what we look for: overview
At KV, several sectors are of particular interest to us: mobile, Internet, consumer health, alternative energy, energy efficiency, storage, materials, and other unconventional areas.
Fundamentally, we like large problems that are amenable to technology solutions. Though our seed and main funds look for slightly different things, both funds seek out unfair advantages: proprietary, protected technological advances; business model innovations; unique partnerships; top-notch teams.
We want only "A" teams and founders —entrepreneurs who know what they know (and are the best in the world at it), but who also know what they don't know and are open to building strong teams to fill in those knowledge gaps. We invest more in people than in a specific plan, because plans change often.
It is also important for us to know what you are looking for from KV. Why have you sought out us specifically?
Broadly, a venture we back offers one or more (and hopefully many) of the factors below:
…significant technology or business model innovation
…"black swan" ideas with significant upside or a significantly better mouse trap
Black swans are high-impact innovations that are beyond the realm of normal expectations. As Nassim Nicholas Taleb put it, black swans are characterized by rarity, extreme impact, and retrospective (though not prospective) predictability.
High-impact investments can change the dynamics of large markets. Can we alter the design of an engine to substantially change its efficiency and make it more economic than hybrid drivetrains? Can we make cleaner building materials?
- Going beyond normal expectations means we take on the challenge of rethinking the familiar. Can we store energy in elements other than lithium? Or can we make lithium ion batteries better?
…in large markets, either existing or newly enabled by the innovation at hand
Will you disrupt a large existing market
? We love breaking monopolies. Or can you find a $0 billion market (versus a $0 million market) with a credible path to grow?
…with short innovation cycles
Start-ups by nature take on more risk than do larger, established competitors. However, the start-up nature adds significant difficulty to getting large, capital-intensive projects up and running. Instead, we're looking for rapid innovation cycles so that proof points and results (whether good or bad) are available quickly. But we can break our own rules: We have invested in a nuclear reactor with long innovation cycles, because other factors were compelling.
…and the risk up front
Every plan has risks, and we understand and cherish risk. But we prefer technology risk to market risk—and we prefer to remove technology or business risks up front. Clearly identified and understood risks, along with a cogent plan for removing those risks for the least amount of money, meet an important criteria for evaluating ventures. It is more advantageous to all parties to fail in six months and on $75,000 than in six years and $75M—we want to focus on the key risks early
If you have a compelling technology-based story or exceptionally accomplished or credentialed people, we are willing to listen. But we are not looking for a good ROI; we are looking to build companies. In our view, the ROI follows company building. We will help you redefine your plan to meet these criteria if the technology breakthroughs are significant.
While the principles above cover our goals, we differentiate our investments between two main funds: Our seed fund
consists of "science or innovation experiments " and other almost imprudent risks, be they in information technology or sustainability, where we are often the sole investor. Our main fund
looks at more traditional ventures, from early to later stages in all areas of technology.