Here’s My Investment Thesis, What’s Yours?

I’ve met up with thousands of investors, analyzed thousands of business opportunities and raised fifty millions euros for more than twenty startups the past four years. I obviously lack some experience on the buy-side. However, being on the sell-side, as well as working with a wide variety of investors has taught me a lot of things. The first and most important of all being:

CONSISTENCY

When hundreds of opportunities pass through your hands every month, having a strong consistency as opposed to simply following your natural human bias makes all the difference between a good and a bad investor. It’s the ability to never stop learning, the habit of processing information from entrepreneurs and fellow investors, as well as sticking to a strong investment thesis that’s being built as time passes.

Truth be told, I have been pretty disappointed by the lack of consistency and investment thesis in most venture capital funds in Europe. And my post about the lack of a content strategy in most European VC funds is not hazardous, it’s an obvious consequence.

That being said, here is my investment thesis combo:

The Basics

My comfort zone being in the seed/series A deals, I always keep in mind on top of each decision that:

1. The most successful deals do not benefit from a consensus at the time of the investment. Therefore, you should not let the noise of a majority stop you from being bullish on a deal.
2. A stunning product and good customer care are not the cause of a successful business but rather the consequence of a talented founding team with strong focus. Don’t get blurred and/or stopped by a mediocre V1.

Market DNA

1. I look for either monopolies / frozen oligopolies or what I call broken markets, the latter meaning that changes of paradigm and access to ressources that did not exist before provide great market opportunities and new segments to target.
2. Low customer satisfaction or an abuse of the current market players allow new comers to exploit an amazing gap.
3. Finally, strong regulatory, technical or business barriers will make it harder to break into the market, letting only room for very strong and resilient teams, making the output of the winning team higher than all expectations.

Let’s take some examples, including typical European/French ones:

• Retail is broken as people have taken a new habit: to order online. Retail must come to the end-customers, not the contrary anymore. #BrokenMarket
• Insurance companies make billions out of great statistic formulas. The collaborative economy, at some point, will take that market over. #FrozenOligopoly #BrokenMarket
• The blockchain is bound to kill the business of proprietary transaction costs. #BrokenMarket. #Monopolies
• Driving permits in France are in the hands of expensive and badly mannered driving schools. #FrozenOligopoly
• National railway companies in Europe still have a de-facto monopoly on the sales of train tickets. #FrozenMonopoly

But the market opportunity is meaningless if the team can’t handle the challenge.

Team DNA

I already shared my opinion several time on this matter, here (The learning curve is the new standard for seed funding) and here (The A-founders’ genome). The team is what ultimately drives a company to succeed or fail, period. And here are the things I look for when assessing a founding team:

1. Is the team — very — product and customer focused? It does not mean that the current state of the company/product must be irreproachable, as long as I can tell that they’re heading toward an incredible product and that they really do care about their customers.
2. Is the team solid and cohesive? Simple questions allow to detect bad signals between founders. However, this is a rather difficult assessment.
3. Is there one leader and solid individual profiles? More specifically, is there a clear leader in the team?
4. Is the story paved with remarkable facts? Great companies are built by singular teams. Remarkable facts inside their story are a good way to spot if this is one or not.
5. Is there a good mix of flexibility and determination? Founders must make and execute many strategic decisions. Their ability to listen, consider options but also to take responsibility and to act is a crucial matter.
6. How does the learning curve look like? Founders are younger than ever and their journey is strewn with mistakes. I tend to make sure they learn from them, and fast.
7. Are they friendly? I only back nice people.

Shoot!

If you’re a talented team with 2 to 4 founders, targeting markets with one or more of these patterns, shoot jean at thefamily.co