We seek to invest in both traditional and emerging industry opportunities, with a strong focus on Security, IT (information technology) and technology enhanced business services. We continue to seek new investment opportunities for well managed businesses seeking expansion capital, and encourage visitors to contact us.
What We Look For:
- Proven Management with a Partnership Mentality
- Aligned Incentives with Management & Investors
- Reasonable, Cash Flow Driven Valuations
- A Sustainable Business Model with a Consistent Record of Revenue Growth.
- Strong References, "Non-Beta" Customers.
- Emerging, Growth-Oriented Industries
- Companies seeking less than $3M of debt or equity (though we will consider larger investment opportunities in conjunction with other investors)
What We Avoid:
- True Start-ups - unless under the leadership of trusted proven mangers with succesful prior exits.
- Industries with High Obsolescence Risk
- Hostile Transactions
- Businesses with Prolonged Sales Cycles or No History of Sales
- High Priced Auctions
- Declining Industries & Overseas Investments
INVESTMENT GUIDELINES AND CONSIDERATIONS
Prior to seeking venture capital, it is important that your business is at the right growth threshold and that you are ready for the responsibility of having outside investors.
VentureCross typically invests between $100,000 and $1,000,000 in early stage, non-start up companies. We seek companies that have an established proof of concept, non-beta customers, actual revenue and are poised for growth. We have invested across multiple industries but we have a preference for technology enhanced business services. Previous investments have been made in the following industries: Security, pre-employment background screening, identity protection, online career counseling, fleet logistics, sales automation systems, proteomics, waste recycling, and manufacturing. We tend to avoid investments that require significant capital and regulatory approval in order to get their product to market. Almost all initial investments by VentureCross have valuations that are below $5 million pre-money, but we have made follow-on investments in portfolio companies at higher valuations in conjunction with new investors.
While the merits of each investment will vary, we evaluate your venture according to the following criteria:
Management team. Is your management team experienced, driven, and willing to partner with outside investors? We look for teams of high-quality entrepreneurs with a track record of leadership and performance - either in the company's specific industry or in prior entrepreneurial ventures. We also look at your team's passion for and commitment to the new business idea, and your ability to inspire confidence among future stakeholders, including employees, potential customers, and investors. As we will be working together as partners, your team's credibility is essential. In addition, your team must be open to and comfortable with receiving input provided by outside investors.
Market opportunity. We invest in solutions that address major problems for significantly large addressable target markets. Do you have an identifiable market segment? Is there a demonstrable and significant demand for your solution? Is the projected spending in your product category large and growing?
Go to Market Strategy. Do you plan to achieve widespread market penetration for your products and services? How will you do this as efficiently as possible? Will you create an internal, direct sales team, or will you rely on external channel partners?
Financials. We are looking for well thought out, logical and reasonable revenue plans. Most financial plans do not achieve their revenue projections, so we will evaluate plans under the assumption of a revenue shortfall. Consequently, gross margin and cash positions are critical variables to manage.
Valuation. We typically invest in pre-money valuations that are below $5 million. The majority of our deal valuations are in the $2.0 million to $3.5 million range. A key reason for this is that it gives the investor the potential for a nice return at a modest exit valuation. It also allows for some protection against future round dilution. It is also in the entrepreneur's best interest to have the valuations of subsequent rounds increasing and avoiding bad will and anti-dilution ratchets.
Use of Proceeds. Funds must be used to accelerate your company's achievement of key milestones that increase the company's value. We often fund activities that include research and product development, building a sales and marketing infrastructure and hiring key executives.
Growth Potential. We look for companies that can grow quickly and manage the scale necessary to succeed. Your company must demonstrate a plan to generate significant profits beyond the initial product idea. Do you have a strategy to achieve multiple sources of revenue?
Competition and competitive advantage. Have you identified potential competitors? Do you understand your company's differentiation points? Will true barriers to entry help your company to maintain a competitive advantage? Your company should have some proprietary features that distinguish you from potential competitors or provide barriers to entry that prevent other companies from capturing your customers with a similar offering. Attributes that convey competitive advantage include intellectual property protection, exclusive licenses, exclusive marketing and distribution relationships, strong brands, scarce human resources (i.e. knowledge and skills), and access to scarce raw materials. Have you protected your intellectual property? Have you performed an exhaustive search to be sure that you are not infringing on patents or trademarks held by others?
Cultural Fit. Our network includes experienced executives and accredited individual investors with significant executive experience in a variety of fields. One of the benefits of working with VentureCross is the network that we can provide to our portfolio companies. As such, there must be a fit between members of our group your idea, and your team.
Technology. We prefer investments with a differentiating or proprietary technology component. However, we approach highly complex, esoteric technologies with caution. The concept behind the technology must be proven and verifiable. Further, we avoid science projects that don't demonstrate a clear path to commercialization. Any breakthrough innovation must be accompanied by a strong business plan.
Exit strategy. A clearly articulated exit strategy - how we as investors will extract returns - is essential. For example, do you plan to sell the company to an established corporation in your industry? Or will your exit be through subsequent rounds of financing - venture capital or the public markets? We are not just interested in the strategy you select, but more importantly in the how - the operational strategy that shows specific steps you will take to achieve the exit.