Criteria for Capital

We are seed and early-stage investors.  We are often the first investor in a start-up company.  When meeting entrepreneurs, we are not looking for a 50 slide Powerpoint presentation with 5 year financial projections.  We are looking to get to know you, understand your vision, why you think you can win and how we can potentially help you succeed.  So, how do you prepare for that first meeting…

1. Your Credentials – The “X” Factor

People are, by far and away, the most important factor when we consider a potential investment. We invest in management teams and their ability to execute on the business plan, first and foremost. We are looking for executives who can leverage prior success and expertise to tilt the odds of success in their favor.  We welcome both successful serial entrepreneurs and first time entrepreneurs. Remember, Musk, Gates, Jobs, Ellison were all once first time entrepreneurs.   If your team is not complete, tells us how you are going to get there.  Maybe we can help.

2. The Market

We are looking for big ideas.  Demonstrating that the business will target a large, addressable market opportunity is important for grabbing our attention.  For us, “large” typically means a market that can generate $1 billion or more in revenues where our portfolio companies have an opportunity to  grow annual sales in excess of a hundred million of dollars.

When you’re talking about a big market – back your claims up with facts and data.  Market sizing should be presented from the “top down” and from the “bottom up.” That means providing third-party estimates found in market research reports, but also feedback from potential customers, showing their willingness to buy and pay for the business’ product.

3. Great Product

We are looking to invest in great product and service roadmaps with a competitive edge that is sustainable.  While there are great ideas for useful features or products, that’s not what we invest in.  We look for platforms that can deliver high value solutions to real, burning business problems that have not been solved before by other companies in the marketplace. We look for products and services that customers can’t do without.

4. Competition

All start-ups have competition.  There may be direct competitors, there may be alternative solutions or approaches, you may be competing for budget dollars.  Confront that fact and tell us how you plan to deal with it.

5. Awareness of Risks

Start-ups don’t exist in nature.  They exist out of the conviction of an entrepreneur that that they can overcome and master the risks inherent in disrupting the status quo in a market.  We understand this.  If we are going to have a working partnership, its essential that we have an open discussion about the risks you anticipate as you move from concept to successful business.    Put those risks on the table – let’s talk about it.  This is part of how we look to our own ability to add value to a potential partnership with an entrepreneur.

6. Summary Financials

We are not looking for your five year financial projections, broken down monthly.  What we are looking for is an understanding of your overall capital requirements – from start-up to profitability.  How much capital do you think you will need over the duration?  When will you need that capital based on your business milestones, revenue expectations, gross margins?  In the early days, we know it’s more theory than fact, but we need to have a starting point for the conversation.

7. Exit Strategy

We are not asking for a commitment here.  We are looking to understand your goals (“I want to run a public company”) and how you see your company fits  into the broader market down the road as you achieve success.  This is another one of those conversations that allows us to get to you know you and to identify where we may be able to add value in the form of strategic partnerships from our global network of major corporations.

8. The Timeline

Put it all together for us.  Give us a timeline graphic that reflects your development, sales and marketing and financing milestones over time. Where does each series of financing get you in terms of critical milestones in the development and execution of your business plan.

Its only 8 points, put they will give us the insights we need into your business plan (and you) for a meaningful conversation.  If we schedule a meeting, we are going to give you an hour.  You should budget to cover your 8 slides in 30 minutes with the balance of the time for questions and discussions.  Demo are great if you have one.  Remember the goal of that first meeting – it’s not to secure a commitment from us, its to get a second meeting where we can drill down beneath those 8 points.  Be prepared.