1Mby1M Virtual Accelerator Investor Forum: With Patricia Nakache of Trinity Ventures (Part 3)

Sramana Mitra: In terms of stage, you said you do seed, Series A, and Series B, your sweet spot being Series A. What is your definition of Series A? What do you like to see if you’re ready to do a Series A investment? What do you like to see in the project?

Patricia Nakache: Ideally, we would want to see some product-market fit. It might just be an initial target market. The product roadmap might leave room for a lot of evolution. We, at least, want to see some initial product-market fit. There’s this rule of thumb that to get Series A funding, you need to be a million dollars in ARR. It is true that that could be meaningful for us, but that’s a bit of a blunt instrument. We do take things like quality of revenue. It depends on the gross margins associated with that revenue.

There’re a lot of other metrics that are important. That ties into this notion of product-market fit. If there is a fit with this core group of customers, you’re going to see better retention. I would say some level of product market fit is the most important. We do like to see companies over time and the progress they make over time. It’s interesting to see when companies start attracting some key management team members. That can be very meaningful.

Sramana Mitra: What is your definition of Series A? We are seeing a bit of a segmentation happening in the industry of people who are willing to do smaller Series A versus people who want larger Series As. That could vary between $1 million and $3 million Series A versus $5 million to $10 million Series A. What is your sweet spot or preference?

Patricia Nakache: We have a fair bit of flexibility. We’re probably more ownership-oriented than we are focused on the check size. I would tell you that our range of check size has no minimum. As a practical matter, we usually don’t write initial checks greater than $12 million to $15 million.

Our median is somewhere in the $7 million range. That’s a bit reflective of the fact that round sizes have just gotten bigger at every stage. What used to be considered a Series A would now be considered a seed. We’re pretty flexible. We can play pretty much any size round whether it’s a $3 million round or a $10 million round.

What we’re more focused on is ownership. We look for 20% plus ownership in the investment that we make. We typically lead or co-lead and we typically look to take a Board seat. Our philosophy is, it isn’t just about the capital. It’s also about really partnering with the entrepreneurs to try to make the company as successful as we can.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Patricia Nakache of Trinity Ventures
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