Who is Sound River Ventures, LLC?
Sound River Ventures (SRV) is the vehicle through which I invest in start-ups and commercial real estate (I am a start-up myself). SRV invests its own capital so I take a very disciplined approach to investing; as such, I will only invest in businesses that meet my thesis. In addition to that, I syndicate any investment opportunities through the Angel List platform. When combined, you can start to see that our syndicate limited partners (LPs) only see deals that SRV is willing to invest in personally and have been vetted.
As far as choosing the name, our location is the story. We are located where the Connecticut River meets Long Island Sound located in the quiet, beautiful town of Old Saybrook, Connecticut.
What is your investment thesis?
My discipline is to follow these four high conviction themes:
1. Play to my strengths
• Financial Technology (FinTech) is a no-brainer for me. With over 20 years in the financial sector, most of that time as a senior executive, I do have a certain expertise. Furthermore, I have studied FinTech at both Harvard and The University of Hong Kong. Whether that be payments, e-commerce, wealth management, cross-border remittance, or something else, this is a space we know well.
• Insurance Technology (InsurTech) is another sector of interest. Life insurance, health insurance, and property insurance all have room for disruption in underwriting processes, distribution, claims processing, speed of the transaction, and customer service. An argument can be made for InsurTech to be grouped with the FinTech ideas above, but I view them as a separate group.
• Health Technology (HealthTech) is so critical considering the global pandemic. This is an opportunity so huge for everyone but the risks to capital are high, hence the discipline around the other themes. Following high conviction themes makes sure we are discerning about which HealthTech businesses to present to investors.
• Education Technology (EdTech) is something I’m very interested in. People want to learn and they want to learn at their own pace in engaging ways. The world’s developing economies will continue to grow, hence the growing need for education. The opportunities in education are endless.
• Within these high conviction themes, are there any markets or geographic locations you are interested in?
• We are most interested in markets in the northeast US and Latin America. We will look at businesses outside this area, but the value proposition must be unique rather than a copy of an industry leader.
2. Invest in the founder
• Spending time with the founder is so important to get to know each other. I need to feel confident in the founder to present his or her business to my LPs
• I’ll want to invest in a founder who can help me understand the business model and the distribution model to assess its growth prospects
• I always want to know how much time and energy the founder has put in, and will continue to put in, to realize their vision
• Enthusiasm and excitement are critical success factors. I’ve found there is no substitute
• I am interested in founders who’ve had success in the past. Have they had success in past endeavors (whatever they may be)? Have they have been through fund-raising, scale-up phase, the hiring process? That kind of experience cannot be underestimated.
• The subject matter expertise is also critical. I want to know if the founder has an ‘idea only’ and needs to hire technical expertise, or if they can develop the product themselves.
3. Understand the business
• Obviously need to know the numbers and drivers leading the business forward.
• I must have a clear understanding of the mission of the business; I want to know the KPIs, milestones, and risk factors
• I love hearing about the past, present, and future. Were there any lessons learned that will help future decisions?
• The founder needs a clear understanding of what the latest round of funding will be for, and why. We also talk about the next phase of growth so we can anticipate some strategic hires and other critical spending.
4. Software platforms that can scale
• Platforms are a business model that can scale, and scale quickly. There are a number of different types of platforms that I find interesting n the context of my expertise, including technology, networking, content sharing, data harvesting, and utility platforms. There are other types, but these have been the closest fit for my area of expertise that I’ve seen.
• The incremental costs of scaling software is virtually zero, and profit margins can be large. That is a very intriguing business to present to our LPs.
• Talking through the rapid growth that comes with scaling up. We need to understand that the next stages of growth are anticipated.
Important to note: an investment opportunity must meet all four themes for us to consider investing.
Where can SRV add value?
SRV can add value in a few ways. Let’s categorize them as fund-raising, asking questions to help sharpen the value proposition, and subject matter expertise. Aside from assisting the founder in raising financial capital, sometimes we can add value to the founder with intellectual capital via asking insightful questions and offering subject matter expertise. Other times we can act as a strategic coach. And there are still plenty of examples of where the chance to add value is not yet determined. That is totally fine if we all agree that the outcome we all want is for the founder to achieve their vision.
Why did you start SRV?
This is a simple answer. I love the financial services sector, I truly enjoy working closely with entrepreneurs, and I am fascinated by what the future can become as very smart founders realize their vision.
What information does SRV gather about the businesses you invest in?
My promise to my LP’s is that I will gather as much information as I can about the business opportunities and add value to the founder where needed. Here is a summary of what we want to learn about each company and founder. I think that the founders and SRV both benefit from this due diligence.
1. One line summary of the business
2. Introduction
o Give a quick overview of what the company does so I can briefly explain to the LPs why I am syndicating the deal.
o Is there a similar product or service already on the market? Do you have incremental improvements? 10x improvements?
3. Problem/Market/Segment/Industry
o Explain the problem the company is trying to solve, as well as the general market/segment they’re in. Here, I am looking to understand the company’s mission so I can clearly articulate it to the LPs.
o We want to talk about: What is the company solving for? Why is this a big opportunity? What is unique about this approach? What is the difference in technology/business model compared to other attempts? Why now?
4. Business Model/Traction
o This theme is very important to investors because they want to see growth and a runway toward revenue and profit expansion.
o We ask: What is the company’s business model? How do they plan to generate revenue and what are their costs? Is the company performing well? Do they have users or revenue? What has been achieved? What are the next milestones?
o What is your scalability? How fast are you able to scale? What needs to happen?
5. Competition
o We want to talk with the founders about a 360 view of the competitive landscape. Give an overview of the competitive landscape. If there are competitors, how do they differ? If there are no competitors, do you anticipate that changing or can you provide context for why that might be?
6. Founders & Team
o As stated in my investment thesis, SRV invests in the founder. We want to learn as much as we can about the founders and the team. What professional experience do the founders have? Have they started companies previously, do they have successful exits, have they raised money in the past? Do they have experience building teams? Do they have an unfair advantage? Have they made key hires with specific domain knowledge? When possible I like to include bios on the founders or founding team.
7. Funding
o How much has been raised so far? Who are the other investors in the company?
o Who is investing in the current round? What are the terms? Also, it will be very helpful to mention the name of the investors in the current round in the memo - those who have already signed. What is the purpose of this raise?
8. Runway
o How many months until your next round?
9. Press
o Include links to any interesting press articles on the company.
o Need a downloaded copy of the deck and the executive summary from the deal room?
What check size do you typically write?
SRV is a start-up, too. And SRV is a syndicate where we have many LPs contributing to a total. That said, SRV will be investing alongside tier-one firms and will take an allocation of $100k or more.
How can someone join the SRV syndicate as an LP?
As mentioned, my syndicate is on the Angel List platform. I expect to present about 20 investment deals per year to the LPs ranging from FinTech, InsurTech and EdTech. I might present a company outside those themes on a rare occasion. When I do, I will give a thorough explanation as to why. Join the SRV syndicate here: sound river ventures
My network sources deal opportunities to us. I put in the legwork of interviewing the founders, understanding their vision, and assessing the potential investment prospects. I do plan to syndicate all my deals.
