-old Brandery, which focuses on consumer marketing startups, highlights connections to big consumer companies, such as Proctor & Gamble (PG) and Macy’s (M), that call Cincinnati home. Co-founder Dave Knox says the burden is on accelerators to give startups reasons to stay. “We’re big believers of playing to the natural resources of a city,” he says.

The accelerator draws entrepreneurs from across the U.S. Many of the startups from the program’s first two classes, like Giftiki, departed in the months after graduating. Knox says an accelerator’s first concern needs to be the success of its companies. If staying close to home limits a startup’s prospects, it limits the potential of the accelerator’s investment as well.

Cities and investors alike are betting on accelerators to uncover new pockets of entrepreneurial talent around the country. Kristian Andersen, co-founder of Indianapolis angel investment fund Gravity Ventures, is a mentor for several accelerators in Indiana and will serve as one for the ARK beginning in August. He estimates that there 150 accelerators in the U.S. alone, and believes that “there are parts of the country that are genetically predisposed to entrepreneurship,” but that not all those places have gotten attention yet.

“It’s really good for a startup as an entity to have a bit of a chip on its shoulder,” Andersen says. “There’s no better fuel in the world than to tell a smart guy that he can’t do something.” The same holds true for regions trying to breed homegrown startups, he says: “Being the underdog can be a really powerful motivator.”

Visas for entrepreneurs

http://www.economist.com/node/21556636

Where creators are welcome

Australia, Canada and even Chile are more open than America

Jun 9th 2012 | from the print edition

MOST governments say they want to encourage entrepreneurs. Yet when foreigners with ideas come knocking, they slam doors in their faces. America, surprisingly, is one of the worst offenders. It has no specific visa for foreigners who wish to create new companies. It does offer a visa for investors, but the requirements are so stiff—usually an initial investment of $1m, or half that if the firm is in a depressed neighbourhood—that the annual quota of 10,000 visas is seldom filled.

Other countries are more open (see table). Singapore offers visas to people who invest $40,000; for some, the government provides additional investment. Britain gives visas to entrepreneurs who meet certain conditions and attract £50,000 ($77,000) of venture funding. New Zealand has no specific capital requirement but offers residency to entrepreneurs whose firms are deemed to benefit the country. Chile is wildly generous: its government gives selected start-ups $40,000 without taking any equity in return. All these schemes have been introduced or expanded since 2008.

Where an entrepreneurial visa is not available, other routes may be. Australia and Canada use a points system that emphasises youth and skills. Since 2007 Australia has curbed the total number of permanent-residency visas it issues, but expanded the number of visas for skilled workers and their dependents from 103,000 to 126,000 a year. That is nearly as many as America (140,000), though America’s population is 14 times larger.

A similar side door let Mohamed Alborno into Canada. The young Egyptian-born entrepreneur incorporated his company, Crowdsway, in Delaware. He had done well in a contest for budding entrepreneurs. But getting a visa to live in America is slow, confusing and unpredictable.
In the end he went to Canada instead, where setting up a company is just as easy as in America, but the visa process is much more straightforward. He now says he is very happy to have settled in Vancouver. His firm, which connects online video-makers with clients, has just launched a beta service.

America’s scorn for skills is extraordinary. The share of permanent visas granted for economic reasons (as opposed to kinship) fell from 18% to 13% between 1991 and 2011. In Canada it rose from 18% to 67%. The Partnership for a New American Economy, a pro-immigration group, warns that America is “falling behind in the global race for talent.” China, meanwhile, offers some highly skilled returners not only free homes but also cash to buy furniture.

Venture capital in emerging markets: Making money by bringing old ideas to new markets

http://www.economist.com/node/21556269

SOME venture capitalists call it “geo-arbitrage”; others know it as “tropicalisation”. The term refers to the practice of backing start-ups that take an established business model and adapt it to an emerging market. Whatever you call it, it is becoming a bigger part of the venture-capital industry as competition at home forces Silicon Valley investors to look farther afield.

