We invest anywhere from pre-incorporation to Series A, and we prefer to be involved as early as possible. We pride ourselves in making independent decisions and helping founders with raising their first round of capital.
We believe the product a startup is selling to investors is potential, and potential is primarily about team. We look for people who have unique insights within their domain, who can build and sell products, who will learn quickly and be persistent, and who are high integrity.
We are looking for teams with technical and non-technical skills and founders that compliment one another.
We look for big markets. It is not enough to have a great product or an outstanding team. Many startups fail from a venture perspective because they executed well in a market that wasn’t big enough.
We look for startups executing on a specific problem where they can outperform incumbents (or more rarely, where none exist) where success within this narrower domain creates the opportunity to challenge incumbents over time.
We look at product holistically. Product is both what your software does for a customer, how you plan to distribute this product, and ideally a set of advantages (e.g. data) that accrue over time that create defensibility and improve the product. For an investment to be compelling, it must be exceptional in at least one of these dimensions and ideally in multiple.
Today it is not enough to have a software business with high theoretical margins. Marginally better products do not produce rapidly-scaling businesses because they struggle against switching costs and expend too many resources on marketing, sales, and support.
We believe talent is widely distributed, and many of the best venture opportunities going forward will be outside the Bay Area. We will invest in any team and market where we feel we can make an intelligent decision.
If you are in a market we are likely to not understand well as Silicon Valley investors, it may take us more time than normal to make an investment decision.
We believe great businesses definitionally are built by people with unique perspectives and perseverance. Non-traditional founders who have made it far enough to found a company tend to have both of these qualities in excess, and if this is you, we want to speak with you.
Our belief is that building diverse teams is a critical skill in the current talent landscape. As we look at teams, understanding and valuing diversity and having a concrete plan for attracting diverse talent from day one are important criteria by which we evaluate founders.
An ideal way to get in contact is to ask someone we know in common for an introduction. This gives us useful context, and assures we’re prioritizing speaking with you.
That said, not everybody has a network of startup people to lean on, and we’re very interested in industries where venture capitalists aren’t and talented people outside Silicon Valley. If you’ve got a great startup, please get in touch (link to contact).
Our evaluation criteria for investments varies by stage. Roughly, we want to see the potential for a minimum 100x return from the first investment and are comfortable with the risk that accompanies that potential.
At the idea stage (pre-seed), our focus is primarily on team and market. We look for a market we believe is large, and founders that have a demonstrated capacity to execute, learn, and who reference well. At this early stage, you are the product.
At the seed stage, we look for a product and “qualitative” usage. That may be one or a few pilot customers typical of the market. This information is important for the founders and investors alike to validate the magnitude of the customer problem.
At the traction stage (Seed Plus or Series A) we are looking at what you’ve accomplished with earlier invested capital. A good traction-stage investment will have well-understood unit economics, data that strongly indicates existing customers are happy, and a non-founding team that demonstrates the ability of the founders to recruit effectively.
We strive to make decisions as quickly as possible. Typically this process is 1-2 weeks from an initial meeting or call. We believe diligence is important and won’t short-circuit that process if the “round is closing tomorrow,” but will always be clear on next steps and never gate our decision on what other investors are doing.
We like to be the first institutional capital into companies and will invest alone as early as your incorporation date, or as part of a larger pre-seed or seed round.
We like to commit to a round and then help you fill it out. For example, we might say, “we will invest $100k in the round, as long as you raise $500k and the valuation is not above $7M post-money.” This allows us to commit early and give you the flexibility to negotiate a price with someone willing to write large checks.
We do not believe at the early-stage it is appropriate for investors to have formal control and we don’t prioritize any formal rights beyond pro rata. We want to work with us in whatever way works best for you.
Typical initial investments are $50-100k at the pre-seed stage and $100-250k at later stages.
We believe in investing in founders who will be successful in life with or without our help and help them avoid the kinds of mistakes that would make this startup a “learning experience.”
Before a startup has achieved product-market fit, we believe the startup’s primary jobs are to establish a high velocity of learning around the customer problem and go-to-market, build the right core team to do so, and raise enough capital to not die in the process.
During this stage, we believe the investor’s primary role is to provide an outside perspective, whether that be on co-founder friction, the instinct to pivot when you hit a wall, preparing for future fundraises, or whatever arises.
We believe in a “pull model” of investor relations. Regular high-level updates are great so we have context, but managing up is a waste of your limited time. We expect you to share problems you want help solving, and we’ll do our best to help or find you someone who can.
TnT Ventures is launching in Summer 2020.