I invest in companies with $200k to $500k ARR. So why am I meeting startups that just launched?
I think of investing as a conveyor belt.
Each day, I put a few more startups on it. In time, they’ll be ready for checkout!
Shopping at the Startup Store
I try to meet as many software companies as I can that meet these criteria:
1) Launched product.
2) A couple paying customers.
3) Incorporated as a DE C Corp
There are more pre-launch, pre-revenue companies than I have time to meet. But when I narrow it down just a bit, the number becomes pretty manageable!
The third criterion might seem wonky, but it’s really important. DE C Corps can do the things a startup needs to do: issue different share classes, options, etc.
Companies that meet all three criteria are real businesses. That’s who I want to meet.
If I like them, they’ll go on the conveyor belt.
The Meeting
When I meet a company, the first thing I want to know is the founder’s vision. I need to understand that 100%.
I also want to get an idea of where the company is today.
How much revenue do they have? Do they have a lead investor yet?
I gather the basics in about 30 minutes. If it looks promising, I make a note to follow up with them later.
Now, they’re on the conveyor belt…
Watching Startups Grow
Depending on how close the company is to my sweet spot, I will follow up with them in one, three, or six months.
I make a note and when that day rolls around, I shoot the founder a quick message.
As I watch companies grow, I learn a lot about the founder.
How does he handle setbacks? Does he seize opportunities?
After a few months, I know a lot more than I did from that first meeting alone.
Time for Checkout
I met an awesome startup last October at a demo day. I knew right away that I had to invest in it.
I messaged the founder several times in the following months. Rounds take a little longer to come together these days, but I kept hanging around.
Come the spring, it was time to check out! They’d found a lead and grown revenue rapidly in the mean time.
I got my wire in and thanked my lucky stars that I was able to invest! I’ll announce the company soon.
Wrap-Up
I used to try to meet great companies at the perfect time. Now, I just try to meet great companies.
Finding great startups is hard enough. Finding them at the perfect time takes a hard problem and makes it darn near impossible!
With the startup conveyor belt approach, my cart is always stocked with great deals.
Right now, I have a good idea what my next 3 deals will be. And I’ve got some bangers coming.
If you’re investing, try following startups over time. And if you’re a founder, keep in touch with investors you meet, even if you haven’t hit their sweet spot yet!
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