On a recent diligence call with an entrepreneur whose startup we were interested in funding, I was asked why they should take our money over some of the other firms competing to let them invest. The question was insightful and made me like the entrepreneur and his thoughtful approach even more.
As a thematic fund focused on voice tech, VoicePunch sits in a somewhat unique and occasionally lonely place for a fund, as there are not a lot of folks like us. In fact, outside of the corporate investment vehicles like Amazon’s Alexa Fund and similar platform investors, you can count the number of thematic voice tech funds on one hand. During the first few months after launching in early 2019, this meant that at least once a day I was asked the question – “Hey, do you think you are early?”
Invariably the autopilot reply to this interrogatory became, “Yes, we may be a bit early, however it’s somewhat challenging to tell. However, if we were late, it would be obvious to everyone.”
SMART SPEAKERS ARE THE FASTEST ADOPTED CONSUMER TECHNOLOGY OF ALL TIME
VoicePunch’s commitment to voice tech provides a clarifying lens on everything we think about, so there is no confusion about how to spend our time and energy. We don’t spend time looking at businesses that would be interesting to broad market investors, as we don’t want to distract ourselves from what matters in voice and where we don’t think we could add as much value to our portfolio companies if we allowed ourselves to stray too far.
Being 1 mile wide and 1,000 miles deep means that we often see things in voice a few steps sooner than generalist investors might. And those few steps matter for our investments and for our entrepreneurs.
This thematic focus on voice operates like an earthquake early warning system – you might only get 60 seconds advance notice before an earthquake hits, but those precious seconds can make all the difference in the world. There are only a few degrees of separation between investing in the next unicorn and the lesser copy that follows it..
“Do the right things, before doing them right”
For the entrepreneur, the early stages are generally the most chaotic and least predictable of the startup journey. It’s the point in time where the first customer and market validation begins, pivots happen, and the importance of the startup’s strategic decisions generally have the most impact on the whether a startup will succeed or fail, and if successful, how long it will take to reach that success. The importance of doing the “right” things at this stage, greatly outweighs the importance of “doing them right.”
And this is the point in time where a thematic fund, with their deep understanding of the technology and market landscape, can help the entrepreneur as they grapple with the key strategic decisions and directional questions they face, in ways that generalist funds cannot. Specialization matters here in the same way that while your primary care doctor knows how to stitch you up if you get a large cut on your chin, you’d be better of having a plastic surgeon do it.
Thematic funds help startups “do the right things.”
On the flip side, successful generalist investors have a broad base of experience to draw from to help entrepreneurs “do things right.” After seeing how to successfully build a scalable enterprise software organization five times, a generalist fund can be very deft when it comes to advising entrepreneurs on how to do things right.
The key takeaway is that early on, thematic funds can be useful to the entrepreneur as they are deciding which directions, products, customers, and lines of business to pursue. Later, once the business has matured to the point where the entrepreneur is looking at how to scale what is becoming a repeatable business model, the generalist investor may have specific capabilities that can help the entrepreneur grow and flourish.
Photo credits, in order: Elena Taranenko, Activate.
