Goals, Investment Thesis, & Selection Process

Goals:

  1. Encourage women to be investors in entrepreneurial companies
  2. Educate women on different approaches and process for investing in entrepreneurial companies
  3. Earn a competitive return

Investment Thesis:

We will look to invest in companies that we feel meet the following criteria:

  • Sustainable Competitive Advantage: Competitive advantages can include high barriers to entry (if no IP, then trade secrets that can allow a reasonable amount of time to become market leader), disruptive technology, etc. Company should foresee creating some type of unique marketing position.
  • Strong, Well-Balanced Management Team: Should include knowledge of the industry, their product and competitor’s product as well as an understanding of where their product fits in the future trending of their industry. Should have enthusiasm and ability to execute their plan.
  • Strong preference for serial entrepreneurs who have successfully exited in the past, are coachable, and communicate well with their investors.
  • Market Opportunity: The market ideally would have room for growth and offer opportunity to capitalize on attractive industry trends.
  • Balanced and diverse growth strategy which addresses both vertical as well as horizontal growth.
  • Product/Service Differentiation (No “Me-too” companies)
  • Has a Plan B as well as Plan A, in addition to a clear exit strategy (or, in cases of alternative financing vehicles, a clear path to repayment of investment + return).

Sector/Industry/Geography:

  • Our fund investments will focus on firms that we believe have a significant positive impact on people, communities, and the planet.
  • We are interested in companies that have shown traction in solving a large-scale problem in education, health, food sustainability, and opportunities in clean / energy saving technology, as well as companies that are focused on the aging population.
  • We will not invest in pharma and medical devices that include FDA approval unless the approval is imminent.
  • We should have geographic diversity and a portfolio weighted more heavily to women entrepreneurs, but not necessarily exclusively women-led companies. We’d like to see women and/or minorities on the founding team.

Financial Considerations:

  • Valuations: Reasonable valuation for the stage of the entity > should be comparable to market median prices. Unless at a later stage, valuations above $6M should be thoroughly reviewed and have disruptive technology; most early stage company valuations should be between $2 – 4M.
  • Funding Ask: Should be in line with their stage of growth
  • Our aim is to have investments of $100K to $250K per company in the first two years of the fund, and follow on investments of $250-$500K in years three and four. With most, we should ask for a board seat. Observer status at a minimum.
  • Number of expected funding rounds: the company should have looked at this and provided their answer which we can then evaluate as to what amounts of money have to be put aside for follow-on round investing.
  • Diversity in terms of Stage of Company – at a minimum, company should have proof of concept. Some companies should be already in the market and selling thus having some revenue. Some investments should be later stage so exits are possible in the near term. Some companies should be quick to cash flow break even, not requiring multiple funding rounds
  • To achieve diversity, we plan to invest in 6- 8 companies each year. We’ll consider the following scenario for annual investments in years 1 & 2:
    1. 2 seed rounds at $100,000 each
    2. 2 seed or A rounds at $150,000 each
    3. 2 A rounds at $250,000 each
  • We plan to syndicate all deals and not be the sole funder. Ideally we should invest no more than 20% of the round. We will aim to syndicate deals with our networks including: Toniic, Investors Circle, Golden Seeds, Astia Angels, Pipeline Angels, 37 Angels, Blue Tree Angels, Portfolia, and other angel and small VC firms.
  • A ‘quick’ win or 2 relatively early would help to grow the reputation of the fund. If the fund reaches $3-5m+ we plan to make 8-10 investments per year for two years and then follow on investments in a subset of those in years 3-4.
  • Our due diligence will focus on ensuring the social/environmental impact is core to the companies’ business models and clearly define it for each company.  Early screening can ensure the impact isn’t, but detailed due diligence will need to prove out how the impact mission is core to the company, so ideally that is preserved post-exit. The fund will follow a triple-bottom-line model of investing (people, planet, prosperity).

Focus Areas (Drawing from GIIN Impact Targets)

  • Education
  • Health
  • Water
  • Fintech
  • Financial Access/Inclusion/Security
  • Green Technology/Cleantech
  • Agriculture & Food, including Agtech
  • Sustainable Consumer Products including Food Products/Organics & Green Consumer Products/Services
  • Employment Generation
  • Aging and Longevity

Other screens/thresholds

  • Solid Team with sector expertise
  • Generating revenues (or ready to go to market if pre-rev)
  • Currently raising at least $500K with some committed capital (other funders already on board) (our minimum investment is $100K and ideally don’t want to take more than 20% of round)

Selection Process:

We review companies monthly.  If you are a company that wishes to be considered, please initially contact our team member in your state or the state closest to you.  We do not typically review many companies without an intro, so please connect to our one of our team.  You can apply for investment consideration here:  https://nextwave-impact.proseeder.com/application/start