Looking Back: Startup Investing Year #1

Female Founders, Hardware, AI & Marketplaces Oh My!

I wrote my first check to a startup on April 11, 2017. Since then, I’ve invested in 16 startups via my personal money and a small fund I manage backed by Social Capital. I’m having blast!

TLDR: I bet on outsiders using capitalism to solve society’s most important problems.

Here’s what the last year & change has looked like…

Investment Pace

  • 16 investments total
  • 11 personal investments
  • 6 fund investments
  • 7 advisor positions

Thoughts: In the future, I want to increase my investment pace to ~20 per year.

Founder Diversity

  • 7 immigrant CEOs
  • 5 female CEOs, including 2 all-female founding teams
  • 3 Hispanic CEOs
  • 2 South Asian CEOs (does this count as diversity? I’m not sure.)
  • 1 African-American CEO

Thoughts: I think there’s a lot of money to be made by investing in people overlooked by the typical old rich white guy VCs, especially when I can mentor & develop the founders to the point where they can pitch & raise from anyone. While I am doing much better than the typical startup investor on the diversity front, a lot of this has been luck and personal relationships. I don’t have a repeatable process for sourcing diverse talent just yet. More work to be done here.

Investment Ideas that Excite Me

Frontier Technologies with Obvious Applications

  • Artificial Intelligence
  • Industrial robotics
  • Energy storage
  • Brain-Computer Interface

Structurally Underserved Markets

  • Women
  • Ethnic Minorities
  • Unsexy non-tech industries

Consumer Products with a Cult-Like Following

  • Direct-to-Consumer brands
  • Emerging social networks
  • Vertical marketplaces

Highly-Regulated Industries

  • Healthcare
  • Financial Services

Thoughts: This is a work-in-progress. I didn’t start off as a thesis-driven investor, but I’ve quickly become one. I’ve steadily sharpened my focus to the companies doing things that that matter to the future of humanity AND have the potential to make craploads of money. I expect this focus to continue into the future.

Investment Stages

  • Seed: 75%
  • Pre-Seed: 25%

Thoughts: I want to flip this ratio. Ideally, I’d be investing in roughly 60% pre-seed and 40% seed stage companies. Not only is the potential for return greater when you’re investing insanely early, but it’s also more fun and less competitive. There are a ton of seed funds out there, yet raising <$500k is still pretty hard! Besides, being the first check into a company is way more meaningful and personally gratifying to me than being the 20th. I can help more, which gives me a ton of personal satisfaction.

Investment Sectors

Consumer: 40%

  • Social App: 2
  • Healthcare & biotech: 2
  • Direct-to-Consumer CPG Brand: 1
  • Marketplaces: 1
  • Financial Services: 1

Business-to-Business: 60%

  • Hardware: 5
  • Commodity Sensor + Deep Learning applied to Medicine: 2
  • Industrial Robotics: 1
  • Brain-Computer Interface: 1
  • Energy Storage: 1
  • Marketplaces: 4

Thoughts: I like this mix. If anything, I’d like to invest in more consumer products. But overall, I’m pretty happy with how this has played out.

Investment Geography

  • San Francisco Bay Area: 6
  • New York: 4
  • London: 3
  • Canada: 1
  • Atlanta: 1
  • San Diego: 1

Thoughts: Wow, I didn’t realize that so many of my investments are outside of the Bay Area! In truth, the majority of these companies were in the Bay Area when I met them, then later moved somewhere else (often back to wherever they were from). My model is to build high-touch, high-trust relationships with founders, and it’s really hard to do this without spending time together in person. Skype is decent for traditional pitch meetings, but I don’t do traditional pitch meetings, so that’s an issue. I’m sure there’s lots of great companies not near me that I’m missing, but I’m not sure how I could invest successfully in such companies, especially as I move more of my focus into the earliest, riskiest, most people-dependent stage of company. If anyone has ideas on how to build high trust relationships with people remotely, I’d love to hear from you!

***
 Are you an
outsider building a company that’s solving an important social problem and/or creating a better future for humanity? Pls email me. I know what it’s like to not have a network — I was driving an ambulance for a living when I started my first company — and I’m happy to receive your pitch cold & take you seriously.


Originally published at Matt Mireles.