Understanding how someone reached a decision is often more important than the decision itself.
One of our core investment principles at Tempus Partners is that we are not sector focused.
This may seem strange in a world of VC’s and accelerators increasingly looking to sector-focused mandates: FinTech, AgTech, Blockchain, AR, VR, InsureTech, HRTech, ConstructionTech, SpaceTech, AdTech, automation, iOT and anyotherTech…
So how did we decide on this principle?
The reality is that the world is moving quickly and no VC can adequately cover every sector, every type of customer, or every product opportunity in a market. Despite most VC’s maintaining a deep sense of exploration in their mandate and a goal of financing the next generation of super-successful startups, even the most focused VC’s miss opportunities due to insufficient knowledge, or where deep knowledge is (wrongly) assumed.
Our decision to avoid a sector focus doesn’t mean we don’t intimately understand certain sectors, nor does mean we will not continue investing in sectors where we’ve previously founded companies and invested (successfully or not). It simply means we accept the reality that we can’t predict the future, and that we can only position for it.
So we made a conscious decision not to back ourselves exclusively into specific sectors. This allows us to avoid the risk of confirmation bias on prior decisions, fund-wide pursuits of false thematics and false trends, and sectors saturated by mercenaries looking to make a quick buck.
“If we do not let the world teach us, it teaches us a lesson.”
— Joseph Tussman
Instead, we look to founders to teach us about the market in which they’re operating. We want to understand why the problem they are solving in that market is really important to future customers, and why second order benefits could emerge from their company’s awesomeness.
To build this understanding, we are looking for early signals that:
- the founders truly understand their market and their customer;
- the product vision and the company have a chance to be revolutionary;
- the team could develop an unfair competitive advantage; and
- the mission will help the founders build a successful team and culture.
More importantly, we then focus on “how” — how have the founders reached decisions and made conclusions that might lead to the great outcomes above.
Understanding how is much more important than what. How puts us in the shoes of the founders. Understanding how a founding team is thinking allows us to see the big opportunity from founders’ perspectives. It helps to ensure we are all starting from the same place on the journey ahead.
This deeper understanding from founders also allows us to gauge how Tempus can help, through our understanding of product and business models, and our experiences in founding and investing in high-growth companies.
All things considered, if we can see how a founding team has come to their understanding of the opportunity, how amazing second order benefits could emerge from the mission, and we’re excited, then we’re in.
So tell us more about how you know, not what you know - and we’ll be more likely to back you on your journey.