Utilities Tech Outlook Weekly Brief
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How do you work with the companies in which you invest? Tell us about your investment style.
Shahin Farshchi, Partner, Lux Capital
My investment style is to teach the founders, which involves driving their talent and leveraging niche technicality to build or conquer market opportunities. We aim to be mentors to the founders to help achieve their maximum potential. Also, we assist them in recruiting, building strategies, and future financing. We stand by them as they seek our partnerships on a strategic and financial aspect.
How do you differentiate between the opportunities that you see?
The way we differentiate is by understanding how we can be a value-add to the company and founders. The first question we ask ourselves is: what is our unique perspective as it relates to the market and the technology that’s being used to achieve the dominant position in the market. Next, we focus on how we can bring resources to the founders in order for them to be successful. So we set apart by understanding what the potential synergies are and matching those opportunities with our own skill-set and resources to optimize the synergies.
What are the key attributes you look at when evaluating a deal?
We look at the founding team, level of cognitive diversity in the team, the team that compliments one another and is aware of their shortcomings. Then, we use their ability to help them overcome the challenges that they would face in the future. In addition, we focus on finding the right technology or an asset that could give them an unparalleled competitive advantage. Last, but foremost, we look for the potential to build a company that is valued by the private and the public market.
How do you work with clients post investment?
•Start to build a personal relationship with the founding team and the early employees of the company.
•Try to understand the questions they are trying to answer; the kind of technical or business related challenges they need to overcome. Later on, we aim to encase them with the best people to continue to do that as the nature of the challenges changes over the lifetime of the company.
•Help layout a plan that would help them achieve their milestones.
•Facilitate them to procure required resources whether it is partnerships or acquiring assets or technologies and financial partners who will take them to the next level.
Please elaborate on the challenges that startups will need to address.
I think the challenges revolve around recruiting leadership and maintaining technical and product-level skill-set of these organizations. There is a lot of competition for talent.
Another challenge I would lay down is the fundraising value of debt. There is an abundant amount of capital available right now for the companies that are in the early stage and in the growth stage and companies in the middle stage who have raised around $20 million to $30 million dollars and are still pre-product stage and need another round of financing to be able to enter the market and achieve their target economics.
What would be a piece of advice that you could impart to the entrepreneurs who look on embarking on a similar venture along the lines of your service?
I would advise founders to aim very high, seek to achieve intended goals but while doing that, be wary of what kind of resources you need and what of kind of risks need to be addressed before you can achieve their goals.
