My investment thesis

Fred Wilson’s blog post on Dave McClure’s investment thesis a few weeks ago reminded me that I needed to do a better job on spelling out my own. I had done some preliminary work when I started W Media Ventures almost 3 years ago but it was very high-level only addressing the sector (consumer Internet), the investment size ($50K-$250K) and the geography (Pacific Northwest / Western Canada). As I have learned a thing or two since then, I now have a much better understanding what kind of entrepreneurs and ideas I want to invest into. So here is what I am looking for:

  • Early-stage consumer internet / SaaS companies located in the Pacific Northwest / Western Canada. Geography is a must for leading a deal but I do co-investments outside of that area.
  • Large addressable and capital efficient market: company addresses a large market (hundreds of $ millions +) and does not require more than $1-$3 million in funding to become a $25-$50 million (exit value) company
  • Strong founder team with a visionary and passionate (yet coachable) CEO at the helm. Team must include at least one technical person who can actually build stuff.
  • Differentiated product: no “me too’s” and strong technical focus
  • Easy-to-understand business model that does not depend on scale and can generate revenues within 9-12 months from launch
  • Initial traction with – at the minimum – an existing prototype/alpha version that is currently being challenged by users

In reality, no investor will ever only make deals that fit 100% with their investment thesis but it is important to have a consistent set of criteria against which investment opportunities can be benchmarked against. So here is mine, looking forward to feed-back!

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  • http://twitter.com/nexcastellan Chris Thompson

    My understanding was that most significant investments in early-stage companies lead to the replacement of the existing CEO, so I would be interested in understanding why you place such value on the founder team in your investment strategy. Obviously not saying you are mistaken, I just think perhaps it is worth a follow-up.

  • http://thegongshow.tumblr.com andrewparker

    This is great Boris. Clear, concise, repeatable. I wish you the best of luck with it.

    Do you care about 800-pound gorillas? In other words, if Google is doing X and the startup you're looking at is a flavor of X, is it a deal killer? I've seen investors split pretty evenly on both sides of this issue.

  • bwertz

    Not quite sure about this – Facebook, Google, Amazon, Twitter, Zappos or Groupon still have their founders at the helm. It is founding team that will make or break so if I had to choose only one investment criteria, it would be the founder(s). If at some stage the founder and the investors decide that somebody else is better at scaling the company, so be it – but this is usually a discussion way down the road.

  • bwertz

    I think I care about 800-pound gorillas, the most important reason being the geographical area I am investing in. You can build great companies in the Pacific Northwest but they usually need a bit more time to develop given less access to capital and senior talent (http://box693.bluehost.com/~version3/wp/news/what-kind-of…). And time you don't really have competing against the big guys :-)

  • http://startupcfo.ca startupcfo

    Thanks for sharing Boris. We should do the same at Real Ventures once we’re up and running.

  • Anonymous

    Looking forward to having Real Ventures invest out West!