WHAT ARE WE @ Matr LOOKING FOR IN AN INVESTMENT?
What Are We @ Matr Ventures Looking for In an investment?
I want Founders and Investors to benefit from learning about how we make investment decisions and remove bias at multiple stages of the investment lifecycle.
Though we are a first-time fund manager, we are highly process and numbers-driven. This comes as a direct result of our business backgrounds and lived experiences as Founders in Tech, Engineering, Data, Security, Digital Media, Investment Banking, and Manufacturing.
Because I’ve observed the disconnect between Founders and Investors too many times, I’ve created a three-part post to provide insight into our:
Selection Process
Due Diligence Framework
Venture Fund Model
THE SELECTION PROCESS
Like at most VC firms, we make our base investment criteria public, but we believe in fostering an even deeper level of transparency than that. In hopes of making things as straightforward as possible, we aim for clear communication throughout the entire Selection Process to shed light on factors that aren’t typically made public, such as the firm’s internal dynamics.
If a Startup meets our base requirements and moves on to the next stages of the Due Diligence Process, the results that follow may depend not just on the Startup but on internal factors at Matr Ventures - at that given time.
As former Founders ourselves, we know that fundraising is hard and that more information and communication is helpful for both parties. At every turn of the fundraising process and during a Startup’s growth or scale stages, we want to help Founders make smarter business decisions and safeguard their mental health whenever possible.
INVESTMENT CRITERIA
Top-notch Founding Teams. We believe that Founders are key to a startup’s success. Understanding why the Founder is suitable for that business at this time is key for us. Products are more malleable than people. A Founder’s personality is far more complex than executing a product pivot. The vision and experience of a Founder are the drives behind everything in the company, and, in these days of celebrity Founders, it is also a branding exercise.
Generally Industry Agnostic. Though we are typically industry agnostic, we are not likely to invest in medical devices, mobility hardware, and biotech due to their capital-intensive nature at the early stages. In addition, some industries will almost always result in an immediate “no:” gambling, liquor and spirits, professional services agencies, brick-and-mortar businesses (physical retail), and real estate.
TAM of $1B or More. Our ideal is Startups with a TAM (total market size) of $1B+. Of course, that doesn’t mean we’re expecting every Startup to reach $1B+ outcomes and return our fund, but we need to see that the market is large enough to be worthwhile.
Recurring Revenues or Valuable Traction. We like to look at monthly revenue run-rate, growth rate, margins, overall user base and growth, customer retention, and other key performance indicators that demonstrate market value.
At Least One Underestimated Founder. Regardless of how many Founders are on the team, at least one Underestimated Founder must have significant controlling equity in the company.
REASONS WHY WE PASS ON STARTUPS
It’s never easy to pass on pitches and start-ups - especially after building genuine relationships with the brilliant Founders behind them throughout the Selection Process.
One of the most significant (but least obvious) factors in passing on a deal is the business opportunity cost. In other words, we must ask: is this investment opportunity better than the next ninety-nine we will, see? If the answer is no, it doesn’t mean that the Startup is bad. To better understand a pass, it helps to understand the constraints on our end:
We have a set amount of capital that we can allocate over a 1-3 year period.
We prefer to invest in priced rounds at the late seed and series A stage.
We can’t invest in our startups’ direct competitors as that is a portfolio conflict.
We prefer to invest where we add most value to Startups, which goes beyond just capital.
In other words — timing — when a startup pitches us is crucial. To get a sense of the numbers, we’re projected to meet with over 100 Startups monthly, investing in one of them on average. This means that we invest in the top 1% of companies that pitch us and pass on ninety-nine out of every hundred Startups that pitch us. We mostly share the process and these numbers with the aim that Founders not take it personally.
Priced rounds are valuable and fair when a Founder is working with an Investor they align with and are excited to partner with - and we hope to be that partner. We understand the rationale and cost-saving for founders raising capital with a safe or convertible note — and these are not deal breakers for us. But, as the standardization of terms for raises of >$250k per investor has improved in the past several years, we find priced rounds to be the best and fair practice — as it also helps to protect early investors like us.
We don’t invest in competitive businesses because it’s challenging to be a strong advocate for either one of them. So, for example, if we had a relationship with a central bank that was open to a partnership, and if two of our portfolio companies offered an AML solution, which of the two startups would we suggest they partner with? Technically we could introduce both companies and let them compete for the business. That’s messy.
We’re an investment firm of partners with diverse lived experiences (who have all been Founders ourselves). With our growing network of PowerUp Advisors, we bring more than just financial capital to the table: we bring Advisory, and we open doors that positively affect our portfolio companies’ bottom line. In other words, we must ask: where can we, our lived experiences and the network add the most value?
We value every Founders’ time and aim to pass as promptly as possible when there is no path towards immediate investment with us. But we also value long-term relationships, and sometimes a “no” for now doesn’t mean a “no” forever.
STARTUPS WE LIKE
We like investment opportunities with advantages and moats that are scalable using technology. We’re interested in business model innovations, proprietary technological advances, large community or culturally-aligned solutions, and unique partnerships.
Our Due Diligence Framework and Venture Fund Model will be covered in depth in future newsletters.
WARM INTROS
We encourage and rely heavily on our networks to introduce us to underestimated and unstoppable Founders — especially those they know well or have done business with. Of course, we appreciate warm intros, but Founders need not wait for a connection to reach out; they should feel free to contact us directly.
HOW FOUNDERS GET IN FRONT OF US
Fill in some information and upload your pitch deck via https://www.matrventures.com/founders
Let’s Gooooooo!!!!!!!!!!!!!!!!