July 30, 2014
Shaun Abrahamson is a successful early stage investor, tech entrepreneur, and author. Abrahamson has invested in companies like ZocDoc, Refinery29 and Trialpay amongst others startups. His latest venture, Urban.Us, is a network of advisors, investors, and urban leaders that works with early stage companies to focus on smart cities solutions. He and his co-founder Stonly Baptiste, are based in South Florida, and work with companies from all regions of the globe.
Abrahamson shared advice for startups wanting to understand the process of investments and valuations. A must-read for tech founders:
What do you look for when making the decision to invest? What is your process like?
We're focused on startups that can make cities better because we see 3 important trends. First, humanity is now urban – more than 50% of the world's population live in cities and there is no sign that this transition is slowing. Also, since cities account for 70% of emissions, they are going to be the focus of most climate change solutions. Finally most cities are facing funding challenges because of issues ranging from pensions to national government budget custom.
Our filter process:
Do we think you can make cities better? Specifically, can you have an impact in areas like – reducing energy usage and associated climate impact, improving mobility of people and things (faster, better, cheaper), improve service delivery from water and waste to social services and public safety.
Do we think you can scale to 100 cities in 5 years? We use this filter because of previous experience with firms like ZocDoc and observations about scale for firms like Zipcar or Uber.
Then we look at team. Our definition of talent is probably not too different than most, but we like to focus on why people are starting a company and look at how they have demonstrated examples of resilience. We think financial motivation is generally not a good reason to start a company – there are probably better ways to make money.
Finally, we look at the product or service. We're interested in something that can be shipped to an initial group of customer who are willing to pay. But we tend to talk a lot about adjacent possibilities – i.e. what becomes possible once you reach certain points that might lead to new opportunities.
What is typically your bite size? Does this change depending on where the company is based?
Currently $50k. It doesn't matter where companies are located. And we do make intros and will be formalizing and simplifying our syndication process with our community of advisors, some of whom are angel investors too.
When was the last time you made an investment?
We should close one this week :)
So far this year, investment has been relatively low in South Florida. In your opinion, why do you think so?
I am not sure. A lot of the data we see says something different – last few quarters have seen an increase in investment in general and in some areas like hardware, all stages have experienced an increase. The challenge for South Florida or Miami might be more related to reporting and data (how many companies are state that they are based out of Miami or other offices in bigger cities for branding reasons)
What is a common mistake made by startups when they are negotiating terms?
We usually encourage startups not to get too hung up on valuations early on. We're used to doing convertible notes, which can defer this conversation until there is a bit more information at the series A. For the most part, if the teams get through the first few rounds of evaluation we're finding that the teams have been good about picking outside references and benchmarks for terms and valuations. So don't see too many mistakes here.
Who would be invited to your fantasy dinner? (Dead or Alive)
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