We include a lot of information about our target investment profile on this page. Please read through it all and if you think you’re a fit, submit your information through our form.
Understanding automatic disqualifications can save you time and streamline your application process.
- Coin/token offering or SAFT.
- A primary business model is crypto mining, issuing tokens, or minting NFTs
- Round size greater than $1M. (This is a hard limit. Our soft limit is $500K.)
- Minimum check size greater than $500K. (This is a hard limit. Our usual commitment is $150-300K.)
- Valuation/cap greater than $6M. (This is a hard limit. Our soft limit is $3M.)
- Previous outside investment greater than $500K total.
- Primary offering is at the idea, mockup, prototype, or pre-revenue MVP stage.
- There isn't it at least one founder working on the business full time (even if some plan to become full time after funding)
- Company is not doing any substantial engineering of its own.
- Product/service is pure e-commerce sales, an e-sports league, or an e-sports team.
- Product is a food, beverage, nutrition, beauty, or similar good.
- Produce/service is related to legal "gray areas" like marijuana, real money gambling, and sex work.
- Company is based in Central Europe, Eastern Europe, Russia, Middle East (except Israel), Africa, India, South Asia, China, Southeast Asia, or South America -- Even if the corporate entity is domiciled in the US. Even if the company intends to move its operations to a jurisdiction where we do invest.
Want to apply? Gain insight into how we assess companies and get an understanding of the startups we fund.
80%+ of our decision process is based on just five variables:
- Business model.
- Traction.
- Unit economics and growth path.
- Capital efficiency.
- Valuation.
The first thing we do is classify your business model based on target market and revenue model. We use the following target market categories:
- Large Enterprise.
- B2B, high price point.
- B2B, low price point.
- B2C.
The higher a target market is on the list, the less we need to be convinced about scalable acquisition and delivery economics. (We evaluate B2B2C companies as either mostly B2B or B2C based on who pays, the payment structure, and the price point.)
We use the following revenue model categories:
- Subscription, taking into consideration acquisition costs and churn rate.
- High recurring transactional, taking into account repeat purchasing metrics.
- Two-sided marketplaces, taking into account acquisition and transaction metrics.
- Low recurring transactional.
- Affiliate and advertising.
The higher a model is on this list, the lower the traction we need to see for a given valuation. As a rough guide, low recurring transactional revenue is worth about half as much as subscription (at a low churn). Affiliate and advertising is worth about a quarter as much.
After business model, we look at traction. Traction almost always means revenues and firm contracts starting within 60 days. (We don't count LOIs, verbal commitments, or pre-sales via mechanisms like Kickstarter unless the product has actually been delivered.) Actually, we focus on gross profit to account for businesses with different margins. There are some exceptions. A large enterprise model with many unpaid pilots at potential lighthouse customers may warrant an exception. Similarly, a B2C model that is pre-monetization but has enormous DAU with high engagement is an opportunity we will often investigate further.
We next consider this traction in the context of unit economics and growth path. Our database of thousands of portfolio companies and thousands more applications mean we know the typical unit economics and growth trajectories of companies at this stage across our business model categories. If your metrics on these dimensions are higher, we need to see less gross profit. If they're lower, we need to see more.
The final consideration before valuation is capital efficiency. Our model places a high premium on companies that consume less capital. These companies can do more with less and therefore have a better chance of surviving and achieving a sustainably growing business. We judge capital efficiency in terms of how much money you've previously taken from investors, your historical cash burn, and your projected cash burn. Beyond a modest level of capital intensity, we're usually not willing to invest at all. Below that threshold, the lower your capital requirements, the less traction we need to see.
At the end of our analysis, we combine all these factors into a valuation.
We make 90% of our investments at a a $1.5M to $4M valuation in companies with MRRs of $5K to $30K+.
Valuation scales with MRR according to the factors described above.
Carefully review the steps to make sure that you have met all the requirements before applying and know what to expect.