You invest at all of the following VIRAL levels:
You begin investing at VIRAL Level:
6: You back products that are rapidly scaling
You typically invest in a heavy seed/light series A round ($100-$500K in investment in up to $2M of a round). You want to see that the team has a product or service that has survived a couple of sales cycles, and has initial evidence that customers are delighted by the product.
Where you can add the most value to entrepreneurs at this stage:
Help entrepreneurs understand the caliber of team you’d expect to invest in, and have them think through who they would hire if they raised money from you. They should be spending most of your investment dollars on their team, so spend far more time helping them think through how to hire–and who to hire–than any other topic.
- Strategic partnerships:Help founders, if they don’t know how, get strategic partnerships with larger institutional players. Help them make intros at the C-suite or senior level with people that can shorten sales cycles. Particularly if you’re an expert in a specific industry, you can add value where others likely can’t.
Common questions you should consider asking in due diligence:
What’s your human capital plan?
Who are you going to hire and for what? (They are about to outgrow the founders. For example, the leadership may have a clear understanding of how the market works, but they’re about to hit the point where the founder/CEO can’t lead all the sales and customer relationships. Who is the sales team, and are you convinced they can effectively lead without requiring the CEO to be a bottleneck? Who do they want to hire? If they can’t afford them-that’s why you’re investing!)
- Are you out-selling and growing faster than your industry? What is industry standard for a product or service like yours, and how are you outperforming? (The team at this stage should be aware of who their competitors are, what industry standard is, and whether they are on track.)
- Tell me where you are scaling next. What new markets are you entering? What new customer segments are you going after? How are you thinking about growth? (It’s likely that the company is doing very well in an “early adopter” market, but may need additional support and resources to grow. Without a clear strategy towards growth beyond this initial market–growth that you likely will fund!–the company will struggle to keep up its momentum.)