Investment philosophy as told by seed investor, Daniel Darling: Invest on “quality”, not on brand name.

Darling Ventures is a venture-fund based in San Francisco and was founded by Daniel Darling in 2013. It invests on early-stage startup geared on mobile applications. Until now, it is involved in highly-competitive deals including Weave and Sendhub, both of which originated from Y-Combinator.

investment must not be decided only by “name value”.

Q1. Could you tell us about your career?

Before becoming an investor, I used to work in marketing department for 7 years. Moreover, I experienced working in Tokyo, Los Angeles and San Francisco within those years.

To be more specific about my job, for example, I was in charge of marketing strategywhere we researched and analyzed what kind of field would become a trend, and think what kind of strategy we should take as a corporation.

Also, while I was doing this job on marketing strategy in Velti, I got a chance to meet different startups in Francisco. From that, I realized that the idea of becoming an investor who has an opportunity to be involved on numerous start-ups, is more appealing to me more  than becoming an entrepreneur, and with that, I ended up founding Darling Ventures.

Q2. How do you make use of your marketing background in your career as investor?

My experience as marketer gave me the opportunity to understand both technology and business. Actually, since I became an investor, I noticed that a lot of startups are having a hard time unifying/reconciling both technology and business.

For example, even if the project is completed at an early stage, it is meaningless if technology part is not properly integrated into the business model. Similar to that idea, understanding of both market and the user must be integrated. It is important for start-up to unify technology and business like this. Well, I have to credit my career for creating this piece of advice.

Q3. What are the circumstances that led you to become an investor?

There are 2 circumstances that led me to become an investor. As mentioned a while ago, I got a chance to meet several startup companies in San Francisco while working as a marketer, and from that, I came to understand that the world needs “revolution” more  than“evolution”.

The second one is the startup’s pitch contest. Velti, my previous employer, had thousands of employees at that time when I represented them in pitch contest. However, a startup with just eight employees won the pitch contest. Seeing that, I experienced and felt that  “power” that drives/launches revolution and speed of growth of a startup company.

Q4. What kind of difficulties did you encounter when you moved to San Francisco?

I had a great difficulty on two things. First, when I moved to San Francisco, building network was difficult for me. Since time is extremely necessary in building network with entrepreneurs and investors to get investments, I worked hard on it. If you do not have this kind of network, you would lose chance getting the investment especially on seed round.

Whenever a Japanese investor comes, he/she will usually go to a well-known accelerator on demo day. After getting information from companies such as Angelist via internet, he/she will get involved in the investment. However, the problem with this approach is that everything in this site is open to everybody. In short, all the items in that site are extremely competitive projects. That is why it is important to use one’s network and be involved in the investment while there is no competitor.

Second, if you do not have a firm reason to invest, you cannot arrive to actual investing. For extremely competitive investment, they will ask until they understand the reason why you invest, even if you are on the entrepreneur’s side. With that, in my case, I will pitch the reason why I will invest to entrepreneurs with firm reasons.

In that respect, Japanese investors would probably think that they can get the investment only by saying that it is published or shown in the media, or because they attended demo day as their reasons. It would be impossible to win an investment with this kind of reasoning. With this, they need to provide a firm reason, the kind of skills they possess and the value they can provide based on those set of skills.

Did you feel any inconvenience while you are doing your work as investor?

As for my case, I did not experience anything like that. However, I guess, if a foreigner invests on  startups, a lot of those startups probably would see their fund as “dam money”. In other words, if you are just to invest, there is a possibility that you are being seen by the startup as a person who will just return to his country without providing any kind of support to them.

Q5. What would Japanese investors do to win over their trust?

First one is the investor’s background. In other words, what kind of career does he/she embark on up to now, and what kind of skills does he/she have. To say it on a Japanese perspective,“even unique and  humble  position  is probably being evaluated”.

Second one is the evaluation of person around him. Is the person able to keep his promise up to now? Did he a lie about something? These are the things that are being brought up.

Q6. What is the first step in establishing network?

You must have flexibility, and above all, speed. For example, as for my case, I usually talk about my personality to the people I met in the elevator, do some pitching and establish relationship with them. Also, in case of Japanese entrepreneurs/investors coming to San Francisco, it is better if I would try to get their contact number and communicate with them. Such small deeds matter.

Q7. What are the things you value when investing?

The first thing is the “future prospect/promise”. Darling Ventures invests mainly on mobile application start-up. Because of that, we are always looking at the mobile market 5 years later, so the first thing we consider is whether or notthe product we invested in is able to deliver the expected value even 5 years later.

Second one is enthusiasm. We can see whether or not a person actually has the drive to accomplish things like vision and mission.

Q8. Have you ever met Japanese investors? What kind of impression do you have about them  that time?

Yes. However, most of them are employees from venture investment department in their company. Only few work as independent investors. I have two impressions about them. First, even if they find a startup with a great technology, I often observe that  they complain that the internal procedures in their company are so slow to the point that they almost miss the investment opportunity. Because of that, as a personal opinion, I think that it is better to partner with local investors and investment funds that can move with a sense of speed, rather that to look for startups and invest on them.

My second impression about them is that they are so attracted to brands. Many Japanese investors focus on startups originating/coming from high-value brands such as Y-Combinator and 500Startups.There was a Japanese investor who told me that he accumulated 12 investments in 6-months time, and most of them are startups originating/coming from 500Startups. I do not think that being influenced by brand name is a correct investment strategy. I think investors must take risks the same way as startups do and they must try to invest on unknown or upcoming startups. Actually, Uber, for example, has grown without the help from a well-known accelerator.

Q9. This is the last question. You have been living in San Francisco for a long time. What is the most attractive thing about San Francisco for you?

I think what makes San Francisco extremely attractive is that not only the “quantity” of startups is high, but so its “quality”.  About 50% of technology startups around the world started from the United States, and 50% of them started in San Francisco. As you can see from this figure, San Francisco gave birth to a lot of startups. Moreover, San Francisco leads with the number of startups, also known as “Unicorn”, which are established in the US from 2003 with 1 billion dollars or more valuation. So with that, we can say that it not only the “quantity” but also the “quality” is high. 


This article and picture is provided by TechWatch. Article is translated in English by TechShake with approval from TechWatch.

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