Memorable Experiences: Why Hospitality Matters in Early-Stage Investing and How Data can Help

 

Recently, I re-read the classic book ‘Setting the Table’ by hospitality guru Danny Meyer and noticed some parallels between his approach to hospitality and startup investing. For those unfamiliar with the book, the famed restaurateur charts his journey building Union Square Hospitality Group (USHG) and his lessons along the way. USHG is behind some of the most famous restaurants in New York including Gramercy Tavern, Eleven Madison Park and the Shake Shack chain. Throughout his career, investing in customer relationships upfront in return for long-term value has been key to the group’s success.

 

Data-Driven Approach

To encourage this long-term outlook culture across the organization, he coined the ABCD approach – ‘Always be collecting dots.' Each time you meet a customer, you should learn something new about them and that becomes another dot. Over time, these dots combine to paint a picture of who that customer is, what they like and how you can serve them better. This data helps managers impress repeat guests by remembering their preferences and providing memorable experiences.

 

The founding of my own venture Idea 2 Scale was inspired by a blog titled 'Invest in Lines, Not Dots' by Mark Suster - which I'd highly recommend. In summary, the piece focuses on the importance of having multiple touchpoints with founders, to understand the team and how they execute. Taking this pragmatic approach will help investors make more informed decisions whether to invest or not and ensure a culture fit.

 

At Idea 2 Scale, we work closely with founders for months and track how they execute with limited resources. We’re then able to plot these dots using our evaluation model and score teams on investor-readiness. Taking a data-driven approach has been instrumental in securing investment partners for our programs who are principally looking for quality deal-flow. It also allows us to scout teams in markets that investors might otherwise dismiss.

 

Hospitality in Investing

The relationship dynamic between founder and investor has shifted from an ‘us vs them’ to a partnership approach. It’s less Dragon’s Den/Shark Tank and more Mr. Miyagi from the Karate Kid. At seed stage, founders want an investor who will roll up their sleeves and help them accelerate traction and revenue. They want to partner with an investor who will work as hard as they do and forego short term rewards for long term growth. 

 

This echoes another lesson in Setting the Table – short term thinking won’t wash in hospitality. A long-term view, hard work with little reward up front and patience are crucial. It’s the same when starting an investment fund. Two investors I admire who exemplify this are Elizabeth Yin at Hustle Fund and Arlan Hamilton of Backstage Capital. They’ve both overcome many obstacles, started small and today lead by example. What’s more, they have shared their journeys and lessons with the rest of the community through regular updates and cogent insights – an approach we intend to echo.

 

Trendspotting

In the early days of USHG, with limited resources, Danny Meyer was able to identify parts of New York that were on the cusp of gentrification. He would secure low cost long-term leases in areas that would rise in popularity, locking in higher margins towards the end of the lease (If they could survive till then). There are various trends, bubbles and waves that come and go in tech and early-stage investors must identify which ones are here to stay.

 

One trend we’re pretty sure about is Food and AgTech. Rapid population growth, changing consumer habits, climate change and a highly analogue sector mean there is so much opportunity for disruption across the farm to fork value chain. There are plenty of startups from other industries looking at Food and Ag as ‘use-case’ for their technology. Specifically, the amount of data available can provide tangible examples for companies in AI, Blockchain, Data Analytics and more. What’s refreshing too is that most investors in the space tend to have a double bottom line. It’s not just about financial returns, but also an opportunity to create impact.

 

To come full circle, with the launch of the Field Academy, we’re doubling down on an industry we’re convinced is set to experience exponential growth (Food & AgTech). By applying a founder-first approach and investing in our community, we plan on capturing value over the medium to long term. We provide value first to our founders (or guests) in the form of our accelerator programs and by investing in these relationships over time, we learn about the most effective teams and how they execute (dots). As we scale this approach through our growing ecosystem, these insights become incredibly powerful.

 

To understand more about our approach or to get involved, reach out! Danny@idea2scale.com  

 
Danny O Brien