Investing philosophy
Coming up on one year investing from our Tech strategy, I’m reflecting on my investment philosophy as it’s evolved over the last 12 months. This is where things stand now.
- Invest in companies that the market wants to succeed, not just us.
If our company is the only one who wants the startup to succeed that’s not good for anyone. I want to invest in start-ups going after big enough markets with enough customers that financial investors want to support it and see it grow. This will give it options as it looks to grow, and it also makes it more attractive to top talent in the market.
2) Get internal sponsorship for the investment and pull-through of its strategic value.
At this early stage, we need sponsorship beyond the Ventures team for the vast majority of our investments. Having senior leadership with a strategic interest in one of our portfolio companies increases the likelihood of it driving value for the company.
You’ll notice I didn’t say we need sponsorship for all investments. We also want, and need, the flexibility to make white space deals that nobody in the company is ready to back yet. We just need to make sure these don’t make up our entire portfolio.
3) Trust, but verify.
Throughout my career, I’ve dealt with shifty coworkers, customers, vendors, and more. In the Venture space, the potential source of less-than-transparent behavior is multifaceted, as it could come from start-ups or other investors. It’s important to get multiple perspectives to understand true motivations and incentives of the people I’m talking to.
There’s no such thing as 100% certainty in anything, but speaking with enough people and asking questions in the right way are key to making a decision with as much insight as practical.
4) Talk to the experts.
I’ve worked in a number of spaces throughout my career, which has made me an expert generalist. I know a little about a lot of things. When I need to go deep on something, however, it’s critical to find the experts, ask decent questions, and shut up and listen.
This is especially true in Ventures, where I’ve reviewed everything from brain organoids to clinical trial simulation tools to virtual reality for chronic pain management. Working with experts to get a basic understanding of the key drivers of success/failure in a space is key.
5) We will (almost always) be a better customer than investor.
Even though my goal is to make strategic investments, the best thing for any young company is a growing list of paying customers. A large company paying for its services increases the credibility of an early-stage company and can attract other large customers, generating more revenue. While having us an investor can help, it doesn’t directly increase their viability as a business. Paying for their services does.
It’s worth mentioning that there are lot of great companies that won’t be on-thesis that could be a great vendor to us. I keep this in mind when talking to start-ups and other investors knowing that the vast majority won’t meet the threshold for investment but could still be a fantastic provider of products or services.
