Archive for August, 2019

Technical CEOs

Posted on August 15, 2019. Filed under: Uncategorized |

This summer has been a lot of catch ups and time spent with angel and seed investors. For the first time since leaving General Catalyst a while ago, I find myself 100% focussed on Series A, slightly further downstream in the capital markets than “first to believe.” The bottoms up, catalyst driven work I do to find early stage companies I want to invest in is exactly the same as it’s always been, but my dynamic with friends who are seed and angel investors has changed in the sense that Pace Capital now represents follow on capital, as opposed to the coinvestment, to their early stage portfolios. When they ask me what types of companies I like, so they can send me relevant opportunities, my answer doesn’t fit into a clean box like “networks and marketplaces” or “SaaS and enterprise.” My default is simply to share the 4 or 5 theses that I’m developing at any given time (currently in the spheres of airpods/voice, blockchain, distributed labor & credentialing, contactless payment, media forensics, and a few less developed things), all of which I think make for interesting conversation, but I know people don’t leave remembering a simple commonality that they can then use to place me in their schematic of relevant Series A investors.

My approach to investing is and always has been entirely bottoms up. I look for catalysts in a few key spheres: 1) technology 2) capital markets 3) regulatory environment or 4) a societal change, where it’s clear that enterprise value is going to shift from incumbents to new entrants, and then specifically, I look for companies that are “native” to that underlying change. So the thing that wasn’t possible prior to the change tends to be the most valuable thing. Within that set I am most tuned to technical catalysts, and most of my thesis development comes from studying and understanding the new primitives that a technical change exposes, and then I start to think about what types of systems people can and will design against those primitives. This framework is, I believe, the best approach to proactively identify companies you want to invest in (at least for me), but I am still left with the reality that lot’s of deals are referrals, especially at the Series A, and I’d like a cleaner way of helping my network know what to send.

I recently looked back at all of the investments I’ve made at Lerer Hippeau and as an Angel over the last 10 years and tried to deduce some more simple tangible commonality between them. The first observation, which I’m not sure is so helpful in this context, is that I tend to invest in companies that express elegant system design (technical or otherwise). I don’t think most angels or seed investors know how to transpose that filter onto their portfolios, but maybe some do. Perhaps more actionable, but more limited and less expressive of what I actually look for, is that it turns out I overwhelmingly gravitate toward technical CEOs. I guess that’s not a surprise given the system design thing, but I actually didn’t realize what a strong bias I’ve had toward technical leaders. This is true as measured not only by volume, but also by depth. By far my deepest and most fruitful investor/founder relationships have been with technical CEOs.

I like the communication plane i have with technical thinkers, so in the absence of a paint by numbers description of the companies I’d like to spend time with, “technical CEOs” feels as close as I’m gonna get to a 30 second sound byte. If that’s you: Jordan@pacecapital.com