1Mby1M Virtual Accelerator Investor Forum: With Evan Zimmerman, Chairman of Jovono (Part 3)

Sramana Mitra: Let’s do another example. You’re doing a very good job of illustrating what attracts you. Keep going. Let’s do a couple of examples.

Evan Zimmerman: Zeekit is another company we invested in. We led the Series A with some friends of ours. We co-led their Series A which was their last round of investment before they sold to Walmart for over $200 million. They had a SaaS business that was growing quickly and had a number of really prominent customers.

Our process with them was that we were introduced to them by a friend of ours who’s considering investing and ended up co-leading the round with us. They came to us because one of the things that we do better than a lot of people is we’re good at understanding the technology behind it. You don’t have to invest in new technology to have a successful company or to be a Jovono company but you have to use it very well.

Zeekit invented something completely new. They showed you what you would look like in clothing. It was, by far, the best that they’ve ever done. We walked through their algorithm and how it worked. That was during the late diligence stage. Normally investors will not sign an NDA. We’re no different than that. We ran it in samples. The core reason why we needed to understand how it works was that it wasn’t perfect yet although it was very good. It was enough to impress people. Is the technology really far ahead so that it’ll be hard for people to catch up?

Number two is we said, “Is the technology bases good enough that, if they get resources and a little more time, it will become perfect?” The answer, we determined, was yes. Number three was, based on what they had, is there a viable business model that is logistically doable? Can we come up with a way to upload clothing quickly? It’s a really big problem that they haven’t yet solved.

The founders were incredible. The founders are Alon, Vir, and Yael. Yael is the technologist. She’s a real superstar. One of the first women to go to Technion. She was in the Air Force. While she was the CEO, she was in the Reserve. We looked at the founder and technology. We have enough resources for them to finish the technology. We opened up our networks so that they could get their first customers. We also helped them with the strategy. The business strategy changed a lot.

One last thing we did to help them which was very unusual was we helped them get software patents. Software patents are very rare and you don’t need it to be a successful company. When you do get them, they’re very valuable. I have a law degree from Berkeley. There were several opportunities that I saw where we could get a software patent. That was appealing. We got several software patents for Zeekit. They never confirmed why but I suspect that’s one of the reasons they got bought by Walmart for so much money.

Sramana Mitra: When you do these very early-stage investments, what is the check size?

Evan Zimmerman: It’s all over the map. It’s funny you mentioned the fragmented space. Some of the fragmentation of the space is just the names don’t mean anything anymore. Pre-seed used to mean a kickoff to your seed. Then it became a whole new round. Now a lot of people do pre-seed after having raised more than one round of friends and family.

Because the names don’t mean anything anymore and the companies raise at different stages of development, there’s not a single answer. The smallest check that I’ve written is $5,000 at the pre-seed level. The largest one at the pre-seed level is $200,000. The $200,000 check was for founders who I helped incubate the company. It’s literally the strongest founding team I’ve seen. I feel very validated by the investment. They’re still in stealth. They’re building a difficult technical product. In their first year, they scaled unbelievably fast. It’s a FinTech product too.

Sramana Mitra: That $5,000 has to be a loan. You can’t really do a pre-seed round on $5,000.

Evan Zimmerman: We just wanted to support the founder because she’s so good at what she does. If you’re raising at a much lower valuation, I don’t have to deploy as much to hit my ownership target. This founder was not as good, so the valuation was way lower. For her, a $5,000 check was the equivalent of a $25,000 check for someone else.

Sramana Mitra: That gives us a good overview of your thought process. Thank you for your time.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Evan Zimmerman, Chairman of Jovono
1 2 3