Our Investment Philosophy at iFly.vc
Seeking Beauty in the Unsexy
The world of VC investment is never short of buzzwords — big data, sharing economy, on-demand economy, O2O, VR/AR, IoT, AI, crypto, blockchain… There are also “Hard-tech”, “Deep-tech”, “Frontier-tech”, “this”-tech, “that”-tech… Each buzz has been associated with an enormous wave of start-ups and investment activities.
Blindly falling in love with technology buzz is problematic to both entrepreneurs and investors. On one hand, technology without product-market fit and scalable commercialization will not achieve sustainable growth.
On the other hand, any space filled with buzz tends to attract more money and higher valuations, but it is important to remember that valuations will have to be justified with real metrics, progress, and milestones down the road.
Since iFly.vc was launched as a new fund, we have wanted to stay away from the buzz-centric investment practice. We have no desire to build a website with a collection of buzzwords and expensive company logos. Instead, we will focus on what makes sense and why entrepreneurs want our money.
As long as problems still exist and are worth solving for in sectors that are unsexy or no longer sexy, and as long as there are entrepreneurs with the grit and tenacity to solve those problems with a new approach, we want to continue watching and learning to find the right investment opportunity for our fund.
Our investment approach is highly thesis driven. That means we do not make random bets. Instead, given a sector of interest, we do lots of research to gain insights into market trend, technology stack, competitive landscape, value chain, scaling, etc. Meanwhile, this approach enables us to gradually expand our network of domain experts and operators who will help entrepreneurs in our portfolio.
When we invest, we aim to build a so-called concentrated portfolio, i.e., instead of writing many small checks here and there to follow a spray-and-pray approach, we aim to invest in no more than ten companies out of Fund I. Each investment is several million dollars on average. Since we invest with conviction, we prefer to be the lead investor (and of course we are happy to follow another qualified lead if it is the best for the company).
With such a concentrated portfolio approach, we can afford to dedicate a substantial amount of time and energy to entrepreneurs and their companies. Portfolio assistance is a priority to our entire team. During a typical week, we spend roughly one third of our time (with no upper limit) working with portfolio companies. Our team members help and cover a number of areas including strategy, recruiting, operation, fundraising, etc.
As an example, BorderX Lab , one of our portfolio companies, was founded by ex-Googlers that builds a suite of APIs and AI bots to help US merchants sell to international shoppers. In 2016 many investors no longer viewed e-commerce as a hot sector. However, we had a different view and followed our conviction to lead the investment in BorderX Lab soon after our fund was set up. Since then, monthly sales by BorderX Lab has grown by 60x in the subsequent 18 months. The company closed an oversubscribed round of financing in December 2017 led by KPCB.
The more we work in VC, the more humbling we feel our job has become. Building a startup is by no means easy. Finding and making good investments are very difficult. Therefore, we will focus on unsexy opportunities, invest in what makes sense, and build iFly.vc one step at a time just like building a startup. It is a new journey for all of us on the iFly team. We look forward to growing together with the entrepreneurs with whom we have the honor to work.