1Mby1M Virtual Accelerator Investor Forum: With Deb Kemper of Golden Seeds (Part 3)

Sramana Mitra: What stage did you get involved in either of these companies?

Deb Kemper: For both of them, Golden Seeds was in their initial seed financing round. On one, I was on the seed. On another, I got in a little bit later. I didn’t invest the first time it came around.

Sramana Mitra: Did your micro-VC also invest in these companies?

Deb Kemper: It did in one of them.

Sramana Mitra: I’m listening to you about the second company where you already got an exit within 18 months which is a good segue into a question that I want to ask you. There are 700 plus micro-VCs and tons of angel groups. I’ve talked to a lot of them. I, very often, hear people who are all looking for unicorns. I’m thinking, “That’s not mathematically possible. Unicorns are rare.”

However, we are in 2018. There are tons of niches out there and there are lots of companies that are pursuing some of these niches. You can build very good businesses that are catering to some of these. They don’t have these multi-billion dollar TAMs.

They’re operating on $200 million and building good products that fit into those niches. You can do capital-efficient business building. You can potentially seek early exit. Most of the exits in the industry happen under $50 million valuation range. What is your thought on all this? How do you process all this?

Deb Kemper: I’m not a unicorn hunter. I follow a philosophy that is very similar to what you laid out. Most of these companies exit via M&A between $30 million and $50 million. You can have a whole bunch of those and have a very good return on investment. You can do great with a bunch of doubles and triples versus trying to go unicorn hunting.

Unicorns require a lot of capital. As an angel investor or a very small fund, you don’t have enough capital to stay in the game and not be crammed out or wiped out off the cap table. If you have a company that’s only going to need $5 million to $10 million to get to an exit, it’s a much safer place to be playing in. Unicorns take $250 million. We can’t play with that.

Sramana Mitra: These large investors load the cap tables up so they take liquidation preferences and squeeze down all the early investors. There are lots of dangers for unicorn hunting.

Deb Kemper: There’s a couple of other things about unicorns versus not. There’s a lot of good business ideas out there. If you look at the M&A market, your corporates are looking to acquire growth. If you’re showing significant year-on-year growth, you’re attractive for someone to acquire and use them to help you scale. They don’t want to rebuild this. It’s cheaper and easier to acquire the talent and customer base versus trying to rebuild. The unicorn hunters are trying to be extremely disruptive. If I limit myself to only trying to find those, I could have none.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Deb Kemper of Golden Seeds
1 2 3 4 5