What Does an Exceptional Early-Stage Company Look Like to us?
After sitting in back-to-back pitch calls and countless deck reviews, we’ve refined what excites us as a firm and what a business might look like in the first investment round – we want to back and invest in only ‘exceptional emerging founders’ building ‘exceptional businesses’.
Caveat: This is through our investment mandate lens and likely not applicable to other early-stage VC firms.
This excerpt is actually from our internal letter to our fund investors.
We understand that at the earliest stages in a startup’s life, there’s often not enough data to extrapolate from so if you’re a founder looking to raise capital for your early-stage startup, we hope this is helpful for you when approaching us.
These are ‘adages’ we’ve found ourselves repeating time and time again, things that may make us ‘hit pause’ on an investment:
1. Companies only slow down with time
Your pace of execution and iteration should be highest at the beginning of a company’s life and ‘slow down as the business matures and you build processes.
This lens applied to new companies means that we only look to back new founders who have executed and iterated very quickly in the lead-up to investing – they have ‘effective hustle’ and it's very obvious.
But more than hustle, it's productive progress toward their goal, not just spinning wheels.
How does this work in practice?
- Founders communicate the multiple validation experiments they have run and number of users they’ve spoken to before getting to this point.
- We often dive into recent releases or experiments founders have conducted in building out their product.
- We set founders' tasks or challenges before we pull the trigger to invest. It has been rewarding to see founders come back to us with meaningful progress and interesting insights.
This will reflect their behaviour post-investment where speed becomes even more critical.
It is surprising how ‘slow’ some founders can be towards getting real customers and feedback, reflecting a different type of business they’re building – which is fine but just not for us.
2. Companies need to be based on earned insight
There are a lot of copycat businesses out there as ‘startup ideas’ become more globalised and opportunities spread a lot faster around the world.
How much insight, specifically from customers, do they have about the market they’re entering?
We’ve found the top emerging founders have deep customer insight into the problems of their industries.
Put simply, insight > experience.
This is why industry veterans typically don’t create category-creating companies but emerging founders do. We believe this is a critical insight that might sound obvious but is much harder to filter for.
3. So what does an ‘exceptional emerging founder’ mean to us?
- First-time founders with the ambition to build their first high-growth business.
- Strong product sense and vision for their technology, almost above all else – they’re almost ‘willing to die to get this technology out there.
- Have earned insight, they are not industry experts or veterans in the traditional sense of having very dogmatic views of why things won’t work – their industry challengers in terms of why things should work differently.
If you’re a first-time founder looking to raise the first round - we want to hear from you! Apply today. If you'd like to see more about how we support our founders, email Luddy @ email@example.com