Venture capital firms always have a philosophy by which investments are made. This helps investors evaluate the VC fund to understand where their money is going and the types of companies the VC focuses on.
Angel investors have generally never been as focused. However, ever since Dave McClure issued a treatise on his investment style back in June, the topic du jour in angel investor circles has been the concept of an investment thesis. Now other angels have chimed in, sharing their own views into their investing style either on blogs or sites like AngelList.
This is a good thing. It helps prevent both entrepreneurs and investors from wasting endless cycles, figuring out whether a deal is even worth pursuing. One of the biggest complaints from entrepreneurs about the funding process is the fact that most investors leave them hanging. This also benefits investors as having an investment thesis forces the investor to remain disciplined on managing risk and return on a singular strategy that can be measured over time.
As I am all for strategies, openness and not having my time wasted, here is my investment thesis:
- Internet software technology companies,
- Building products that eliminate the friction and inefficiency in small business operations,
- Developed prototype and some discernible milestones achieved,
- Team consisting of at least one technical founder who built the technology,
- Seed round investments.
My background in technology is based on my work at places like Siebel and Oracle, so I prefer to invest in what I know, which tends to center on enterprise business technology software applications. Teams that can show that they have built something tangible and have done at least some market/customer validation demonstrate both technical capability and perseverance. Seed round investments allow me to help companies at the very beginning, when they are most at risk, and give me an edge when the company starts to get traction.
So given my experience in enterprise software, why small business technology? Small businesses have always played an important driver of our economic growth and generation of innovation. The burden of rebuilding our economy will depend more and more on small businesses creating jobs, establishing new markets, and competing against global competition. The advent of SaaS, cloud technologies, easier development tools and adoption of Web 2.0 have given small businesses the opportunity to leverage tools that previously were only available to much larger companies.
So there it is. If you are a technology startup and this fits your situation, reach out to me. If you are an angel investor, get yourself an investment thesis and let entrepreneurs find you.
This article was originally published on Strong Opinions, a blog by Birch Ventures for the NYC tech startup community
Image Credit: CC by Aleksandar Cocek