But that just helps us come up with the “long list”. How do we actually decide who gets in and who is outside looking in? Here is the (sort of) short answer: We are looking for TEAMS (single founders need not apply) with domain EXPERTISE who are ALL IN (have quit their “day jobs” to pursue this full time) and who are PASSIONATE about pursuing a BIG opportunity with the AGILITY to adapt and deal with the inevitable bumps and perhaps a pivot or two and who want to get RICH rather just be king (ie, no life style businesses). Notice a common thread there? OK, here’s the really short answer: team, team, team – teams who see an opportunity and have the skill and desire to make it real. While the “jockey vs horse” debate has been around as long as VCs have done capital calls, most early stage investors would agree that the earlier the company the greater the importance of the “jockey” (the team) versus the “horse” (the product / technology / market).
There are certainly other factors. Because we are a small fund, we look for companies who can get to cash flow breakeven on no more than about $1 million or so – sorry, no 5 year science projects for us. Along those lines, we look for companies who can make real progress in a short amount of time. So while we are sector agnostic, the bias towards companies who can make quick progress on relatively small amounts of capital means we mostly do software companies, although we’ve been known to do a few physical product companies as well. We also want to be, or be part of, the first capital into the company.
We do often ask our mentors and other investors we know for input on companies where we have some questions. We also have our “secret weapon” of 60+ founders of our portfolio companies who often have great insights into the teams and opportunities. But at the end of the day, the final investment decisions are made by us.
One difference between us and some other programmatic accelerators is that we can, and do, make “out of cycle” investments. In other words, we don’t want to lose a good investment just because a hot new company is closing a round in the middle of one our classes. We will make the investment as long as the company commits to full participation in our next class.
Hope that helps – let us know if you have other topics you want us to talk about! A few we have in mind for future posts include convertible notes vs priced rounds, why VCs need angels in today’s startup ecosystem, how to be an awesome mentor, whether or not to participate in a follow on round … And more! Let us know if you have suggestions.
Jim and Angela