Julio Vasconcellos, one of the founders of Peixe Urbano, a Brazilian site offering users discounted deals, is thrilled by the “huge flood” of American investors he has noticed coming to Brazil, for instance. No wonder. Some of them, including Benchmark Capital and General Atlantic, have invested in his own company alongside Brazilian venture capitalists. The financiers have reason to be upbeat, too. Peixe Urbano is a clone of Groupon, an American start-up that went public last year; its business model is one they know can take off.

The idea of tropicalisation has been around for a while. It has already been lucrative for venture capitalists in India and China. Take Baidu, a Chinese interpretation of Google, which made early venture investors a killing; or Alibaba.com, a Chinese version of eBay, an online-auction site. Now venture capitalists are looking at other markets, including Brazil, Indonesia, Russia, South Africa and Turkey. Last year $3.4 billion of venture-capital deals were done in emerging markets, more than double the amount in 2008.

This push into emerging markets has gained momentum because venture capital is experiencing problems in its traditional markets. Silicon Valley was once so inward-looking that venture capitalists used to say they would not back a start-up unless they could cycle to its office. But valuations in North America have risen for both early-stage and later-stage investments (see chart), making it much harder to make great returns.

That is partly because there are too many firms; 369 of them are currently in the market trying to raise $50 billion, according to Preqin, a research firm. There is a lot less competition in emerging markets. The pressure from investors is also rising. A damning new report by the Kauffman Foundation, an outfit which promotes entrepreneurship, analysed its venture-capital portfolio and concluded that 62 out of 100 funds failed to exceed the returns offered by the public market.

Most venture-capital firms do not head abroad with the sole aim of looking for copycats, but plenty of their investments end up that way. Douglas Leone of Sequoia Capital, a big venture-capital firm, reckons that in emerging markets like China around 50% of start-ups backed by foreign venture capitalists in the internet and mobile sectors are copycats, and in markets like Brazil it is closer to 70%.

That is not so surprising. Backing tested concepts mitigates the risk inherent in start-ups and means companies are likely to grow quickly, because the original firm has already worked out the kinks. Often the originator of the business does not have the expertise to enter new countries quickly, so copycats can get there first.

They can also gain an edge by tailoring businesses to local habits. Flipkart, an online-commerce site in India founded by two former Amazon employees, has received funding from Tiger Global, a New York-based hedge fund that specialises in this kind of investing, and Accel Partners, a venture-capital firm. Flipkart has taken off in part because credit cards are less common in India and it offers the option of payment on delivery.

Another example is Trendyol, a Turkish “flash sale” site that mimics Vente-privee.com and Gilt Groupe, which popularised the idea of time-limited online sales of designer clothing. But Trendyol, whose backers include Kleiner Perkins Caufield & Byers, also sells its own mass-market clothing line, with seasonal designs “crowdsourced” from users in Turkey.

There are different ways to play the copycat game. Rocket Internet, started by the Samwer brothers—Alexander, Marc and Oliver—in Germany, is a cloning “factory” that copies American and European businesses, hiring entrepreneurs to run them and exporting these start-ups to emerging markets as fast as possible so they are the first entrants. More traditional venture capitalists are setting up offices and selectively backing local entrepreneurs. American venture investors often prefer to bring in a local partner to provide more consistent mentorship to these entrepreneurs and give advice on how to navigate the domestic market.

Such advice can be valuable, given the specific risks of setting up in emerging markets. First, companies can take longer to get off their feet, given grinding local bureaucracy. “An eight-year fund might not be sufficient in Brazil,” says José Luiz Osorio of Jardim Botânico, a Brazilian seed investor. Second, there are cultural barriers: it can be hard to recruit employees to work for an unknown company in exchange for equity, for instance. Third, exiting through large initial public offerings is unlikely in countries like Turkey and Brazil, where IPO activity is muted and investors like to buy well-known firms; that means venture firms are reliant on strategic buyers to gobble up their creations.

Tropicalisation piles on an additional set of risks. Copycats can easily lose share when the original company eventually enters the local market. Sonico, once the Facebook of Latin America, got “pummelled” when Facebook arrived, says Nenad Marovac of DN Capital, which was behind Sonico. And even if they can see off competition, the copycats are unlikely to be mega-blockbusters because, by definition, they are not new. “With innovation you have a global upside, but with copycat innovation you have geographical limits,” says Eric Archer of Monashees Capital, a Brazilian venture firm.

