1Mby1M Virtual Accelerator Investor Forum: With Nate Redmond of Alpha Edison (Part 3)

Sramana Mitra: What about stage? Are you investing in concept? Are you investing in a little bit of traction? What is comfortable?

Nate Redmond: Many investors have been using stage as a segmentation that is reflective in terms of process both in terms of sourcing and understanding of a business. We are early stage investors. By that, we mean we tend to be the first institutional investors in the company. In many cases, this company will have raised angel or seed money.

In some cases, that will have been called seed round. In some cases, A round. Most importantly, it’s understanding the type of risk that describes where this company is and the type of risk that we really want to own at this stage. We’re not religious about it being called Series A. We are focused on partnering deeply with an entrepreneur in a way that we seek to become that entrepreneur’s first call.

Sramana Mitra: My question is more about what you want to see in terms of validation to be okay with investing in a company.

Nate Redmond: It’s not about any one specific set of metrics. If you’re a company that is going in and targeting consumers in financial services, we have a very specific thesis. When we talk about trust, it is evidenced by things such as very high MPS and very low churn. MPS affords you the opportunity to build a base of customers without spending lots of money on marketing. Very low churn creates this long-term durable relationship.

Having that context, we will focus more on those metrics as opposed to what is the trailing month-over-month growth, which frankly anyone fresh out of school can look at and make an early assessment. It differs the way in which we would think about a business in a very different space. It is more important to understand how is the pace of learning for an entrepreneur for a company, the mode of development, and how that maps to the long-term vision.

We spend a lot of time and work on our focus on business model innovation on how we understand the whole potential of the business and the path by which we can unlock that full potential.

Sramana Mitra: What about fund size and check size? What sized checks are you comfortable writing?

Nate Redmond: Our core investments tend to be somewhere between $2 million and $10 million. Those aren’t hard ranges but only to provide a bracket. Sometimes we come in a little earlier with a very clear thesis on how we begin to unlock that upside. If we come in earlier, it’s with the hope and intent that we can lead the subsequent rounds and do so in a way that is consistent with the execution pace and our thesis around unlocking that. That maps back to the notion of early stage investors.

Sramana Mitra: How big is the fund?

Nate Redmond: $175 million.

Sramana Mitra: You are based in Southern California. Is the investment preference also Southern California?

Nate Redmond: That really does afford us a view and a set of opportunities to dig in around Los Angeles. We are not a regional fund. We actually don’t believe that regional strategies are sustainable over the long term. Instead, we have really looked through these lenses at the very best companies reflective of our thesis. We have investments in Los Angeles. We also have in San Francisco, New York, and Seattle to date.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Nate Redmond of Alpha Edison
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