Seeking advice on investor profiling and structuring for a unique opportunity: As an independent sponsor, I've submitted an LOI for a micro-PE deal. The target is non-US domiciled with US-based operations. We're planning a strategic pivot in the enthusiast market, moving toward an e-commerce focus with VC-level return potential. How can I effectively identify and target the right investors for this opportunity? Additionally, any insights on blending PE and VC approaches for structuring the investment would be greatly appreciated.
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1) Is this even a ventureable asset/opportunity? A good test is if the demand of the product is so high that you are constantly in need of capital or if the market structure of the opportunity is a few-take-most market where growth begets more growth.
Institutional venture route expects the company to grow 3x YoY for the first several years. Anything less likely will lead to dead end/wind down or worse, removal of you as the CEO.
2) Are you okay with total loss on your equity? The price of pegging a non-ventureable opportunity into VC hole is loss of control of company and likely total loss on your equity given pref stack. It's an unreasonable high-risk, high-reward game. You'll quickly have a board to answer to, who will likely be breathing down your neck to push for growth at all cost.
3) If and only if #1 and #2 pass the test, structure-wise you can likely do a SAFE (look up YC SAFE) for a small friends-and-fools round or look for pre-seed funds on VC Sheet.com to find investors. Likely, you'll have to network in for warm intros.
Be prepare to meet some very high skepticism as VCs will look at the history of the company and quickly realize it doesn't fit their box.