A veteran investor and founder of Brooklyn Bridge Ventures, Charlie O’Donnell has built a reputation for spotting successful businesses early on. Recognizing the potential of companies such as FourSquare, GroupMe, Refinery29 and many others has driven him to become a key player within the tech community. Having been named one of Business Insider’s 100 Most Influential People in New York Tech over five times, we were eager to sit down with him to gain his insights.
How do you identify a startup with the potential for success?
I don't! I try to eliminate the ones that I believe have no chance or a chance not worth taking. I feel like my job is to separate my deal flow into a bucket of companies that have a 0% chance of being $250mm exits and those that have a 10% chance. It's such a hard thing to take a company to an exit that most of the opportunities fall into the zero percent bucket, while only 810 have a 1 in 10 shot. The companies that wind up in the zero bucket get there for a number of reasons mostly because the opportunity is too small, the management team doesn't have the right skills, experience or insight to pull it
off, or the plan is unrealistic.
Is there a specific startup you’ve invested in whose exponential growth surprised you?
There are aspects of various companies that have shined in a way that I couldn't have predicted. Canary has proven to have one of the best management teams I've ever worked with and they're first time founders. Hungryroot and Homer have hurdled over operational challenges that were more complex that I
would have imagined they would be, and they did it faster than I could have hoped. Tinybop's acclaim as a top mobile developer has put it in a class with much larger companies often being promoted by Apple next to some content heavyweights. They've accomplished a lot for such a small team.
What characteristics differentiate between a “good idea” and one that can turn into a viable company?
People make the difference between good ideas and viable companies and specifically discipline. The difference between someone who has a good idea and a company is a set of personal and professional habits that are part of a larger, well outlined plan.
You’ve written how a cofounder isn’t necessary for a startup, but a team is. What roles are essential to fill in beginning a successful company?
It depends on the company. Some companies are more design and product driven, and others rely more on sales. In general, I'd say great product and design talent usually isn't hired early enough.
What characteristics do you seek out in hiring team members to fill these roles?
To be successful in a startup, you need great communications skills, grit, an interest in learning and self improvement, and empathy.
Has there been a startup in which you have seen potential success, but didn’t deem it a “good fit”? How do you determine this?
The only "fit" I look for is early (before raising $750k in capital) and in the NYC area, and most of my deal flow reflects that. Other than that, I'm pretty open in what I invest in–I've lead investments in brick and mortar food retail (Ample Hills), fintech (Orchard, SeedCX, Even), parent focused apps and services
(Tinkergarten, Plum Print, Tinybop), B2B SaaS (SocialSignIn, Floored, Logcheck), consumer electronics (Canary, goTenna, Ringly), so I look forward to being surprised about what I'll be in next.
What are tips you could give to early stage startups in pairing with the right investor?
Do your homework by talking to companies they previously invested in. Investor references are where the rubber meets the road. Most investors aren't nearly as helpful as they tell you they're going to be.
Are there red flags regarding certain investors that young companies should look out for and consequently avoid working with?
There are only a couple of investors in my "avoid" book and they usually get there by doing selfish things. One investor was in the middle of raising their fund while a company was going out of business. They pushed the entrepreneur to raise money to prop up a failing business because they didn't want to show a zero on their books so early. That's the definition of advocating fraud. Luckily, in my experience of leading investments in nearly 50 companies since 2010, and being in the asset class since 2001, I can count on just a few fingers the times I've even heard of anything like that. Most investors aren't actually bad they're just kind of duds that don't really do a heck of a lot.