We invest in born global startups - best defined as international new ventures that from inception seek to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries (Oviatt & McDougall, 1994) - with United States as their lead market and either New York City or Silicon Valley their headquarter.
We are industry agnostic but we currently tend to focus on high-growth startups that fall under following non-standard industry classifications: Web, mobile, distributed social media, cloud computing, nanotech/materials, entertainment, niche social networks, apparel/textile, media & advertising technology, marketing services, and financial services.
In 1995 - at the dawn of commercial Web - it cost about $20 million to develop, test, secure, and scale an e-commerce application. The time and money required to launch a scalable, secure commercial Web service has since dropped by half every two years, thanks to new technologies like Java, Apache, Adobe Flash, AJAX, XML, Amazon cloud servers, and soon HTML5. Today, $150,000 is a sufficient engineering budget to launch an online startup.
David Cowan
Bessemer Venture Partners
(Technology Review, December 2010, P. 12)
"World-class entrepreneurs have reached critical mass in some surprising places - and their number is growing quickly. These innovators just might revive the global economy."
Anne S. Habiby and Deirdre M. Coyle
Cofounders, AllWorld Network
HBR, September 2010 Issue
The coming decade will be the first in 200 years when emerging-market countries contribute more growth than the developed ones. This growth will not only create a wave of new middle-class consumers but also drive profound innovations in product design, market infrastructure, and value chains.
McKinsey & Company
(McKinsey Quarterly, June 2010)
A great rebalancing of the global economy is underway. An industrial transformation fueled by technological, economical, and societal change is simultaneously destroying old and creating new economies, industries, and societies.
Technology has never been so pervasive and its diffusion is having deep rooted economic, social, and political impacts globally. This decade will witness an unprecedented growth from the East. Hundreds of millions of people will come out of poverty to join the middleclass, for the first time, giving birth to a brand new global consumer market. There will be a rise in the global demand of products and services at a scale never seen before.
Despite the fact that the largest share of global consumer demand will come from the developing world, the United States will remain the lead market for all global businesses. While much of the innovation and entrepreneurship activity will be centered on fulfilling the unprecedented demand of the new global consumer, we believe that the United States will remain the entrepreneurship capital of the world for many decades.
We believe that most startups do not need capital to start. Some need modest investments to prove concepts before raising additional capital to fund growth or product development. Very few startups, mostly in R&D intensive industries, require large capital investments at inception. Some of the biggest entrepreneurs in history started with bootstrap finance - with little or no money at all.
Bootstrap financing is a phenomenon at the heart of the global entrepreneurship activity. It is precisely what drives the global entrepreneurial engine. Generally speaking, majority of the bootstrapped ventures are founded by well experienced and highly educated founders usually in their late 20s or early 30s. They are experienced in their industries and have been incubating their ideas on job while working for large businesses or earlier failed attempts to launch ventures.
In order to successfully launch and grow startups in a sustainable fashion, the entrepreneurs and their ventures need continuous market tests and relentless adjustments to the business model mix to avoid the chasms most startups fail to cross.
The process of venture development and growth is heavily driven by continuous market validation. All successful startups have to get, what we call, the "business model mix" right: what to sell (product), who to sell (market), how to sell (service model), and how to make money on it (revenue model). But before entrepreneurs can start to worry about the business models they need proof of concept. The sooner they can prove a concept the sooner they can set the direction of their startups and worry about next steps. Ventures that don't get their concept right at the offset are ultimately fateful but almost never grab any investor's attention. We provide our portfolio companies, entrepreneurs, and high-profile venture engineering clients a framework to fail fast with their concepts and ideas in order for them to succeed faster.
We believe in a clear distinction and separation between venture investing (financing) and venture development (incubation). Venture incubation is the most critical factor that determines the success and the failure of a new venture. The incubation stage can be referred to as a pre-seed stage in the overall venture development process.
Pressure of turning high internal rate of return on funds forces venture capitalists to pursue deals where funding in excess of $1MM is required. Smaller deals are almost never attractive for professional venture capital investors. However, angel investors are able to make smaller investments in new ventures but only if they can easily see a trajectory leading to the first round of venture capital financing, in which case angel investors strive to get a 1000% premium.
Further, the cost of starting technology ventures has dropped so low that most new ventures do not need more than $150,000 to get to the growth stage. At this stage ventures can raise venture capital at reasonable valuation, be acquired, or enter the dead pool.
We typically invest $25000 in new ventures and incubate them for a period of upto 6 months. During this incubation period we help entrepreneurs focus on the venture development process, especially optimization of the business model mix. We then make follow-on investments of upto $100,000 given that the entrepreneurs have found the right business model mix and are ready to go to market
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