Seed Capital From Angel Investors: Manu Kumar, Founder And Chief Firestarter, K9 Ventures (Part 2)

By guest authors Irina Patterson and Ravi Bulusu

Irina: How many pitches do you receive every month?

Manu: It is something that I want to track, but I have not had the time to do it yet. If I were to guess, I would say somewhere around fifty to sixty a month, and that includes presentations at events, pitches that come in directly over e-mail, and those that come through referrals.

Irina: Out of all of those pitches, how many deserve a closer look?

Manu: I would say probably about five or ten a month deserve a deeper look or at least a first or a second meeting. If I look at my statistics from last year, I looked at almost 500 ideas and ended up doing five investments last year.

Irina: When you see a promising pitch, what is your next step?

Manu: Typically, the first thing that I do is a bit of background checking on the team and some early reference checking. That helps me to get to know the people better and get a better sense of how credible their pitch is.

Irina: When you look at a potential investment, what are the factors that you give the most weight?

Manu: I use five necessary but not sufficient conditions. The first one is the quality of the team. Specifically, I look for technical founders. I want founders who are capable of building their own product.

They have to be highly capable and have exceptional integrity. That is the factor number one.

The second thing that I look for is it needs to be either something that has some core new technology or a new market.

The third factor is that I invest only in technologies that have a direct revenue model. I typically do not do anything related to advertising, content, or media. I focus on direct revenue model technology and services type companies.

Fourth, I look for capital efficiency. I am looking for companies that can get to cash flow positive very quickly and may need a series A but could get away without needing a series B or series C.

The last one is the hyperlocal factor that I mentioned earlier. The entire team has to be located in the Bay Area. I will not invest in a company that uses outsourcing or contractors to develop its core technology or one that has a distributed workforce.

Irina: How do you usually conduct your due diligence?

Manu: For the seed stage, a lot of the due diligence is really in talking to the founding team, looking at the demo, talking to potential customers or existing customers, and a lot of reference checking.

The stage that I am investing in, there is not a lot of additional diligence to be done. It is more a question of, do you really believe that this team has the ability to deliver on what they are promising, and do you like the concept? It is not a lot of due diligence at the early stage; it is more like making sure that these are people that you can trust and that they are capable.

Irina: In the past twelve months, how many investments have you made?

Manu: I have made seven investments in the past twelve months.

Irina: What was the dollar range?

Manu: The initial investment would typically be in the range of $100,000 to $250,000. Then I also reserve capital for participating in the follow-on round.

Irina: How long does it take a company to receive funding from you?

Manu: It varies considerably. It depends a lot on how well I’ve known the team. If I already know the people, it is a lot quicker because it is a known quantity. If I don’t know them, then I might want to do multiple meeting so I can get to know them and get a better opinion of the team.

The range can be quite far. I have done deals where I have said yes within one meeting, and there are others which have taken as long as one to two years over a period when I have gotten to know the entrepreneurs and then eventually invested in the company.

This segment is part 2 in the series : Seed Capital From Angel Investors: Manu Kumar, Founder And Chief Firestarter, K9 Ventures
1 2 3 4 5