In business like in rugby, winning is a collective effort….

A while ago, I wrote about what I was looking for when investing in start-ups — this was more of an intro to my investment thesis.

After a little more than two years on the job, hundreds of start-ups met, tons of articles read, events attended, fellow investors met, 3 investments closed and a couple more companies from our previous fund that I follow, I feel a little clearer about my investment thesis…. Yet, beyond my experience as an investor (in the end, I’ll assess in 5–10 years whether I was good at it !) this mostly builds on 20 years of experience working for startups and large tech corporations. Beyond what I look for in start-ups, here’s what will drive me to invest — or rather, the picture and traits of an ideal company 😉

(1) You are an enterprise software company, selling large, sticky (read: recurring) contracts, with the complex and long sales cycles that come with that sport… The problem you address and solve is very specific: you are either a thinly verticalized solution or a very specific piece of a horizontal stack — with a key and clear role to play in that stack. Your elevator pitch is crystal clear and I can instantly see where you fit;

(2) You’re very good at what you to and intend to be the best / lead your category. You won’t try and boil the ocean and will forego leads that will de-focus you; rather, your eyes are on the ball with an obsession of becoming the expert at the very problem you’re solving, and outweighing your competitors and available substitutes at it;

(3) To do that, you have a strong product strategy that drives the organization. The product (or suite thereof) is at the heart of everything: its outlines and epics are driven by market needs, and you have a best in class product team that designs and prioritizes those must-have features that will feed the tech organization ;

(4) Unless you’re an American or Chinese company (but I invest in Europe….) you see your home market as a village that happens to be a convenient test bed to get started. Your international ambitions must be clear: your home market must in the end weigh way less than the biggest one available out there: if you’re a French Enterprise Software start-up, please recognize that 30 to 50% (depending on sources) of global IT spending happens in the US… Meanwhile, some markets (e.g. the US) feature corporate buyers that are less risk-averse than their European counterparts: why struggle with longer sales cycles in a shallower market?

(5) You may well be a tech company with better code, a more elegant infrastructure and more modern technology stack than your competitors… That won’t change my view that it’s hardly ever the best tech that wins. Great marketing and sales execution remain more important. If you consider storytelling, visibility, lead generation, and sales teams less important than developing perfect code, my conviction is you won’t make it;

(6) You recognize that in front of large corporate clients, and amidst fierce competition, you have no brand name and hardly any market recognition. You are most likely up against more established players, and corporate decision makers know they “won’t get fired for choosing IBM”. That won’t change overnight and therefore you recognize the power of partnerships: your go-to-market model is fully based on that (although it certainly calls upon direct sales people to establish credibility and feed your partners with leads). There’s so much to say on this that I’ll write a separate piece on the matter. In any case, you must master complex enterprise software sales cycles and have clarity on the strategy, tactics and type of resources you need to achieve your goals.

(7) Your mind is set on growth — not only that of your company and its numbers, but also that of your employees (their development) and yours as founders and leaders: you know what you don’t know and are determined to do whatever it takes to close the gap and ride that learning curve as fast as you can;

(8) Meanwhile you recognize that the organization will need to evolve over time as the company grows — including you, the founder, and will need to call upon special scaling expertise at some point to take the company to the next step. Great leaders are very ambitious and bold, the best add the right dose of humility and self-awareness that make the difference;

(9) On a final note — and not the least — your company is one where there is a strong culture, genuine values, where people feel they can be themselves and grow into better people, and where you truly nurture that. In the war for talent, foosball and free meals have just become standards. Great talent is attracted — and retained — by exceptional leaders who distill an inspirational culture and embrace strong values. And that goes way beyond posters on the wall or casual reminders at all-hands speeches: it’s something you live by on a day-to-day basis. Winning is a collective effort….

What makes our job so fantastic is that I have yet to come across a company that perfectly ticks all of the above ! That doesn’t prevent me from investing, and in fact, the most interesting part of our role is to help the founding team develop those areas where they need to improve / focus.

I’ll make sure to dig deeper into some of the aforementioned in future posts, and, as always, am hoping for valuable comments, insights, counter-examples, and antagonist opinions…

Alexandre Pelletier, Partner Cap Horn