Continuing the last post, here are some business characteristics we almost definitely won’t fund.
Pharma (and medical devices)
If your business requires ten years, hundreds of millions in total funding, approval from the FDA, clinical trials, etc. we are very unlikely to be a good source. Our investment horizon (meaning when we would like to start seeing a return of our investment) is 3-5 years. This doesn’t completely eliminate medical devices,* but you probably need to find more specialist sources of financing than generalist angel investors.
Doing something that is consumer focused – a new brand of [xxx], sporting equipment, a clothing line, a new beverage or food line, household goods, or something similar? We are almost definitely going to pass.**
If the first question people ask you when you discuss your idea is “is this legal?” the chances we fund you are slim. You may well be right that your poker tournament organizing software is permitted. But debatable legalities aren’t for us – because our pockets are not deep enough to make the case once you’re big enough to attract the attention of regulators.
We are unlikely to fund any company raising money through a 506c “general solicitation” (or that has been raising money that way but is now switching to a 506b raise). The short reason why is that compliance with these regulations is not straightforward. There are already plenty of things that can go wrong in startup companies: being on the wrong side of the SEC is one challenge we don’t need to attempt.
If you pass these hoops, we might be interested. Don’t send us a one sentence email, ten paragraphs of life story, or something that suggests illiteracy. Do send us a concise “elevator pitch” email and your executive summary (follow the instructions under “initial conversation” here), and we will look forward to learning more.
* “Not completely eliminate.” If you have a finished product with IP protection that is not implanted in the body, requires “only” a 510k and has clear predicate devices, your application is essentially ready to submit, and there are already reimbursement codes for what you do, we would consider investing. But companies with such a clear “company killer” like being denied FDA approval aren’t very appealing.
** “Almost definitely” – yet we invested in Growjourney, Plum Print, and New York Butchers Shoppe. Each has a compelling rationale for why our usual objections (minimal differentiation / barriers to entry, lack of technology moat, scalability, brand reputation marketing expense) did not apply. In that case, having an “understandable business” can actually be helpful.