CONSIDERATIONS FOR VENTURE CAPSTONES

Wingman has worked with some of the top VC firms, investors and entrepreneurs. For those looking at the Venture pillar as their Capstone, the process remains the same - the first step is awareness. We sat down with one UHNW client that outlined what they look for when they are considering venture investments.

“It’s important to know what you are looking for before you embark on investing. I look to think through the following path of ten steps with a potential venture”:

Founders – People – Opportunity – Timing – Product – Marketplace – Investment levels – Follow on finance – Scaling – Exiting

As an example, here are some of the considerations you might be looking for in a founder, team, market & timing and product:

1)     FOUNDER

The founder is so important in setting the company culture and one of the most important things in a company is its DNA- that is set early on. A wise investor once said to me:

“There are six things I look for when investing in technology projects: People People People People People Technology People”.

I look for:

-        A magnetic founder. A person you want to spend time with them, they are energising and attract other great people. They will help create a halo effect around the company

-        Someone who can lead out of the chaos. Someone with a sense of optimism as well as grit

-        Have they displayed determination and leadership in the past? Have they succeeded in a competitive environment?

-        Do they have a point to prove (a powerful motivator)?

-        Do they have reasons to make the venture a lifestyle over a job?

-        Do you back them to push forward a venture to reach its full potential?

-        Do they have a history of sticking with something and seeing it through?

-        Are they willing to delay instant gratification e.g. live on a smaller salary to keep their stake in the company high?

-        Do they have a compelling vision that they will fight for? And one that others will follow?

-        Do they have short memories (will they move on from failures and challenges quickly?). Do they spend their time in the present? They don’t dwell on misfortune or mistakes

-        Will they act fast if needs be? They won’t let things fester and will make quick, decisive and committed decisions

-        Are they a good listener as well as a good talker?

2)     PEOPLE

At the end of the day you are most likely wanting to help build a high-performance team in the venture. Act like a pro sports team. Finely tuning constantly. Clear on roles, what the win looks like. You can be one of the coaches. Help set the culture where everyone is healthily competitive but ultimately wants all to win.

With teams I often look for: 

-        Good chemistry, the desire and a high density of talent (or get to one quickly)

-        Shared sense of frugality in the team. They spend it like its their own money

-        Can they work under real pressure?  

-        When the shit hits the fan – will the team attack the problems not the people?

-        Does the team have a shared history (can be of successes and failures)?

-        Do they demonstrate high team EQ?

-        Are they a team well regarded amongst their peers?

-        Are they bringing in coveted hires?

-        Will they become a tangible asset that helps you protect the downside?

-        Are the founders thinking about a CFO and Head of Culture/ People/ HR as key hires? If not- they should be

-        Do the team buy into the compelling vision?

3)     OPPORTUNITY AND TIMING

Example questions I consider are:  

-        When is the market really going to happen? You can be too early as well as too late. “Being early is the same as being wrong”

-        Is this the right time for this product/ opportunity. Do you feel this opportunity is coming into fruition?

-        Have you missed the boat? Are you chasing and are now at the back looking at those in the driving seat?

-        On market size, small market = small outcomes. This might be by design. You may not want to invest in something that is looking to take over the world…

-        Is it / will it be category leader? If you are category leader you can hope to avoid chaos. Those pushing are often caught in the chaos of a market or trend

-        How patient are you going to be with this opportunity?

4)     PRODUCT

There needs to be an extreme clarity of purpose with the product or service i.e. what is the problem and how you solve it. It can change. But that clarity is important for focus and the destination in mind.

-         Can the Founder articulate the product or service in one sentence? If their declarative statement takes more than six words to explain what they do, they need more clarity…

-        Is it going to be the best at one important thing?

LASTLY OVERALL- DECIDING ON YOUR LEVELS OF INVESTMENT / COMMITMENT

-        What capital do you want to commit?

-        What is the maximum you are willing to invest a) now b) further down the line?

-        What stake are you looking for in the company?

-        Do you want an active or passive role? A seat on the board?

-        Do you want to put time, energy, resource, additional capital into this in the future?

-        What is your length of holding time potentially in the company?

-        Do you have a sense of deep conviction into the project?

-        Could you over fund? Overfunding can often mask operational issues. Careful you don’t overfund and create conditions that make a venture complacent…

-        Ask yourself what can go right?

-        Ask yourself what can go wrong?

TO SEE A VENTURE CAPSTONE IN ACTION: IN CONVERSATION WITH URI LEVINE CLICK HERE

For additional information please also see Wingman client and their Venture Capstone, the London Technology Club (www.londontechnologyclub.com)