An Appetite For Risk: Investor Professors

Wharton Professor of Internet Commerce Kartik Hosanagar

FROM COFOUNDER TO ANGEL INVESTOR

Hosanagar entered the investment world somewhat differently. It all started with Yodle, an online marketing company cofounded by a couple of his former students. The students initially asked him to be an advisor, and he eventually came in as a cofounder. But when Hosanagar found that he couldn’t make the time commitment, he decided to invest “as a way to keep the dialogue going,” he explains.

That experience led many more students to approach him in future years. “I was just enjoying it, and so just started working with more and more,” he says. He counts Yodle, whose IPO isn’t too far off, among his biggest investment successes. Additional star companies: Milo, which Ebay acquired for over $70 million, and RJMetrics, an analytics platform from which he fully expects a good financial return.

TO INVEST OR NOT TO INVEST?

When deciding whether to invest or turn someone down, Hosanagar and Bell look at a number of different areas. Hosanagar’s top reason for turning someone down is getting the sense that the person isn’t very hands-on—i.e., that the person can’t actually get things done. People who are too sales-y and don’t have many product-related skills are included in this category, too. The second has to do with personal qualities like a solid work ethic, the ability to keep going in the face of setbacks, et cetera; if he can’t verify that the person has those qualities, he won’t invest. The third is not being intimately familiar with the market the person wants to enter.

Still, Hosanagar does want to venture outside his comfort zone a little bit. His biggest investment-related regret is not hopping on the Warby Parker train when he had the chance. “In many ways, I had all the data I needed,” he says.

Bell, who did invest in Warby Parker, is more of the branding and marketing guy. He won’t invest if he doesn’t feel that the company will contribute much, if someone seems like he or she is just trying to make money (he notes that this one is pretty unusual), and if the person doesn’t have an intimate knowledge of the paying point for his or her product. If possible, he likes to see entrepreneurs who are building products for themselves.

BUSINESS SCHOOL AS AN INCUBATOR

Are business schools the new incubators? “They’re kind of complimentary,” Hosanagar says. He gives an example: Entrepreneurs can use business school to find ideas they love, meet future teammates, and learn some useful business frameworks. Once they’ve solidified those things, they can move on to more traditional incubators. Still, that’s not the right path for everyone. “I suspect if you already have an idea and you’re pretty clear on what you need to do, you’re in many ways better off at an incubator like Y Combinator,” Hosanagar adds.

Still, business schools might begin taking cues from Silicon Valley in another way. Because their areas of expertise are so different, Hosanagar and Bell have discussed combining their investments to create something that looks like a diversified fund. Who said academics can’t be entrepreneurial?

 DON’T MISS: THE WHARTON MBAS BEHIND WARBY PARKER; Q&amp or A WITH HARVARD’S TOP ENTREPRENEURSHIP PROFESSOR