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Defining Early Stage Investing

There is no one-size-fits-all definition of what “early stage” means and it varies among industries. Typically, it means a VC firm is either the catalyst for starting a company or the first, and often only, institutional investor. Early stage investing involves a few other key themes detailed by Brady Bohrmann of Avalon Ventures.

Defining Early Stage Investing

  1. 1. Defining Early Stage Investing by Brady Bohrmann, Partner at Avalon Ventures
  2. 2. About Brady Bohrmann Brady has over 20 years of experience as a venture capitalist and operating executive in both information technology and biotech. His focus is on early-stage investments and backing talented entrepreneurs. Throughout his venture capital career, he has worked with over 75 companies. He currently is a director or observer of many Avalon portfolio companies, including Backupify, Chart.io, Cloudant, Inc., Conjur, Indix, Juliet Marine Systems, Kaltura, Kinvey, Memrise, Nanigans, Pingup, Redbooth, Selectable Media, Simulmedia, The Happy Cloud, Twinstrata and Vook.
  3. 3. One Size Doesn’t Fit All There is no one-size-fits-all definition of what “early stage” means to us, and it varies between industries. Typically, it means we are either the catalyst for starting a company or the first, and often only, institutional investor.
  4. 4. Early Stage Investing Involves 3 Key Themes
  5. 5. 1. Thesis-Driven Investing
  6. 6. Thesis-Driven Investors As thesis-driven investors, we seek out opportunities that align with our point of view on emerging markets.
  7. 7. Thesis-Driven Patterns We look for patterns and target waves of innovation and change that are both large and timely. Over the years, we’ve pursued a diverse set of these, ranging from digital media to Internet infrastructure, consumer services to technology, and cloud-enabled services.
  8. 8. an example When Avalon Ventures first invested in Cloudant in 2008, the idea for the company had originated with three MIT physicists who were moving around multi- petabyte data sets. Frustrated by the tools available for managing and analyzing large amounts of data for their research, the founders built a distributed, fault-intolerant, globally scalable data layer on top of the Apache CloudDB.
  9. 9. example (cont.) Their vision for Cloudant fit neatly with our thesis that cloud computing represents a major shift in computing infrastructure and increasingly will be the preferred delivery method for software and systems.
  10. 10. 2. Backing and Building Early Teams
  11. 11. Company Creation We’re attracted to the company creation process where small teams of people are attacking big problems and opportunities, often in unorthodox ways.
  12. 12. Team Building Successful founders and managers, from first-timers to repeat entrepreneurs, are driven, relentless, and able to recruit and retain great people.
  13. 13. an example One of our portfolio companies, Simulmedia, was founded by a serial entrepreneur, Dave Morgan, in 2009. Previously he founded TACODA and Real Media, demonstrating an uncanny ability to attract and motivate highly diverse and talented teams of people. Simulmedia is a product of online and data methodologies and lessons learned from Dave’s prior companies.
  14. 14. 3. Risk Management vs. Risk Taking
  15. 15. Risk Management Defined We consider ourselves risk managers, not risk takers. As early stage investors, we are willing to take on investment risk for the potential to gain a multiple of invested capital; however we need to be convinced that there is a big data idea in play and that there is something special about the company and its ability to execute.
  16. 16. Risk Management Partnerships Avalon has a thirty-year history of creating life sciences companies. Recently, we partnered with Glaxo Smith Kline to fund ten new companies. GSK looks to Avalon to source, launch, and oversee the development of these companies, which GSKs financial development contributions significantly reduce the financial and development risk inherent in early stage biotech companies.
  17. 17. Risk Management in Action The first company launched from our collaboration with GSK is Sitari Pharmaceuticals, which is developing ways to combat celiac disease. Sitari was sourced by Avalon and is based on intellectual property licensed from the Stanford University lab of Charles Khosla.
  18. 18. Over 100 Investments Later Spanning many technology boom and bust cycles, Avalon has: • Doggedly stuck to its focus of investing in the early stages of company creation • Stuck to the exact strategy that has helped build great companies and consistently driven top-tier returns to our investors.
  19. 19. Learn more! Visit http://avalon-ventures.com/blog for more actionable advice on early stage startups, VC funding and other entrepreneurial tips.

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