1Mby1M Virtual Accelerator Investor Forum: With Kelly Perdew of Moonshots Capital (Part 5)

Sramana Mitra: Let me do a thought experiment with you on this one. If this particular concept came to you from a domain expert, but it wasn’t Scott or somebody who had a track record of building a company but was a military veteran, would you still invest?

Kelly Perdew: There are way more people that I don’t know than there are that I do know. We’re not anticipating that even half of our investments are in people that we’ve already met. We’re seeing hundreds of deals a month. Using the criteria that I described to get to the point where we get the meeting and get follow up meetings and an ability to understand that that entrepreneur isn’t going to do what we tell them. They’re open to hearing what we’re saying so we can help them avoid a lot of the company-building pitfalls that Craig and I have gone through. We’re much more likely to invest in that than on somebody who thinks they know everything.

Sramana Mitra: Our audience does have some serial entrepreneurs, but the vast majority of our audience are first-time entrepreneurs. When you need money to start a company as a first-time entrepreneur, it’s a problem. There’s all sorts of things that you have to do to be creative about bootstrapping to levels of success, which is why I’m asking you these questions.

Kelly Perdew: For the 14 companies that we’ve invested in, we believe in the value we add to the investment. We want the team to have the domain knowledge that we’re investing in. If we can help with our networks, we will do so. That’s another consideration. Where Craig and I add the most value is the empathy and experience of being a founder and the company-building elements.

How do I hire my first sales person? We’re big enough now that I can’t be doing all the sales. The list of those questions that first-time entrepreneurs have is endless. Craig and I are able to apply our experiences not only as an investor but also as an operator; those are things that you can’t get and really feel unless you’ve been an entrepreneur before.

Sramana Mitra: Absolutely. Last question, you said you’re seeing hundreds of deals a month. What trends are you seeing in your deal flow? Which of those trends are interesting to you?

Kelly Perdew: We’re seeing much more developed companies. Three or four years ago, we would see two-thirds of our deals is the MVP’s almost done. There’s going to be a market test next quarter. Now, that’s dropped to less than a third. There are many ways to get that early financing. That bar has reached a point where there has to be a good reason for them to be not in revenue for us to go past that first stage.

If you’re Scott Painter or you’re just starting with your idea that in two years is going to be at a $2 billion valuation, that’s where we’ll ignore the fact that you don’t have revenue yet. Especially with software, it’s so relative to how it was in the past. Distribution is less expensive so that you can get enough users in to test and understand what works and what doesn’t.

You really need to get to a point into revenue or into an MVP that’s working with some monies raised from a whole bunch of different sources that are available to you in order to register as a serious player that’s going to be successful to an institutional VC.

Sramana Mitra: Interesting. By the way, this is what we teach. Do not go to VCs as beggars; go as kings. That requires that you build up to a certain revenue level with which you can have a conversation that is a real negotiation as opposed to begging for money. That conversation is not a healthy conversation.

Kelly Perdew: This train is moving out. It’s a great train. Do you want to be on it or not? That’s a much better approach.

Sramana Mitra: Great. Thank you for sharing your perspective.

This segment is part 5 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Kelly Perdew of Moonshots Capital
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