1Mby1M Virtual Accelerator Investor Forum: With Christopher Mirabile, Senior Managing Director at Launchpad Venture Group (Part 2)

Christopher Mirabile: We have a couple of different programs. We have a traditional monthly forum where companies that are, presumptively, ready to work with investors are present. That’s usually three companies a month. Two out of three of them go right into due diligence.

We also have a catalyst program where we look at a dozen additional companies a month. That’s not intended to be as much of an investment forum but more of an opportunity to begin a relationship. We poll the participants and give written feedback to every company. Typically, about a third isn’t going to be a fit. We’re very honest with them about that. We think it’s a sin to waste an entrepreneur’s time.

Sramana Mitra: The way we work is, I send you deals if you’re working with One Million by One Million. These are fully-vetted. The diligence is done on our end. What check sizes do you like to write?

Christopher Mirabile: We’re participating in the classic $500,000 to $2.5 million round. These terms have become meaningless. We tend to invest, most frequently, right at the point of market entry. There’s an MVP. There might be a couple of customers piloting. We know the product can be built. We really tend to be funding that first go-to market. That’s the stage we do most commonly.

Sramana Mitra: But you want to see some customer engagement?

Christopher Mirabile: If we know the entrepreneur and we know the category exists, we’ll invest as early as the PowerPoint stage. If it’s a first-time entrepreneur and it’s a speculative category, we need to get comfortable that this is going to be a top buying priority for the customer they’re targeting.

Sramana Mitra: You talked about specific categories that we’ve been paying a lot of attention to long before it became fashionable to pay attention to these categories. That’s a smaller TAM than what is considered venture scale. The venture-scale TAM has to be, at least, a billion-dollar TAM.

That has left the category of $150 million to $500 million as an undesirable category. My observation has been that there are a lot of strategic exits. Enterprise software in particular and other kinds that happen in the sub-$50 million range. To make money off a sub-$50 million exit, you have to build a company in a capital-efficient way so that everybody can make money.

That category of $150 million TAM where it sits strategically into somebody else’s portfolio and can go-to-market through their sales channel is a very attractive category.

Christopher Mirabile: I couldn’t agree more. I’ll give you an example of that. We had a company that was a SaaS company. It wasn’t, technically, recurring revenue, but it was repeating transactional revenue. They had a lot of repeat customers. They got a mediocre revenue multiple. They exited for 4x. That deal was a 21x cash-on-cash for us and a very good IRR. The reason for that is that they were very capital-efficient. We seeded them about $400,000 and we put another million in. The team got to a $20 million run rate and got acquired for 4x revenue. It was a clean cash acquisition for $80 million.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Christopher Mirabile, Senior Managing Director at Launchpad Venture Group
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