1Mby1M Virtual Accelerator Investor Forum: With Tony Olivito of Comeback Capital (Part 2)

Sramana Mitra: Let’s talk about geography. You talked about this bus tour being the catalyst to founding this firm. Talk about what is your philosophy on location.

Tony Olivito: For us, it’s the Midwest. We started the firm because we saw an opportunity due to lack of capital in the Midwest, specifically in areas outside of big cities. There’s a lot of capital in Chicago.

If you look at our portfolio, we’ve invested in companies in Indiana, Iowa, Missouri, Minneapolis, Ohio. It’s all Midwest. We are here in the Midwest. We understand the market. That’s where our networks are. It tends to be in the smaller markets. 

Sramana Mitra: Where are you based?

Tony Olivito: I’m based in Chicago. I have partners in Cleveland, Pittsburgh, and one in Detroit. 

Sramana Mitra: Let’s go to some case studies. When the companies came to you, what did they have? What did you see in them that compelled you to write those checks?

Tony Olivito: Typically, they haven’t raised a lot of capital prior to our investing. That’s important for us. On the team, there maybe some proof points that they’re able to execute.

When you look at this early stage, there’s just not a lot of data. We collect as much data as we can but then you have to augment that with information to help us predict whether this team or these two founders can execute and excel. We’ve seen that they’ve built this technology, but how successful are they in having conversations with customers?

If we invest in the next stage, that money is typically used to build sales and to grow. The backgrounds of the founders and their experience in the industry they’re selling to is important for us. Those are some of the things we look for. We’re not looking for unicorns. 

Sramana Mitra: You’re looking for early exits?

Tony Olivito: Yes. My partner has this good example that we use quite frequently. If you’re a founder, would you rather have 40% of a $100 million company or 4% of a billion dollar company. They’re both equal, but the probability that you’ll actually reach a billion dollars is less than 1%. Your probability of $40 million if you’re trying to build a unicorn is much lower.

If you look at the exits, the bulk are between $30 million and $50 million. We’re looking for the companies that we think can build something that could exit in that range. If they go on, that’s great. If you look at our portfolio, we have one or two that are on that track. It’s not like we’re explicitly looking for those types of companies. 

Sramana Mitra: What is the size of exit that you are aiming for? Is it sub-$50 million?

Tony Olivito: We’re happy with singles and doubles. We’re happy if we’re able to identify a lot of companies that have successful exits. Even a $15 million exit is great if the company was capital efficient in getting there. If they only raised a million or $2 million and they exited at $20 million, that is perfectly fine.

The nice thing about that is that entrepreneurs would end up with most of that exit as opposed to if they raised a lot of money. If they raised $5 million and exited at $30 million, they diluted themselves along the way. Capital efficiency is important.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Tony Olivito of Comeback Capital
1 2 3