The Argument For
The ecosystem of an early stage company is delicate. Every investor contributes capital, but every investor is also a consumer – of company information, management time, and all forms of reporting. Under this analysis, investors who don’t know enough about your company and industry may offer little beyond a check. In the end, they may consume more than they give.
The Argument Against
Companies can secure valuable resources in multiple ways. Those that thrive are those that are most creative in gathering the resources they need. Investors are but one potential outlet for sourcing any need other than capital. Many investors are happy to deliver a check and disappear; sometimes that is for the best.
We consider ourselves experienced in early stage investing, particularly with respect to identifying the critical success factors for a company and evaluating how it scores on them. We have deep industry experience in SaaS, education services, business services, marketing services, and medical IT. Our sweet spot is investing in these industries because we have a good sense of how to identify the best companies in them. We also have more to offer our portfolio businesses through our networks and general advice.
That stated, we take a broader view and regularly invest in additional industries when we see a strong opportunity. When a unique business is created, it almost doesn’t matter the industry: nobody is an expert in it yet. We endeavor to be among the first to recognize a new concept’s value in the marketplace and to provide support to those companies we think will succeed with it.
For us, the biggest challenge is performing due diligence on those opportunities. We cover the gap by working with other investors and industry experts whom we know and trust. We never rely entirely on somebody else’s recommendation of an investment, but we are flexible as to how a deal gets diligenced. We often surprise our partner companies – and ourselves – at how much value we can add even when we travel outside our comfort zone. Still, if we find ourselves in a deal where money is all we can offer, we try to be humble enough to acknowledge that and to leave it to management to find their own route to success.