After ~1 year at Cowboy focused entirely on seed, my frameworks for investing at this stage have changed.
Still (and forever) learning, but sharing my current thoughts on seed investing ✍️
1/ Founder > market
Investing at seed often means investing when the market opportunity/size isn’t clear. I believe it’s more important to invest in amazing founders than amazing market opportunities*.
*network effects businesses excluded
2/ Partner w/ "Learning Animals"
I picked this one up from the queen of coining new terms @aileenlee. Founders with a growth mindset can adapt to changing market dynamics & develop into successful leaders at different stages of growth.
3/ Build for tomorrow
Founders at seed are building for tomorrow's world, not today's. They need foresight grounded in a deep understanding of the tech & market forces driving change.
This is framed very well by @m2jr in his piece on "Backcasting".
4/ Diligence should not convince you to make an investment
Using diligence to move from "no" to "yes" is dangerous. It can result in projecting a vision on founders that isn't theirs.
S/o to @twang for keeping me honest on this point.
5/ Why (this founder) now?
I used to obsess over “why now” but have edited that to “why this founder now”. At Cowboy, we look for 'earned insights' that demonstrate a founder's unique understanding of their space in addition to the tech/market trends supporting "why now".
6/ Find talent magnets
This extends to advisers, early engineers, other investors, and any other high-quality ppl the founders have convinced to spend their precious time helping them. This can be a huge point of leverage early-on.
7/ Invest in products w/ a fast 'time to wow'
This is so important for seed-stage companies to drive early adoption, usage, & customer/community love.
8/ Back companies that can get to Series A
Our companies usually raise multiple rounds & need to hit milestones to raise more $.
At Cowboy, we consider this in diligence & do an all-hands session post-investment to fine-tune milestones & have a path to get there (hiring, etc.)
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Sharing some of the most common reasons we've passed on B2B companies at seed/pre-seed 🌱
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1/ Depth of understanding of the problem space isn't clear
Why are you the best founders to build in this space? What's your unique insight? Why are you willing to spend the next 5-10 years focused on this problem?
2/ Massive company vision isn't there
What north star are you tracking towards? If you're successful, what will the company have accomplished in 5 years?
At 🤠, we spend a lot of time with our seed companies on their Series A pitches. While most founders have a good sense of what needs to be in it (comp matrix, P&L, etc.) many miss the narrative top Series A firms look for.
Sharing views on a strong Series A pitch below✍️
1/ Proof of the billion+ opportunity
By Series A, you should have early data points that support a massive market opportunity (deal sizes, volume of deals, etc.). The picture may not be 100% clear, but there should be market feedback driving you to raise more venture capital.
2/ Clear framing of the “why now”
Seed investors are used to raw pitches. The presentation style is more conversational and we often discover the founder's perspective on "why now" through an open discussion. By Series A, this narrative needs to be clear and in the pitch.
Founders often ask about the value early-stage VCs can add
Reflecting on 4 years in venture, I’ve found it generally falls into the below categories
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1/ strategic advice
VCs work with multiple companies and have seen them through different stages of growth; they can share learnings to augment your strategy and prevent you from making the same mistakes as others (we advise a lot on GTM)
2/ future financings
Early-stage VCs will have relationships with later-stage VCs so have a sense of the milestones needed for a successful future raise; they can also advise on the best firms/partners for your space