5 Things I Need To See Before Making A VC Investment, With Dennis Joyce

“I invested in one of my earliest deals for all of the wrong reasons. The deal was presented with a lot of energy and excitement and I followed a pack of talented investors into the deal. The problem was I did not understand the product or marketplace as well as I should have. When the company started struggling I was powerless to react in an effective manner. If I can’t understand the product and the marketplace, and I have not created a relationship with the team, I do not belong in the deal no matter how great it seems.”
I had the pleasure to interview Dennis Joyce. Dennis is an experienced investor across multiple asset classes including commercial real estate, equities, and various alternative investments. Dennis is passionate about supporting entrepreneurs and seeing great ideas come to life. Dennis believes that a vibrant investing ecosystem such as Seattle needs strength and expertise at the angel level. Dennis is an active member of Seattle’s Alliance of Angels and Puget Sound Venture Club and sits on the screening committee of both groups. His angel investments in the Seattle ecosystem include Blokable, Visual Vocal, Bluhaptics, and CityBldr.

What is your “backstory”?

I joined the Alliance of Angels investing network a little over four years ago because I was looking for exposure to early stage companies in Seattle. The group consists of over 145 independent angels who have a deep network in the Seattle ecosystem and was the perfect place for me to learn how to evaluate companies.

I come from a non-traditional background for venture investing. I started my career as a real estate investor and property developer. Over the years I’ve invested in everything from real estate to stocks and mutual funds and even documentary films.

Working with small businesses is a perfect expression of my passion for investing because it allows me to help support early stage companies pursue a dream in a structured, responsible way. By syndicating the deals with other investors, I can help build an effective round for companies.

Can you share a story of your most successful Angel or VC funding? What was its lesson?

A little over a year ago I saw a company presentation in the real estate space that I thought was completely ludicrous. I decided to perform due diligence with the founding team so I could justify my decision to NOT invest. At the meeting, I peppered the team with questions to prove my thesis. The team calmly answered every question and won me over. After that meeting, I became their biggest fan.

The lesson — Investors need to be willing to change their minds, it could be the beginning of a great investing journey.

Can you share a story of an Angel or VC funding failure of yours? What was its lesson?

I invested in one of my earliest deals for all of the wrong reasons. The deal was presented with a lot of energy and excitement and I followed a pack of talented investors into the deal. The problem was I did not understand the product or marketplace as well as I should have. When the company started struggling I was powerless to react in an effective manner.

If I can’t understand the product and the marketplace, and I have not created a relationship with the team, I do not belong in the deal no matter how great it seems.

Which person or which company do you most admire and why?

I admire any person or company that has the passion and drive to pursue a career at an early stage company. It’s a long, lonely road with doubt and rejection at every turn. Every single one of them is a winner in my mind. Even if I choose not to invest, I am committed to do whatever I can to help them reach their goals. It would be impossible for me to choose one person or company since they are all heroes to me.

How have you used your success to bring goodness to the world?

You have to be committed to bringing goodness to the world in everything you do; whether it be at work or at home. The teams I invest in are like family to me and I love them with all my heart. In my work, I look to invest in Sustainable Products, Diverse Teams, Forward-looking Marketplaces not just sometimes, but in every deal. Without these three elements in place, there is no chance for a successful investment.

What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.

The five elements that I look for in every deal are:

1. Great products — this is pretty self-explanatory but I am really drawn to products that solve a real problem that is never going away. I really love the feeling of imagining myself investing in a new product that doesn’t currently exist that lots of people enjoy.

2. Diverse Teams –I can’t tell you how many times we see pitches with multiple founders that are virtually the same race and gender. I once saw a very polished pitch where the team and advisors consisted of 14 individuals with the same race, gender, and age range. A winning team welcomes a diverse set of viewpoints very early on.

3. Huge Marketplaces — A lot of times we see a very good product with a strong team of domain experts chasing a marketplace that is very limited. I had a number of meetings with a company once and liked everything about the deal but could not for the life me see how the company could grow into something big and generate a lot of revenue. I need to see an idea that has the potential to grow into something BIG to get excited.

4. A team of engaged advisors — Some deals have a list of dozens of experts advising the company. Other deals have a lonely group of founders with no advisors. The best deals I have seen have a solid board of advisors that meet regularly with the leadership team to plot world domination. In the inevitable case where things don’t go as planned, a strong Advisory Board of engaged pros can make a huge difference in determining next steps.

5. A solid, well-thought-out set of deal terms — I like to see deals where the team has planned, in advance, for their own success by thinking through their current and even future rounds and presented investors with solid deal terms. There is a lot that goes into presenting great terms for investors to take action. I realize nothing ever goes as planned but I like when teams have at least thought about things in advance.

I have been blessed with the opportunity to interview and be in touch with some of the biggest names in Business, VC funding, Sports, and Entertainment. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why?

He or she might see this, or I might be able to introduce you. (When you answer this, if you prefer that I not publicize this, please let me know. I might be able to help regardless)

I am a big fan of the work of CNBC contributor Josh Brown. His blog is required daily reading and his viewpoints are spot-on. Would love to show him my world as an early stage investor in Seattle and pay him back for all the great work he has done over the years.

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