Our Angel Investment Thesis
As a software engineer in Silicon Valley, I’ve been fortunate to be a part of several acquisitions. Unfortunately, I’ve also witnessed a few massive implosions. I will be the first to tell you that there are no fool-proof plans for picking winners, but that doesn’t mean you shouldn’t establish some guiding principles when making investments. Below are the guidelines Sarah and I use to evaluate new opportunities.
Ten X
You don’t need to be unicorn to be a success
Most of the major venture capital firms I’ve talked to have crazy financial models that they run on every potential investment in an effort to optimize their fund for returns. The problem with this methodology is that traditional VCs will pass on difficult problems because the upside isn’t as lucrative as the next unicorn. To fill this gap in funding, our focus is on difficult problems that we believe can be solved with the right team. We’re more likely to invest in a company solving a difficult problem with a 6x potential return than the next 100x blockchain ICO. Given a goal of having profits that can be reinvested into new problems, and the high failure rates of startups, we aim for more reasonable returns.
Domain Expertise
What’s your area of expertise and do you have practical experience?
It’s a blessing in disguise to have worked with some brilliant technical minds who happen to be terrible at product vision, management and leadership. They focus too heavily on the technology which they neglect to translate into a viable product or delay getting feedback until the technology is perfected. Successful founders will be happy to tell you that most of their time is spent in meetings, not researching new state-of-the-art ideas or writing code. It is a founder’s responsibility to hire a staff that they trust to research & develop new ideas while the founder tries to convince potential partners to buy, use, or invest in the product. Having two similarly-focused founders brings additional challenges when it comes to hiring, as they may not know how to evaluate skillsets outside their domain. As such, we look for companies that have multiple founders with complementary skill sets.
Explain It Like I’m Five (ELI5)
What problem does this solve?
We often hear startup pitches that start with “We’re the Uber for <Insert thing Here>”. It can be a good way to quickly explain what your company does, but these tag lines can also be ambiguous and fail to describe the problem you’re out to solve. One of the first few slides in a pitch deck should always cover your problem statement. This should be a simple statement that anyone (even people with no domain knowledge) can understand. Instead of saying “We’re the Netflix for video games,” you could say, “A Majority of gamers only purchase two games a year due to the high costs of video games.” This helps us understand why you’re starting a business and we can better evaluate your plan and the team you’ve assembled to execute that plan. If we don’t understand the problem, it will be a simple “no” from us.
If you’re solving a big problem that needs an angel investment? pitch us! pitch (at) AdventureVentures.VC
