Even though I’m a seed investor, I look at a potential investment with the eyes of a Series A investor:
- Team: Amazing, passionate, articulate, experienced, connected founding team with strong product, tech, business and growth experience and a track record of success, united by a compelling vision, mission and purpose.
- Product Market Fit: Product that has product/market fit, great traction, is growing at a very nice clip, has super happy customers with a positive Net Promoter score.
- Model: A killer market and model. Massive potential market. A repeatable business that can scale. Network effect properties where more is more for all. A natural moat that deters competitors. A sound business model with great unit economics.
This takes a lot of imagination and creativity on my part because no seed stage deal *ever* looks like this.
Companies are messy in the early stages. Teams, products and models are most often incomplete. I’m looking for something in each of the three areas — some part of the story that is…well…Fanfuckingtastic. And there are some non-negotiables.
Team: The earlier the company, the smaller the team so getting all those boxes checked is very rare. The most important thing is that the founder’s core strength is the secret sauce of the company. Jordan was the only full-time team member at Sktchy when I invested but had a truly awesome designer and developer helping out (part time). Jordan is a terrific community builder. It’s in his blood. It’s what he talks about when he talks about Sktchy. And that’s the secret sauce of the company. The founder has to be Fanfuckingtastic. At something. Period. Non-negotiable.
Product and Product Market Fit: Here is where imagination is required. Usually the further along the product is, the higher the valuation. I need to see a product with *some* consumer feedback. When I invested in OfferUp, the app had been launched in Seattle and there were something like 3,000 listings. Did they have $1M in monthly GMV and at least 10%+ liquidity (things Series A investors might look for in a marketplace)? Uh, no…just 3,000 listings in one city. Back in 2011 when Nick and Arean launched OfferUp the only way to sell your stuff was on Craiglist or Ebay and neither had mobile apps that made it 1-2-3 easy to photograph, list and sell your used baby stroller. OfferUp did just that. It leveraged all the new tech that made smartphones powerful computing devices (camera, geolocation, etc.) to make it super easy to sell. Users loved it. It didn’t take too much imagination to see the potential right away.
Model: If imagination is needed for product and product market fit, then clairvoyance is often needed to see the business model. In the case of OfferUp, I didn’t have to do much market analysis to see a massive market, the potential for network effects and a great business model with terrific unit economics. It was easy to imagine a scenario where the boxes could be checked by Series A. And, indeed, they were. In the case of TheRealReal, this required more imagination. Julie had a great team when I invested. She had a great product with clear product market fit. Although she had a fast-growing business already, I had to do a bit of work to convince myself that a) affluent people would actually take the time to consign their merchandise, b) there were enough of them to provide the supply required to build a $1B company. I got there in about 24 hours and very quickly TheRealReal proved points A and B to the world. In the case of Twitter, it took clairvoyance. The app had just launched. There had never been anything like it. 140 characters to communicate a thought, idea or update? Via phone? It was abundantly clear the world was going mobile. I could just imagine 1,000 ways Twitter could be used by people, brands, press. I could just see the power of the status update. So tangible. So real. I’m glad I wrote that check.
When you pitch, you don’t have to check every box. But you do have to show me something Fanfuckingtastic.