It will not be long before emerging markets spawn their own innovations that can be trotted out on a global scale. That would be closer to the spirit of venture capital, which is supposed to ferret out and fund new ideas, not imitations. Until then, however, tropicalisation is set to become an ever more popular strategy. Copy that.

Video: Good Dog - Bad Dog Pitch (Modern Family)

Sausage vs. Meatballs: A Study in Start-ups

http://www.inc.com/jon-burgstone/the-epicurious-case-of-currywurst-bros.html?nav=pick

Why did the Currywurst Bros. chain fail in New York, while little Meatball Obsession is thriving? Entrepreneurs, take note.

By Jon Burgstone and Bill Murphy, Jr.

This is a story of meat, square feet, and microeconomics. It's the tale of how two food entrepreneurs opened up shop about 10 blocks from each another in Lower Manhattan. One crashed and burned. The other might just make it.

Like any good story, there's a moral. Two, actually. And since you're a busy entrepreneur we'll give them both to you up front. First, keep your overhead low. And second, at all times, do everything you can to obtain maximum information for minimum cost.

Meet the Meat Vendors
Exhibit A is Currywurst Bros., a German chain that opened its first U.S. location in Greenwich Village, not far from New York University. It served an inexpensive sausage dish, very popular in Germany, called—yes—currywurst. If you're not familiar with it, it’s basically chopped up pork sausage smothered in curry powder and ketchup.

Sorry to say, but if you haven't tried Currywurst Bros., you've missed your chance to do so in New York. The restaurant opened in May 2011 in a high-priced storefront, "after a long build-out that took many months," according to The Village Voice. But it closed for good just seven months later.

Against this, we submit Meatball Obsession, which sells "meatballs in a cup"—one, two or three of them, plus tomato sauce and a piece of bread. According to the company's founder, Dan Mancini, the place grew out of his memories of meatballs his grandmother used to make.

Meatball Obsession opened this past week about 10 blocks from where Currywurst Bros. stood, but it has a very different setup. In fact, the eatery is, "a stall—just a window, really—embedded near the PATH train entrance on the east side of Sixth Avenue just short of 14th Street," as the Village Voice puts it..

So why did the sausage place go kaput after just seven months? And what might the meatball place learn from it? (Even more important, what can you learn?)

Pay heed to what customers need
We're using "need" in a generic sense here, but currywurst was basically new to New York City. It's a German food, and while New Yorkers are pretty much willing to try anything once, it hadn't been proven before. Who knew if anyone would really like it?

That's not the case with meatballs. Many if not most people have eaten a few meatballs in their life. More than that, Meatball Obsession isn't the first New York City eatery focusing on the humble meatball. There's The Meatball Shop, for instance, with three locations in the city.

Even more important, Mancini had been selling meatballs and sauce to New York City supermarkets for four years before he opened Meatball Obsession. He must have had pretty good information on New Yorkers' tastes before he started.

Keep überhead under control
Meatball Obsession is operating out of a window outside a subway stop. But Currywurst was paying rent for a much bigger place, around $16,000 a month, according to The Village Voice. Do the math: If you cleared $1 on every sausage you sold, you'd have to sell more than 500 of them every single day simply to pay the landlord. That doesn't leave a lot for other all your other business expenses---you know, like paying your employees and yourself.

Mind your p's: Process and profitability
Of course costs play right into profitablity, but there are other factors as well. According to The Voice, Currywurst Bros. needed 10 minutes to cook each sausage after it was ordered. That's kind of a long time to wait for a $7 hot dog substitute. (Especially, as one commenter pointed out, when you can buy a hot dog for a couple of bucks from a street vendor for about $2.)

We didn't actually eat any meatballs in the course of writing this article, but it looks as if the prep time at Meatball Obsession is much faster. And yet, one meatball goes for $4 at Meatball Obsession; $10 will get you three. There's likely a lot more room for profit with that kind of math.

The restaurant business can be brutal, and there's no guarantee that Meatball Obsession will survive any longer than Currywurst did. But their odds look more favorable. Gather the best insights you can achieve into customer needs and tastes before you launch, and keep costs low, especially before your idea is proven. It's good advice for just about any entrepreneur in any field.