“What’s your investment criteria?”
We got asked that a lot when pitching the idea of an angel fund. The question broke down into two components: “What rounds do we invest in?” and “what sectors do we invest in?”. The questions were delivered with a presumption that we should choose a specific round and sector e.g. Seed round Fintech and IT companies. The idea of restricting our investment universe into a specific sector and round seemed unfitting for us. While PEs and VCs might be looking for a min(revenue) and min(growth+profitability) in sector XYZ due to funds restrictions, we are not bound by such investment agreements. Our difference with a general equity investor is that we invest from our own balance sheet. We have no outside pension or private funds which could dictate our fund’s investment universe and life cycle.
Having less bureaucratic restrictions opens up a lot of doors. Of course, there have to be some conditions but we believe that the restraints should not come from economic indicators or third-party agreements. To us, the conditions are more business-related. First, we try to understand if the business solves a concrete problem. Second, If we can see the problem which requires a solution, we move on to further questions, for example: “do we understand the business?” and “is change inevitable?” etc.
Our investment criteria
Our investment criteria are business and people-centric. We look for founders that are dedicated to changing things instead of hunting for glory. This boils down to us believing that honest hard work is the right way to do things. In our experience, hard work and glory hunting have a negative correlation (maybe not causal). There might be multiple reasons (or just a biased sample), but we rationalize that glory hunters work for the wrong reasons (in our view. Not necessarily a universal truth). Therefore, we have decided to invest in founders that stay out of the spotlight and focus on their way of changing the world.
Companies that are able to grow organically are more within our area of expertise. While multiple arbitrage and financial engineering can be a lucrative and ideal way to expand a business, we feel that we do not have the necessary expertise or knowledge to share or guide such a growth journey. For this criteria, we leave the door slightly open. In some exceptional cases when there is no doubt that market consolidation is eventually going to happen and it is absolutely clear that the growth should be attained via M&A we can make an exception.
Even Trado Capital has to sign out from some businesses. These are the gaming and the device industries. We do not simply have the right skills and experience to join the expanding gaming industry. Even tho, the industry is tempting we consider it too hard to forecast for us. For the device industry, we have to skip it as well. Our investments are (mostly) done in the early stage and physical product manufacturing takes too long for us and is too risky for our portfolio.
Our current investments and specialization
The previous paragraphs tried to elaborate that our investment scope is wide. However, nothing speaks better than actions and therefore it is better to introduce to what type of companies we previously invested in. If you want to skip the intro and find out by yourself, you can find the full list of current investments and exits here.
We have made a total of 17 investments in the past decade with 4 successful exits. Out of those six are Marketplace companies, five SaaS, three E-commerce, one Fintech, and one HH service. However, these categories are too broad to give the full picture. If we add a subcategory to our investment will broaden our spectrum to 17 different markets. Thus, our investment universe is quite vast.
Our portfolio consists of distinct companies and concerns might arise that are we just a jack of all trades but master of none? Absolutely not. There is no “one size fits all” – strategy available that can be utilized for every industry successfully, at least we don’t have it. However, we firmly believe that expertise gained in one industry can be harnessed to another industry. Founders want to grow their business while avoiding the largest mistakes. We can guide you in internationalization, growth, IPO, etc. and the guidance we give is from personal experience.
Please find more about our investment philosophy and criteria here. If you are missing the story behind Trado and our introduction please click here.