A Seed Fund’s Investment Checklist

With seed investments, failure is excusable. But having a poor process for making investment decisions is not. To help ensure that we are thoughtful about the commitments we make at Upside Partnership, I keep the following Investment Decision Checklist on my desk.

For us to make an investment, not every question has to be answered affirmatively. But every question has to be asked. This allows us to proactively identify the risks in a company, and be self-aware of the blind spots in our decision. Very purposefully, the checklist is not a litany of metrics that a company must achieve in order to raise a round, rather it is a tool to invite both imaginative and critical thinking.

For us to make an investment, not every question has to be answered affirmatively. But every question has to be asked.

I’ve recently shared this document with a handful of folks looking to become full-time investors, so I thought I would publish it here as well. This investment decision checklist is neither perfect nor exhaustive. But building Upside Partnership, I’ve found it to be helpful. If you’re thinking about becoming an investor or getting a better sense for how a seed investor approaches investment decisions, take a look below and please share your feedback.


Investment Decision Checklist

Market

What is the market?

What is changing in the market that creates this opportunity?

What is not changing in the market that sustains this opportunity?

Product

What is the product?

Is it first? Is it different?

How will it reduce friction?

Customer References

Team

How are they purpose built for the opportunity?

What are their blindspots?

What are the key hires?

Can they recruit?

What insights do they offer to other members of Upside Partnership?

Founder References

Risks

What are the identified risks?

What are the key risks?

What mitigates these risks?

How can the downside be minimized?

Investment Risk vs. Fundamental Risk

Upside Partnership Questions

What do you need to believe for this to be one of the 10 companies that matter?

What do we not know?

What is the return the fund exit (RTFE)?

Follow-on Specific

What do you know now, that you didn’t know at the time of the initial investment?

Knowing what you know now, would you have made the original investment?

Why?

Are you being blinded by commitment bias?