2 Answers
The following points should provide you a clear answer as to what we look for when we invest in startups.
- capital efficiency - can you get to sustainability (if needed) with a $1M in capital? While most of our startups will raise a Series A, having the ability to decide as to whether your want to raise more money or not, is a great situation to be in.
- Need to see a revenue model: Can you generate revenue now or in the near term? There have been very few exceptions to this. Yes, we are likely to miss the next Instagram or Tumblr, but we are ok with that.
- Team: ideal team have the following skill sets: hacker (engineer), hipster (designer), hustler (marketing/sales)
- Product: at a minimum, need to see a functional product, however the majority of the startups we invest in have product AND some customers/revenue
- Global: we invest anywhere, to date was have invested in 35+ countries (every continent except Antartica). We have a focus on startups who serve major languages, in particular English, Spanish and Arabic. We have investment Partners in US, India, SE Asia, China, Mexico and Brazil, will likely expand to Europe and Middle East next.
- Several areas/sectors of interest/expertise: FoodTech, FamilyTech, SMB, developer tools, marketplaces/ecommerce, language/translation, real estate
- Valuation: majority of our initial investments are at the seed stage and our fund model is somewhat unique nowdays in that it is based on generating returns to our LPs (Limited Partners) on smaller exits (sub $200M), so initial valuation is an important factor. So if you are raising at a high single digit million, unlikely that we invest. If you look at the valuation data on AngelList (Page on Angel), the average valuation is $4.7M. I will add that valuation is very geography dependent, so the point being is that we are not investing at the high end of the valuation range for seed investments in that particular region/country.
one word: "PLASTIC!"
or, see an old post I wrote 3 years ago... still holds up pretty well:
MoneyBall for Startups
http://500hats.typepad.co
or, see an old post I wrote 3 years ago... still holds up pretty well:
MoneyBall for Startups
http://500hats.typepad.co
