Social Proof

What the greatest technology investors say about Social Proof

SOCIAL PROOF POSTS (7 posts)

The following is a list of the post titles by author under this topic.  Scroll further down this page to find the actual blog post by your selected author.   Author’s posts appear in reverse alphabetical order.  For example, following this list, Fred Wilson’s post appears towards the beginning of the blog page, and David Cohen’s post appears towards the end of the blog page.  

DAVID COHEN  (1 post)

David Cohen:  Social Proof: Surround Yourself with Great People

BABAK NIVI   (2 posts)

Babak Nivi:  The Biggest Mistake Entrepreneurs make when Raising Money

Babak Nivi:  “Good” Social Proof

NAVAL RAVIKANT (3 posts)

Naval Ravikant:  Social Proof:  From “Best to Worst”

Naval Ravikant:  5 Main Qualities of an Exceptional Startup

Naval Ravikant:   Social Proof is Powerful

FRED WILSON (1 post)

Fred Wilson:  Fred Wilson:  Social Proof is Nonsense

Fred Wilson: Social Proof is Nonsense

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“I have always hated the idea of social proof. It's just the herd instinct at work. It's nonsense.

If you can't figure out why you like an investment and why it will be successful, don't make it. []

But we don't care who else wants to invest. In fact, I'd prefer if nobody else wants to invest in it. That would be great.

Make up your own mind. Don't follow the herd. Don't chase.”  Fred Wilson, Social Proof Is Dangerous, Jun. 6 2012 http://www.avc.com/a_vc/2012/06/social-proof-is-dangerous.html

 

Social Proof is Powerful

Naval Ravikant angel investor, Co-Founder AngelList and Venture Hacks and former entrepreneur

“[Ravikant] measure[s] four dimensions [in startups for AngelList]:  Traction, Team, Social Proof and Product.” (AngelList is “a closed private social network [where] startups and angels [come] together.”)

“[] social proof refers to who else is involved [] as an investor and/or advisor. Which person has already given them the thumbs up is really important.  If any one of those people who is associated [with] the company is phenomenal it [the startup] passes the filter [selection criteria] [].

[] Social proof is [] powerful []. [] Get one great person to commit to your startup and you will have more control in raising your round. This is a tactic I have seen many startups use to start a bidding war or get the funding process rolling.”   Naval Ravikant, Naval Ravikant and AngelList: The Match.com of Funding [Interview] by Fatema Yasmine, February 17,   2011;   http://thenextweb.com/entrepreneur/2011/02/17/naval-ravikant-angellist-the-match-com-of-funding-interview/

 

5 Main Qualities of an Exceptional Startup

Naval Ravikant angel investor, Co-Founder AngelList and Venture Hacks and former entrepreneur

“[Ravikant ] broke down the 5 main qualities of an ‘exceptional startup,’ in the following order:

1. Traction
2. Team
3. Product
4. Social Proof
5. Pitch/Presentation

[] [Ravikant] explained [] ‘Investors are trying to find the exceptional outcomes, so they are looking for something exceptional [],[so] do one thing exceptionally.  As a startup you have to be exceptional in at least one regard.’”

Naval Ravikant, Anatomy of an (un)fundable startup by Babak Nivi on June 22nd, 2011,  Ravikant’s keynote speech at the 7th Founder Showcase Q2 2011;  http://venturehacks.com/articles/unfundable-startup

Social Proof: From “Best to Worst”

Naval Ravikant angel investor, Co-Founder AngelList and Venture Hacks and former entrepreneur

 “In the AngelList context, social proof, in order of best to worst:

·         A top-tier investor is publicly willing to invest in this round [], and this is either their first investment [], or they are doing more than their "pro-rata" in this round [on the same terms as new investors]

·         A less well known investor is investing under the criteria above

·         A top-tier entrepreneur or advisor is recommending your company and is throwing their time and reputation behind it

·         A less well known entrepreneur or advisor is recommending your company

·         A close relative is willing to loan you their lunch money

·         An investor is choosing not to invest in your company and is making the introduction for you.”  Naval Ravikant, What is good social proof?  Aug. 19, 2010;  http://www.quora.com/Naval-Ravikant/answers/Startup-Advice-and-Strategy

“Good” Social Proof

Babak Nivi Co-Founder AngelList and Venture Hacks and angel investor

 “Social proof is when you do something because other people are doing it. []

In this context, social proof is looking at what other investors, entrepreneurs, and advisors are doing. Customers don't count.

I'll disagree with Naval Ravikant [Co-Founder AngelList and Venture Hacks] on "An investor is choosing not to invest in your company and is making the introduction for you".  I don't think this is as bad as he makes it out to be.

[] [The] logical part of your brain will ask why the investor is passing.  And there's often a good reason: wrong market, wrong stage, wrong geography, bad chemistry with entrepreneur, some known risks that the investor doesn't want to take, etc.

Rejecting a deal just because a peer rejected it is mathematically unsound. Here's the proof. Every deal you ever invested in was probably rejected by a peer at around the same time you made the investment. So, if your criterion is that you will reject deals that peers reject, you will never make any investments.” Babak Nivi, What is good social proof?  Aug. 20, 2010; http://www.quora.com/What-is-good-social-proof

The Biggest Mistake Entrepreneurs make when Raising Money

Babak Nivi Co-Founder AngelList and Venture Hacks and angel investor

Nivi says “the biggest mistake entrepreneurs make when [] raising money” is that “[they] focus on valuation when they should be focusing on controlling the company through board control and limited protective provisions.   (Protective provisions let preferred shareholders veto certain actions, such as selling the company or raising capital.)

Valuation is temporary, control is forever.  For example, the valuation of [a] company is irrelevant if the board terminates [the founder] and [he] [loses his] unvested stock.

The easiest way to maintain control of a startup is to create good alternatives while [] raising money. If [the founder is] not willing to walk away from a deal, [he] won’t get a good deal.  Great alternatives make it easy to walk away.

Create alternatives by focusing on fund-raising: pitch and negotiate with all [] prospective investors at once. This may seem obvious but entrepreneurs often meet investors one-after-another, instead of all-at-once.

Focusing on fund-raising creates the scarcity and social proof that close deals.  Focus also yields a quick yes or no from investors so entrepreneurs can avoid perpetually raising capital.”  Babak Nivi, What’s the biggest mistake entrepreneurs make? , October 14th, 2007  http://venturehacks.com/articles/biggest-mistake; Why do investors want protective provisions? August 2nd, 2007;  http://venturehacks.com/articles/understand-protective-provisions

Social Proof : Surround Yourself with Great People

David Cohen Founder and CEO TechStars, angel investor and former entrepreneur

“Part of the game has always been [to] surround yourself with great people [and] have great supporters that help you stand out []. [Social proof is surrounding] yourself with great people, and having great customers who will talk about your product, [] who will vouch for it, matters. [] Do you have a name brand customer ? [] Advisors again [are] another thing. [] But if those advisors are actually doing real work and really bringing you customers and talking to investors on your behalf, that can really help.”  David Cohen, This Week in Startups, TWiST #323, Published Jan 22, 2013 @ 17-19 min. into interview by Jason Calacanis, TWIST host; http://www.youtube.com/watch?v=KuWLGAbyEaw