I talk and interview investors at Founders Grid — from VC’s to angels, on a regular basis. The thesis behind most investment funds is pretty simple — they invest 10k to millions in the hope that a third of their portfolio will break even, a third will become rocket ships and the remaining will fail… if they are lucky!

I understand the economics, yet I see there is a huge gap in the market that’s yet to be filled with businesses I’m passionate about: Small lifestyle businesses.

Business that have the scope to generate $1m+/year by staying as small and lean as possible instead of the $10m+/year traditional investment institutions expect.

Buffer is a perfect example of this. While they have raised a round of funding, from what I have read online they have been profitable from day one — and could arguably have still grown the company without the outside investment. They started with a MVP and a small team (2 founders), yet improve the lives of many on a daily basis.

I want to see more Buffer’s in this world.

To do this, the fund would focus on:

1) Entrepreneurs who understand and appreciate it’s much more feasible to reach $100k+ a year with a business they are passionate about, can run from anywhere in the world (freedom) and who want in the game for the long haul — vs. the stress, pressure and lower chances of success involved with starting a venture backed company (often with the aim for an exit).

2) Build MVP’s within a month or two using open source software, if possible and reiterate from there. This is also known as winging it to save time and costs to reach market fit and profitability as quickly as possible.

3) Focus on businesses that have a clear revenue model from day one. Sure this can change, but soliciting feedback from paying customers is the best way to improve products and services — fact.

Becoming profitable as quickly as possible (by charging users) will also mean startups will increase the chances of the longevity of the business, without the need to raise more funding and give away more equity.

4) Small teams — who want to stay small at the beginning (nothing worse than scaling too quickly). Small teams can get more done, and reiterate on their products faster. The ideal founding team would consist of a developer, designer and a marketer — or two of the three.

5) Focus on founders who want to leverage geo arbitrage — something I’ve been doing for 9 years now. There are multiple spots in S.E Asia where you can live very comfortable while working on your startup for $1,000/month.

Yes — the cost of a 3 person team living and working in San Francisco for a month can easily buy the same team 6 months in S.E Asia with the same resources. We could even argue better when you take into account the cost of maids (time) and the lack of startup events , etc (distractions).

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By combining the above, the startups would require a smaller investment (yet heaps of guidance) to get started and I’m pretty sure, would have a higher success rate.

I’d love to hear your thoughts and any flaws you see in this model.