1Mby1M Virtual Accelerator Investor Forum: With Andrew Romans of Rubicon Venture Capital (Part 2)

Sramana Mitra: How big is the fund?

Andrew Romans: We’re investing out of a $50 million fund that has a hard cap of a hundred. We’re already actively making investments. For your audience, we’re actively looking for deal flow. If the company has not raised at least a million dollars of outside non-founder funding capital, we prefer not to hear from them.

We like to see companies that have raised at least $1 million from someone who’s not on the founding team. If founders invest, that’s great but we want to see outside investors who put in a million. We do like to see companies that are up to $100,000 MRR but sometimes we like to get to know the company before them.

Sramana Mitra: Let me ask you a question here. We have a philosophy in our methodology of bootstrapping first, raise money later. We have companies that have gone well past your $100,000 MRR with no outside financing whatsoever. From what I’m hearing, you don’t want to hear from these kinds of companies.

Andrew Romans: Unless they’re got another VC or angel that we know at the table, I actually don’t. There’re a lot of reasons for that. There are many investors who are seeking the glory of being the very first. I’m happy to be in the first round of outside funding. We’ve, very often, been in that but I’d like to see someone that I know bring it to me saying, “I’m putting in this amount of money. Do you want to join me?”

Sramana Mitra: What sectors do you have your corporate relationships in?

Andrew Romans: We avoid all things healthcare lifestyle as well as healthcare IT. We avoid things that are capital-intensive. That means no companies that have the characteristics of biotech where there is a serious degree of total binary failure risk. A clinical trial might come back with bad efficacy, so that’s the end of that. That’s part of the reason why for some companies, it can be pre-revenue and it’s not a problem for us.

For a lot of companies, they’re saying, “Our box will work a thousand times better than a human.” With no customer paying for it, it’s a hypothesis. When we see some revenue and we can talk to customers, we can verify that it is indeed a thousand times better.

Sramana Mitra: In our portfolio, this is not even an issue because we only do IT and IT-enabled services companies. We don’t do clean tech. We don’t do biotech. We do healthcare IT. That is something that we see a lot of activity in. In healthcare IT, you can prove what you need to prove with small amounts of capital.

Andrew Romans: There’s often no risk of total binary failure. One day, we will focus on healthcare IT but for the moment, we are so overwhelmed with deal flow that being able to say no to something is just a relief.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Andrew Romans of Rubicon Venture Capital
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