If I Ran It: Profit-Driven Fund (Part 1)

If I Ran It is a thought experiment series on my blog where I think about how I would run a company/fund if I was in control. Its hypothetical (for now). Previous entries in this series can be found Here(2013) and Here(2014) (Part 2 of this post is Here)

I spent a large chunk of the past 10 years of my life talking to founders, learning about their companies, and trading advice through successful/difficult times. I did it for fun as I really enjoy learning about what other founders are working on and I'm happy to give another perspective if they are open to it. With that experience in mind I recently started to think about what patterns I saw and what types of companies I'd like to see funded in the future.

This past summer I also started a event series called INFLECTION, which focuses on profit-driven entrepreneurs who are primarily focused on growing revenues in their companies (Update: Featured in NY Times https://bit.ly/goatedinflection). Some of these founders have incredible grit, and have been creative in their ability to keep their companies afloat, often times without much outside funding. They have quietly focused on the fundamentals of serving customers and grown revenue year after year, without fanfare or at times the explosive growth that many tech companies aspire to have. If given the right resources and mindset, some of these companies can convert their linear growth into exponential growth.

So if I ran a fund focused on growing profit-driven companies, here is what it would find interesting:

Overall Thesis: Natural entrepreneurs, who are domain experts in their field, building for niches that will be mainstream in the future.

Here are some categories of companies and founders I’d be interested in.

Natural Entrepreneurs

Entrepreneurs who have an inclination to being profit driven in their entrepreneurial history. They may have a traditional view of entrepreneurship through a small business lens. Many of these types of entrepreneurs have strategic / growth initiatives they would like to employ but are consumed with the day to day minutia of their business. With the right infusion of capital and help on growth strategy, many of these natural entrepreneurs can scale their impact and transform their trajectory, given they already have hit on some product-market fit.

Technology That Shapes Culture

Fundamentally, technology can shift how we think and interact with each other. While some innovations extend what has already existed and amplifies it, I'm interested in technologies that shape culture in ways we'd like society to be. Infused in this is a unique opinion on how society should function, and great entrepreneurs use that perspective to differentiate themselves against the pack.

Niches (for now)

With cultural shifts and changing buying power, niche markets of the past will not be niche in the future. Instead of evaluating size of markets now, we can look forward to see how those communities could grow, given cultural shifts brought on by the prior mentioned principle.

Micro Brands
I tweetstormed this https://twitter.com/FrankDenbow/status/1008410276088205312 when Gary Vaynerchuck tried to say that big brands are going to figure out facebook ads and dominate brands culturally. I 100% disagree. The future holds many smaller brands that fit the needs of a growing number of communities. Its harder for one large brand to maintain authenticity and individuality for the masses. Platforms will continue to make it easier to build your own brands, and focus mostly on the creative and marketing aspects. If you think apparel (the $70BN industry) is ready for an api layer for all of production and fulfillment, I know a guy.

Wellness as Fashion

Wellness (defined as all things to benefit health, from boutique fitness, to low calorie drinks, to meditation apps) has an air of fashion coolness that makes cultural adoption happen. The pursuit of products/services that better suit our longevity will continue to gain popularity.

Future of Flexible Work/Life

As posted in a previous blog, the idea of everyone having one 9-5 is changing. People will become more comfortable having flexible ways to monetize their knowledge and abilities, which enables them to live more flexible lives. As manual jobs get automated (we can ascend to a higher level of society where we place value on intelligence and creativity that cannot be automated, making it easier to monetize your thought process).

Integrated Future

The first talk I ever did in tech was on how to build a great API. I spent years following Twilio and Sendgrid, seeing two companies who were API first turn from startup to IPO. APIs have power to provide great distribution and scale quickly when implemented in the right systems and usually provides a level of lock in that makes them unlikely to be taken out easily. Companies that can simplify advanced functionality into APIs are interesting.

Know any companies that match any of these themes? Feel free to pass them along, as I’m happy to help give any advice/connection to the right investors ([email protected])

Part 2 will include the team and companies that I find interesting and investable.