Others can answer as well, but will share some Pros and Cons:
Pros / Neutral:
- Require zero social proof. In fact, I sort of prefer there isn’t much. I don’t care which accelerator you went through, where you worked, where you went to school, or who the co-investors or angel investors were.
- Will “lean in” a lot. I am happy to take the entire round, even if it is a relatively high % of the fund. I am OK investing 5% of the fund in the first check. Most folks only want to do 1–2%. I want to buy all the shares I can up front.
- I am a high-conviction investor. I believe all my investments will be pretty darn successful. I do not bet on the assumption some will make it and others won’t. So far, zero have failed (although two had immaterial ourtcomes) and the first batch has gone from $1m to $150m in total ARR in 3.5 years.
- I will help you build your first management team. For many startups I’ve invested in, I’ve helped put in first VP of Sales, Marketing, Controller, etc. Ideally, very quickly.
- I have actually done it. Later this won’t matter as much. But in the early days, it means I can give you pretty good advice. At least, I can help you avoid some critical errors.
- I have strong follower VCs. Top VCs have funded almost all the companies I’ve invested in, at much higher next-round prices.
- I can promote you. If you are in tech especially, I can help get you customers and brand equity by promoting you through the #1 platform in SaaS.
- As long as you give it your all, that’s enough for me. I am OK losing all the money. I am OK making lots of mistakes. As long as you have given it your all, I always believe and am always a backer.
- I don’t care about “being on boards.” I do need to be on the board if I am the largest investor, but I am not in the business of collecting board seats (or observer seats). I am 100% OK leaving the board at $8m-$10m ARR as long as there is a bigger investor on board — if you want me to.
- Prefer more diverse teams. Most of our investors have a female co-founder, and three so far have a woman CEO. The majority of our investments are immigrants and/or founders from other countries. I have performed the best as CEO where I had the most diverse teams.
- I take it all personally. I put everything in. The best investors view investments a bit more dispassionately. This means my feelings do get a bit hurt sometimes.
- You may not like my advice as much as you approach $10m ARR. Ideally, I transition off boards around $10m ARR. By then, the advice you might cherish at $1m becomes less interesting at $10m ARR. You’ll feel like you’ve made all the mistakes already. You probably could write SaaStr yourself at this point.
- Limited tolerance for hiding the ball, and baloney. I know you will miss a month, a quarter, and even a year. But if you try to hide the ball or pretend otherwise, I start to lose confidence.
- You have to want to work with me. Life is short and I only want to work with CEOs I’d work for. If you don’t really care who funds you, I am not the right choice. This stuff takes too long, and you really don’t make enough money off most investments (if any).
- You can’t only go 90%. If you aren’t willing to give it 100%, I will drift away. But if you give it 100%, any outcome is A-OK by me.
- Don’t invest pre-revenue. Unless I know you personally, I won’t invest before you have 10 Unaffiliated Customers or at least $8k-$10k a month in MRR. Others will. That’s just not me.
More here: SaaStr Fund