Below is my current working pre-new investment checklist.
Most of these questions are answered early through conversations with the Founder or others at the company – so this is mainly a final reminder of what qualities I’ve found to be important in potential investments over my time at True (either through others or learning directly the hard way)
Would love any feedback on any potential new qualities to add (or questions about attributes on the list that you’d disagree with)
New Investment Check List
1. Who is the main protagonist Founder that you’re backing?
a. Are there any potential trust issues?
b. Would you want to work with this person for the next 12+ years?
c. How do they treat other individuals? (Lawyers, employees, etc)
d. Do they have the ability to be a long-term leader for the company?
2. What do they understand about the market that other don’t?
a. What experience led to that unique insight?
b. Why would others think they’re wrong?
3. Do they have the ability to recruit great talent?
a. Who are their co-Founders and how is equity split?
b. Who are early advisors and why are they excited?
c. Can they identity the people they will hire for their first 10 roles?
1. Does the company’s mission matter?
a. Will you be proud to talk about this investment?
b. Can it inspire employees, future investors, etc
2. What is the company’s long-term sustainable competitive advantage?
a. Network effects are ideal
b. Are there features that increase customer lock-in or switching costs?
c. Is this a company that could exist for 100+ years?
3. Are you swimming with the tide long-term?
a. What are the major macro market forces in your favor?
4. Why is this possible now?
a. Why would have previous attempts failed?
b. Either technology or capital efficiency story
c. Why would others say this business won’t work now?
5. Is there significant innovation around product?
a. 10x better than alternative products
b. Are there any alternatives that could be indirect competitors?
6. How often do customers interact with the product?
a. Ideally more than once per day
7. What is the quality of the company’s future revenue?
a. Visibility or predictability of revenue matter
b. Recurring or Re-occuring revenue is ideal
c. Arbitrage doesn’t usually lead to long-term enterprise value
d. Any customer concentration issues?
e. Any partner dependencies?
8. Is there a path to $100m in Annual Revenue? $1 Billion in Annual Revenue?
a. At scale, what is the customer + margin profile of the business?
b. What is the profile + challenges of similar businesses at scale?
9. Is there significant innovation around early go-to market strategy?
a. Organic marketing is best
b. Are there channels to effectively reach your target customers at scale?
10. How much equity capital is required to scale the business?
a. Are there alternatives financing sources if more capital intensive?
b. Can you make money as a seed investor?
Most Important Question:
1. If you could only make one investment this year, would this be it?