Investing in points, not lines
Mark Saster published a great article a few years ago on the topic of investing money in lines, not points. If not read, be sure to read .
I admit, I'm a little old-fashioned in the field of European venture projects. I began working as an analyst at the Atlas Venture Fund almost a decade ago. My mentors are Fred Destin and Sonali de Ricoeur, who are now partners at Accel Partners. In many ways, they repeated the advice of Mark: it is necessary to invest in the process, ideally, contributing to the growth of the business, where you understand the underlying driving forces of the business, understand the dynamics of the team and the economy in this area.
Since then, much has changed in the market. Even in Europe, much more capital is being invested in the early stages. New funds, new faces, platforms and a new wave of entrepreneurs.
A lot of business school graduates are avoiding consulting and banking, as start-ups in these areas have nowhere to grow (I do not criticize, I just say it is).
In Sunstone, where the average size of attracted investments is $ 120 million, we invest in both the sowing round and series A rounds (from $ 100,000 to $ 5 million); a combination of these market forces and an understanding of the fact that it is investments at very early stages of development that allow us to remain in the group of leading European organizations (on paper!), and we are not afraid to invest now when no progress or development is visible yet. In about a third of the cases, we invest in a point, not a line .
')
In order to deal with the increased (seemingly?) Risks of putting money into points, I stop thinking like a techie, who is worth the charts on some coordinates, and act like a normal investor. Of course, I need to see a prototype and market expertise before making a decision. But it is much more important for me to understand the team with which I will work the next few years.
To evaluate these qualities, I rely on recommendations. Investing involves a lot of preliminary work that goes beyond the standard valuation that a technical broker does. Superficial acquaintance with the techniques of professional coaching was very useful: you ask the right questions, and quickly find out what lies in the root of the entrepreneur's motivation. I also do not reject intuition and never go against the inner voice in terms of assessing future partners.
Repeating for the unsurpassed hedge fund founder, for whom I had the pleasure of working as an intern: “Risk is a matter of price.” If you risk a little money in the early stages of a company’s development, with a positive assessment of this company, then the possible success is much greater than the potential risk, both for us and for the entrepreneur.
In the next article I will talk about how to cope with the inevitable choice between "seed investment as an option" and "social contacts with the entrepreneur."
Spoiler: the entrepreneur is the client, the fools!
In the meantime, feel free to contact me if you need some $ 100,000. May I fall in love with your point.
Good luck.
Love at first sight. This is also true for venture funds.
PS: I'm a big fan of Mark. Our joint portfolio company Seriously-game developer Best Friends is at the height. I can’t imagine how Mark manages a media company at the same time and runs a venture fund, but let him get his “Snapstorms” strength with him. In the end, investing in the company "Seriously" was also an investment in the "point" :)
Original: Investing in dots, not lines
I admit, I'm a little old-fashioned in the field of European venture projects. I began working as an analyst at the Atlas Venture Fund almost a decade ago. My mentors are Fred Destin and Sonali de Ricoeur, who are now partners at Accel Partners. In many ways, they repeated the advice of Mark: it is necessary to invest in the process, ideally, contributing to the growth of the business, where you understand the underlying driving forces of the business, understand the dynamics of the team and the economy in this area.
Since then, much has changed in the market. Even in Europe, much more capital is being invested in the early stages. New funds, new faces, platforms and a new wave of entrepreneurs.
A lot of business school graduates are avoiding consulting and banking, as start-ups in these areas have nowhere to grow (I do not criticize, I just say it is).
In Sunstone, where the average size of attracted investments is $ 120 million, we invest in both the sowing round and series A rounds (from $ 100,000 to $ 5 million); a combination of these market forces and an understanding of the fact that it is investments at very early stages of development that allow us to remain in the group of leading European organizations (on paper!), and we are not afraid to invest now when no progress or development is visible yet. In about a third of the cases, we invest in a point, not a line .
')
In order to deal with the increased (seemingly?) Risks of putting money into points, I stop thinking like a techie, who is worth the charts on some coordinates, and act like a normal investor. Of course, I need to see a prototype and market expertise before making a decision. But it is much more important for me to understand the team with which I will work the next few years.
- how well they understand the area (it is a good indicator if they used to work or launch startups in this area)
- do they have related knowledge and skills and how cohesive is the team (well, if they already worked together, started a startup or went to university together)
- Do team members demonstrate mental integrity and openness?
- they are thoughtful, efficient, aware of their weaknesses and strengths, do not suffer from excessive self-esteem (say, not too excessive, most entrepreneurs are still alpha males), ready to plow a common cause?
To evaluate these qualities, I rely on recommendations. Investing involves a lot of preliminary work that goes beyond the standard valuation that a technical broker does. Superficial acquaintance with the techniques of professional coaching was very useful: you ask the right questions, and quickly find out what lies in the root of the entrepreneur's motivation. I also do not reject intuition and never go against the inner voice in terms of assessing future partners.
Repeating for the unsurpassed hedge fund founder, for whom I had the pleasure of working as an intern: “Risk is a matter of price.” If you risk a little money in the early stages of a company’s development, with a positive assessment of this company, then the possible success is much greater than the potential risk, both for us and for the entrepreneur.
In the next article I will talk about how to cope with the inevitable choice between "seed investment as an option" and "social contacts with the entrepreneur."
Spoiler: the entrepreneur is the client, the fools!
In the meantime, feel free to contact me if you need some $ 100,000. May I fall in love with your point.
Good luck.
Love at first sight. This is also true for venture funds.
PS: I'm a big fan of Mark. Our joint portfolio company Seriously-game developer Best Friends is at the height. I can’t imagine how Mark manages a media company at the same time and runs a venture fund, but let him get his “Snapstorms” strength with him. In the end, investing in the company "Seriously" was also an investment in the "point" :)
Original: Investing in dots, not lines
Source: https://habr.com/ru/post/316568/
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