1Mby1M Virtual Accelerator Investor Forum: With SC Moatti of Mighty Capital (Part 3)

Sramana Mitra: Is this the traditional way that you get involved in a company? Do you have people in your community who go out and raise funding and bring you into the cap table? Or are VCs also bringing you into the cap table?

SC Moatti: In the example of Amplitude, we were brought in by the entrepreneur. About half the time, that’s how we get into deals. Entrepreneurs who see the value of Products That Count tend to come to us because they know what we can deliver. That’s about half of our investment. The other half of our investment is the investors of those entrepreneurs who see the value and then come to us and invite us to be part of their syndicate.

Sramana Mitra: What is the size of your involvement in these cases that you’re talking about?

SC Moatti: We’re minority investors. We generally don’t lead a round.

Sramana Mitra: How much do you put in? What is the average check size?

SC Moatti: It’s typically under a million dollars.

Sramana Mitra: What’s the range?

SC Moatti: Depending on the opportunity, it ranges from a few hundred thousand dollars to a million dollars. If I look at our last three investments, we’ve written checks of $500,000 to $1.2 million.

Sramana Mitra: Are there other examples that are worth discussing that illustrate other aspects of your value proposition?

SC Moatti: Amplitude is getting value out of access to Products That Count for the purpose of selling. Some of our other portfolio companies have used us for the purpose of hiring and scaling their teams. It’s a similar model where they’ll say, “There’s great value here, especially to gain access to this audience.” The purpose of the access varies. One thing I’d like to clarify is that we are not interested in getting involved in companies where we’re not adding very tangible value. It’s very important for us to be smart money.

Sramana Mitra: What VCs do you co-invest with? What VCs are familiar with your value proposition?

SC Moatti: With Amplitude, we co-invested with Benchmark, Battery, and IVP. In another of our recent investments, we co-invested with Matrix. We have a number of firms that we’re very friendly with and have invested with in the past like Mayfield, Menlo, and Floodgate.

Sramana Mitra: When you look at the opportunities, are there specific investment theses? Are you looking for unicorns and billion-dollar plus TAMs? Are you looking for companies that have mid-sized TAMs and would be looking at capital-efficient executions and early exits? What is your investment thesis from a scale point of view?

SC Moatti: Let me give some perspective on this. I want to say there are three segments of investors out there. I’ll call them the whales, the dolphins, and the minnows, which some of your listeners may be familiar with. Whales, in the gaming industry, is somebody who buys all your shiny armors. You have very few of those. When you find one, you do whatever they ask you to do. A whale, in the world of investing, is exactly the same.

If you’re going to get a whale on your cap table, you’re going to do whatever they tell you to do. That check better be really big. On the other hand, if you’re going to take a huge check, you need to know how you’re going to spend it. Otherwise, your company is not going to go anywhere. We don’t play in that category. We’re not interested in playing that game. It’s what SoftBank is doing.

The second category of dolphins includes the people who tell you, “You should totally play Candy Crush. They’re your social butterflies.” We like to think of Mighty Capital as a dolphin where our portfolio company’s success is our success. When you’re looking for investors, you should be looking for dolphins because they will add something unique to your company and they will care a whole lot about making your company successful.

You want to think about the kind of access they have and what kind of ecosystem they can accelerate for you. In the case of Mighty Capital, you get access to that incredibly large community of people and then you can leverage that for selling, hiring, testing, and so on.

A third category of investors, which we’re not part of is the minnows. They’re excited to be there but they’re incredibly passive and they don’t add a ton of value. You will, as an entrepreneur, need to get some of those on your cap table, but you also need to be aware that their value is limited.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With SC Moatti of Mighty Capital
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