How We Decide
Founders and changemakers have a few things in common no matter which industry they want to reinvent: unstoppable passion; a singular commitment to achieving their vision; and an unreasonable mindset.
To find the right investors, board members and partners, it’s critical for founders to acknowledge and be transparent with their goals, whether it’s to go for a bigger play or stay more conservative, turn a quick sale or build a long-lasting company. The right advisors are people who can be both your biggest cheerleaders and your toughest critics, and who won’t shy away from hard conversations. They ask the questions you never knew were important. They serve as guides, helping you navigate the difficult road of building a company from the ground up, spotting things that an entrepreneur might otherwise miss (risks and opportunities alike.
We look for A teams and founders: entrepreneurs who know what they know, and are the best in the world at it — but are also aware of what they don’t know, and are open to building strong teams to fill those knowledge gaps. Experience in the domain in which they want to innovate is not a requirement. We invest more in people than in a specific plan, because plans often change.
We differentiate our investments between two funds. Our Seed Fund supports science or business innovation experiments where we often are the sole investor, but may also partner with angel investors or smaller funds. At the seed stage, we’re looking for a crazy idea, one that may require upending an established business model or even an industry — and may have a significant chance of working. We don’t need to see a full team or even complete plans; we need to understand the key technology risks of your approach, and the economic and market benefits if it is successful.
From a seed perspective, planning for risk elimination at the lowest possible cost is the key variable. Your seed plan should validate your hunch about the market and help you to decide which segment you want to enter, refine an entry strategy, or remove a key technical risk.
Our Main Fund supports more traditional ventures from early to later stages in all areas of technology, including all financings that exceed $7M in total round size. We are looking for billion-dollar markets and differentiated approaches. For Main Fund consideration, we assume that a reasonable number of the risks and milestones (or uncertain markets) associated with seed-type investments have been mitigated, though we understand there is still significant technology and execution risk.
While our focus is on the capabilities of the underlying technology or business model as well as winning in large markets, we want to understand what risks remain, and what you’re doing to mitigate them, as well as your go-to-market approach. Markets, financials and a critical mass of teams become more important for the Main Fund, though we still accept gaps in the complete picture and business plan.
But clear identification of the key success variables and missing pieces is important. What are you looking for from KV? Why have you sought out us specifically? It will be important to provide a clear statement of the milestones you’ll achieve with financing, your future cash needs to break even, or an explanation of another determinable milestone. The thoroughness and quality of the team’s thinking is also important: with some exceptions, the goal is to execute rather than to explore markets or technologies.