Some early stage investing lessons courtesy of the market

Being an early stage investor is full of surprises. Every week you learn humbling lessons about how little you know about the world and how bad your ability to predict the future is. 

After nearly 8 years investing across dozens of startups I've had my share of lessons (good and bad) but can still be surprised.

Last week I had three surprises/lessons:

1. The US VC market is so much deeper and less price sensitive than Australia

This isn’t a surprise to me as I'm invested in both markets but the degree of difference on available funding and valuation sometimes is. An AI investment in the US went from ~$10M valuation to 20x that in 2 years with the kind of revenue which would, maybe, justify $10M in Australia. A much bigger addressable market and global enterprise customers/partnerships certainly helps but doesn't fully explain it.

If you are an Australian founder its easy to get valuation envy from seeing all those US valuations but you shouldn't forget there there is also more competition, more investors, a larger market, a higher cost of talent and of course deeper pools of money.

2. Enterprise SaaS is good but B2C can be better

I come from a world where enterprise SaaS is seen as the apex predator of the business model. It certainly has more predictability than many business models but can also suffer from long sales cycles.

I’ve been tempted to get out of my comfort zone and backed some awesome B2C founders recently. They have blown me away in terms of what can be achieved in a short space of time - all growing from a standing start to approaching $10M annualised revenue in a year and still with decent margins. It just shows when you have the right product for the market everything can look easy (from the outside at least).

3. The VC market is awakening to the value of funding women and founders with diverse backgrounds

The company with the highest revenue growth in my portfolio was founded, and is led by, a woman. She has achieved this with amazing tenacity, vision and efficiency. Who even knew you could have revenue of $2M per employee in a startup?

Looking where others aren't is a sensible strategy to find new opportunities and underepresented founders often have more fire to succeed.

All these founders have achieved these accomplishments during one of the most uncertain times for business, and some from Victoria while in lockdown. I'm impressed by their achievements so far and here’s hoping that these and other startup founders all continue to kick goals and change the world.

There are few formulas to startup success (or investing) that will work over an extended period of time. You need to be open to change, conduct experiments, learn and rinse and repeat.

If you want to help us fund the next generation of awesome founders and learn along side us, reach us at archangel.vc (only if you are a sophisticated investor unfortunately).