What is Venture Capital?
I had a chance to join a wonderful team of people from the venture capital world, where we tried to unlock the secrets of venture investing, learning from some of the phenomenal speakers and thought leaders in the industry such as Dave McClureBedy YangChristine TsaiMike LyonsPedram MokrianTim DraperMark SusterAydin SenkutElizabeth GalbutMike LepechJason Calacanisand others.
In this article, I want to focus on one of the most important — yet often overlooked — aspects of a successful investment strategy: For an investor, the good thing about defining an investment thesis is that it is actually not that difficult!
There are a few aspects you should focus on, depending on your experience and motivations, but you absolutely need to have one before taking the investment plunge! It forms the foundation of your investment philosophy and will help you succeed as an investor. The following sections outline factors to consider when deciding where to invest.
There are many industries you can focus on — enterprise software, e-commerce, digital healthcare, consumer services, biotech and FinTech — to name just a few.
To increase the chances of investing in a startup that will succeed, you should have a solid expertise in the field in which you plan to invest.
Usually, VC firms rarely invest only in one domain, but rather form a macro-thesis around big picture trends and types of investments that will lead the path of innovation in these areas.
For example, the focus of SoGal Venturesthe first female-led millennial venture capital firm, is focused on how millennials work, consume, and stay healthy, so they invest primarily in Enterprise SaaS, Digital Healthcare, Consumer Technology and Global Products and Services.
Additionally, in their due diligence process, they are heavily focused in evaluating the design approach of the startup, as well as the diversity of the founding team. One of the most important factors to consider is the startup team. An investor should evaluate the track record of the team when assessing an investment candidate.
Some investors think that having teams that have previously worked together is a big plus, as it shows that they know how to stick together when things get difficult. Others may be strongly opposed or strongly supportive of investing in companies in which the co-founders are in a romantic relationship, especially if not married.
These types of preferences vary by the investor, and is something that is usually driven by previous great or awful investment experiences. Another aspect to consider is the domain expertise of the team members. Questions investors should ask include: Do they effectively convey and communicate this passion to others?
While some investors are comfortable with co-CEOs, according to Thomas Kortethe founder of AngelPadit should be very clear who the ultimate decision-maker is. It is important to notice if the named CEO does not actually seem to be running the show.
Yes, it is great when a CTO comes along to help pitch the technical details, but the CEO should be leading the fundraising process and should know enough about the technology they are building to communicate it clearly.At signals VC we value clarity, dependency, and honesty.
We want to convey realistic expectations from the get go. Our graphic explaining the assessment and investment process gives a good indication about the timeline of interactions with us. DFJ Growth is pleased and excited to announce our investment in DataRobot, an emerging leader in automated machine learning for predictive modeling.
This investment is part of our ongoing investment thesis in artificial intelligence (AI) and our growing portfolio of AI-powered companies.
There are many good examples of early-stage VC investment thesis. There is no one place you can find them all, however, you can find a lot just by visiting VC webpages individually. Big thumbs up goes out to Alexander Jarvis, discovered some investment thesis on his blog.
The Wrong Model for Clean Energy Innovation An MIT Energy Initiative Working Paper July returning a premium for the length and illiquidity of the investment. The venture capital fund (run by GPs) Rising fossil fuel prices supported the investment thesis that clean energy would be a high-growth market.
Between and , rising. We talked about Forerunner Ventures, one of the most interesting VCs in e-commerce today, at the end of last year: This year, Forerunner Ventures made headlines when their investment Dollar Shave Club sold to Unilever for $1 billion and their investment attheheels.com sold to Walmart for $ billion.
On VC Thesis Evolution Since I started my VC career back in , I worked for 3 VC firms and invested in 35 startups in the US, Europe and the Middle East. Over time, I learned a lot, specially from mistakes, and I kept evolving and changing themes and investment theses.