STRATEGYMany promising companies initially get off the ground with funding from founders, friends and family, and individual angel investors. This funding may enable a business to incorporate, assemble the core team on a full-time basis, develop their offering, and land their initial customers.
Many of the most promising start-ups, however, find that they require more equity capital just when things are really starting to accelerate, but for various reasons are not interested in, or are not ready for, $5-8 million from a larger venture capital firm.
Rincon Venture Partners fills the need for more modest first-round funding. Our initial investment in a company is typically in the range of $500,000 to $1.5 million and we are typically a company's first institutional investors. We like to see a completed offering that has been embraced by early adopters. We will only very selectively consider seed investments, where significant effort by either a predecessor entity or a university research program will dramatically accelerate a young company’s progress.
We target a geographic region that we believe displays highly favorable supply-demand characteristics for venture capital investing. This region is bounded by San Luis Obispo, CA to the north, and Orange County to the south. We consider investments outside of this area, but generally only in conjunction with strong co-investors who are located near the company.
We are guided by certain investment themes, regardless of sector, which we believe will drive business success. These include: the digitization of communications and content of all kinds; the provision of information technology as a service; the reduction of fossil fuel consumption; and consumer adoption of technology. These themes do suggest certain sectors, such as digital media, technology-enabled services, cleantech, and consumer Internet, but we remain open-minded with regard to opportunities in other sectors. As with geography, we consider investments outside our target themes and sectors only in conjunction with co-investors who have strong relevant expertise.
The greater the fit with our sector and geographic focus, the easier it will be for us to make an affirmative decision regarding an exciting investment opportunity. The further an opportunity is from the “top” of the diamond, the harder it will be for us to make an affirmative investment decision.
INVESTMENT CRITERIA AND STRUCTURE
We look for the following attributes in portfolio company investments:
- Referral from a trusted, informed source
- Highly differentiated and proprietary technology, and/or massive market opportunity with a clear first-mover advantage
- Compelling core team already in place
- Clearly defined milestones and associated financial plan
- Clearly defined routes to market
- Attractive plausible exit strategies
We make investments with the following structure:
- We typically own a minority interest: executives and founders control their companies, and serve as stewards of our investment
- We seek world-class investment partners
- We, along with our investment partners, must own a meaningful interest in each portfolio company (at least 20%)
- We, or our investment partners, hold a Board seat
- Initial investment range: $500,000 - $1,500,000
- Average total investment over a portfolio company’s life: $3,000,000
