Although there are exceptions, our goal is to invest in companies that meet most if not all of the criteria below.
We like to see strong management teams committed to their craft. Teams with seasoned founders, industry experience, track records of success evidenced by successful exits, and personal capital at risk are all attributes we consider attractive.
Large market opportunity
Market opportunity must be large with the startup having potential to generate $50M or more in revenues at maturity. This goal typically requires businesses sell nationally and/or internationally, so we are precluding from investing in local businesses that serve local clientele only such as retail, restaurants, and local services businesses.
Addressing a compelling problem
Innovators taking a novel approach to solving pain points for their customers are preferred. We typically do not invest in “me too” businesses unless the management team is stellar and has extensive, successful experience.
We tend to avoid pre-revenue startups. We prefer to invest in companies delighting their customers with innovative products and services. Delightfulness is typically evidenced by high growth rates and low customer churn. For industries where pre-revenue may exist at exit, such as life sciences or medical devices, we look for breakthrough, defensible intellectual property with promising clinical data through studies or trials, such as nonsignificant risk medical devices that do not require massive sums of additional capital needed to clear regulatory hurdles.
High margins and growth rates
We look for businesses with compelling competitive advantages that enable them to generate above market gross profit margins and sustainable high sales growth rates for 5+ years. Because of these requirements, we generally avoid labor-intensive businesses and focus more on scalable, technology-focused businesses.
Businesses not requiring more capital for at least 12 to 18 months after our investment are preferred to those needing more frequent capital injections.
Reasonable valuation and structure
Valuations above $10M are challenging for us. Equally challenging are SAFEs and other structures that do not afford investors important post-funding rights such as information rights and pro rata rights.
Credible exit path
We need to see a clear path to liquidate our investment with an attractive return within five to seven years of our investment.
Startups need to be able to generate timely, accurate financial statements and to create reasonable financial projections based on management’s plausible assumptions about the business. We prefer to avoid opportunities where accurate financial statements are not timely prepared, projections are not based on reality, and/or the management team does not have a firm grasp on the important financial metrics and unit economics that drive the business.
Our preferences are information technology (e.g., cloud computing, artificial intelligence, data analytics and business intelligence, SaaS, fintech, edtech, adtech, and enterprise software), healthcare, and digital media, but we will consider other opportunities on a limited basis as well.
U. S. based
We only invest in businesses based in the continental United States.