User Manual: The Early Stage Startups I Want To Hear About Most in 2017

At KEC Ventures, I have been largely focused on finding and meeting the founders that we can become most excited about and partner with. I will continue to maintain that focus over the course of 2016 and 2017.

Here are some notes for the founders of the startups I am most eager to meet.

About KEC Ventures

We are a team of early stage investors based in New York City. We invest in information technology startups that are pursuing business models with the potential to transform the way business is done in their market. In such startups, we generally invest in the first institutional Seed Round or, less frequently, we will invest in the Series A round of financing. Often, but not always, we act as the lead investor. On rare occasions, we might invest earlier than this when we meet a founder pursuing a vision that we believe in. Currently, we focus on investing in startups based in the United States or Canada.

Connecting With Me

If you know someone who knows me, an introduction would help. If you do not, never hesitate to communicate with me directly. I am easy to reach on the major social networking platforms. Also, I hold regular and frequent office hours at various co-working spaces in New York City. Some allow non-members to sign-up and attend.

The best time to start communicating with me is at least 6 – 9 months before you believe you will raise a round in which KEC Ventures might invest because I believe it is important to build trust before entering into the kind of working relationship that exists between startup founders and their early stage investors.

That also gives me sufficient time to understand the problem you are solving, so that if we invest, we are doing so with conviction. Time enables me to become a more effective advocate on the startup’s behalf when my colleagues and I have discussions about making an investment.

Communicating With Me 

If we are not meeting through an introduction, I will respond quickest to founders who get straight to the point, and explain why we should meet in 250 – 400 words in their first email to me. I try my best to respond. However, depending on what else I have going on, I may not respond if I feel the startup is outside KEC Ventures’ areas of interest and that the founder could have easily found that out before emailing me. Please follow up with me once or twice if you believe I have made a mistake.

If you are not connecting with me or anyone else at KEC ventures through a warm intro, you can email me at: [email protected]. I’ll go through submissions to that email address every Friday.

Characteristics I Look For in Founders, and Teams 

I look for teams in which the founders have known one another for a considerable amount of time prior to launching their startup. I look for teams in which the level of trust and respect between the co-founders is high. I look for teams that will not have difficulty attracting other great people to join the startup. I look for founders who inspire confidence and loyalty from others because they are good at what they do, the kind of people I could picture myself working for.

I look for founders for whom solving the problem that their startup is solving has become their life’s mission and they plan to solve that problem with or without help from outside investors. I look for founders who have an unconventional opinion about the market opportunity they are pursuing, and can explain why their position is correct with evidence which investors can analyze independently.

At the outset I look for teams that can focus on building a simple product that their initial customers love, and who can focus on a niche within which to launch their product. I look for teams that are judicious and frugal in how they deploy the startup’s resources.

I look for founders who value teamwork, and who can become great leaders if they desire to do so. I value transparency, honesty, and openness. I value self-awareness. I like people who are determined and tenacious, who do not give up just because the going gets get uncomfortable and things seem bleak.

I look for founders who have a hard time doing something simply because it is what someone else expects them to do. I look for founders who are not afraid to be different.

Characteristics I Look For In Markets 

I look for large markets that could ultimately be served by the startup’s product, even though the initial target might be a small portion of the whole. I look for customers capable of and willing to pay for the product, and who are looking for and eager to find a solution to their problem.

I look for markets in which the pain is acute because the problem suppresses customers’ profits significantly, or because the problem makes users less happy than they could be.

If currently the addressable market is between $1B and $10B, I want to see evidence that it is growing quickly enough to support the startup’s future goals, and the competition that I assume will quickly follow if the team is successful.

Characteristics I look For In Business Models 

I look for products and business models that:

• will benefit from network effects as time progresses,
• can scale efficiently and quickly, and
• can eventually benefit from an economic moat.

The Themes I Am Focused On

Notes:

1. These themes cut across different industries and sectors. That is a deliberate choice.
2. The technology sector evolves constantly. Accordingly, our team’s interests might ebb and flow in response. The themes I have described below should serve as a rough guide to how I think about the universe of startups in which we wish to invest.
3. Ideally, a startup raising its first institutional seed round should have raised less than $1.5M – 2.0M or so prior to the round in which KEC Ventures would be investing.

I am currently interested in hearing about:

• Marketplaces: Platforms that enable the participants in large, global markets to interact with one another in ways that reduce waste or create new, untapped opportunities.
• Interconnectivity: Platforms that enable large numbers of different types of connected devices, machines, apps, and websites to communicate with one another and with the people managing or using them within a secure environment.
• Data & Analytics: Platforms or applications that help people or other machines to manage, analyze, interpret, make decisions, and take actions based on vast and growing troves of centralized or decentralized data.
• Effectiveness & Happiness: Products that enable people to accomplish more at work, or to become happier outside work. Products that help large enterprises and other types of businesses and organizations to grow or function more effectively.
• Distribution: Products that make it easier to create, manage, distribute, and consume existing and emerging forms of digital media and content.
• Asset Management: Technologies for managing different forms of enterprise, business, or individual assets. Technologies for managing different forms of enterprise, business, or individual risk.
• Other: New, and as-yet unknown technologies and innovations founders are building to solve problems that exist only because no one else has developed a solution.

Things I am Not Interested In

1. Exploding rounds: An exploding round comes with a caveat like “Seed round in ground-breaking tech startup closing in 1 week!” I do not like exploding rounds, not even exploding rounds that are being led by a name-brand VC. I need time to do my own homework.
2. Meetings led by an advisor: I prefer my first few interactions with a startup to be with the team of co-founders, not with an advisor. It is okay for an introduction to come from an advisor, but I do not like to have advisors or mentors micro-manage my interactions with startup founders. That does not inspire confidence.
3. Lack of control over core technologies: I try to avoid situations in which the startup has a product that has launched to the public, but the startup’s team has no primary responsibility for actually building the core product.
4. Founders who will not share bad news: I only want to work with founders who will not hide bad news until it is too late for investors to do anything that might help the startup make a course-correction. I absolutely want to hear about difficulties, challenges, and problems. I expect the good news, but I think we have an obligation to try to fix the bad stuff before it becomes unfixable.

My Commitment to Startup Founders

Based on Gil Dibner’s VC Code of Conduct;

1. I will be transparent.
2. I will respect your time.
3. I will not ask you for material I do not need.
4. I will not string you along.
5. I will let you know about any competitors in our portfolio.
6. I will be transparent about conflicts of interest.
7. I will not share any of your material without your permission.
8. I will not speak with your customers without your permission.
9. I will educate before I negotiate.
10. I will be honest about what standard terms are.
11. I will not issue a term sheet unless my firm has made a firm decision to invest.
12. I will reflect the term sheet in the final legal documents.
13. I will not seek an unreasonable equity stake.
14. I will avoid surprises.
15. I will always act in the best interests of the company.