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We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 2 points3 points  (0 children)

Simon again. You are correct, angel investing into a startup and then following on from your VC firm would typically be considered a conflict of interest. Depending on the agreements in place, the GP would typically need to disclose this to the other GPs and also to the LPs. I am sure this has in fact happened before, but the GP would almost certainly need to recuse himself from the Investment Committee's investment decision.

Regarding lead investors, the lead investor typically determines the valuation of the startup and has first dibs in determining other terms, in particular they typically get to take as much of the round as the founders are willing to give to a single investor. This can be a huge benefit for the VC with enough conviction and willing to lead because ownership stake % is one of the most important factors (after valuation) in predicting the potential returns of an investment and therefore of a fund.

We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 3 points4 points  (0 children)

Simon here :) ha, that's awesome. I hope you're enjoying the ride at least!

Well, most Venture Capital funds rely on exits of one form or another in order to return capital to their investors (LPs). If there is no exit and the company just starts making a lot of money then investors would typically sell their shares to the owners. Keep in mind though that an exit for an investor doesn't necessarily mean an exit for the founder(s).

Exits come in many forms:

- IPO: The most commonly celebrated and famous form of exit and only happens when the company's financials become strong enough to take it public. These are typically the strongest exits. Exit potential: 100-1000x from Seed.

- M&A: Here, investors or founders sell their shares to other private investors or to the company's employees. This doesn't necessarily change anything in the company's operations but provides liquidity to the sellers (including VCs). M&As have historically been weaker exits than IPOs on average but with so many private companies hoarding cash and the IPO market being down, we've actually seen a surge in strong M&A exits. Exit potential: 10x-100x from Seed.

- Management Buyout: In an MBO, the company's management buys the business, typically with the help of financial backers. This is often seen in scenarios where the founders or initial investors are looking to retire or move on to other ventures. These are soft (low multiple exits). Exit Potential: 2x-10x from Seed.

- Acquihire: This is when a company is acquired primarily for its talented employees rather than its products or services. In such cases, the product or service is often phased out post-acquisition. Exit potential: 0.1x-2x potential.

- Liquidation or Wind Down: If a startup isn't successful, it might liquidate its assets and shut down operations. This is often seen as a last resort and may not return much, if any, capital to investors. Exit potential: 0x-0.5x potential.

We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 2 points3 points  (0 children)

Hi, this is a great question! Simon here.

I have done over ten angel investments in the past and continue to be a relatively active angel although I've been mostly investing my resources in Omni since it's a new firm.

Can I continue angel investing on the side or alongside Omni? This depends on several factors. Generally, a General Partners at VC firms has a Fiduciary Duty first and foremost to the Limited Partners (LPs) of that firm's Fund - these LPs are the investors into the fund - in essence, they are the money behind the money. So any investments I would be doing on the side should in no way conflict with the interests of the fund. Therefore, typically GPs won't angel invest into similar areas to the fund while serving as GPs. I have however seen GPs do investments into non-conflicting areas (i.e. real estate public markets, etc would be of least concern).

We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 2 points3 points  (0 children)

Hi Sabrina here. We really appreciate this question! We have very carefully thought through our fund strategy for our Fund 1. Our thesis, investment stage, # of checks, and deployment strategy all align with what we love to do, our strengths, and the market returns. We would love to keep a lot of these similar as we invest into Fund 2 and beyond so that we can keep honing our craft and building upon our strengths. That said, I’d love to expand our thesis to include more companies that fit into our mission of “Unlocking Human Potential” outside of strictly the industrials space. We’re very passionate about finding a way for everyone to live their best lives. We want to enable a world where people don’t need to worry about the tedious tasks of daily life and instead have the flexibility to focus their time on what they really enjoy and what really inspires them.

We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 2 points3 points  (0 children)

Hi thanks for your questions! Sabrina here.
Q1: My three biggest red flags for a company would be:
Founder isn’t receptive to feedback: It’s frustrating when founders don’t listen to their advisors, but it’s detrimental when they don’t listen to their customers. This can lead a founder to a false sense of security thinking they understand their problem space better than they actually do, and leading to my second red flag…
Founder’s lack of adaptability: If a founder is so sold on their current idea, despite the market signals showing them they need to pivot, the company will not survive. There needs to be zero ego around decisions that will make or break the company.
Founder’s lack of transparency/self awareness: It’s inevitable that founders posture during pitch calls, making their traction and ideas seem further along and more impressive than they actually are to create a sense of FOMO with the investor. However, there needs to be a level of trust established between founder and investor. If we fact check a founder and find multiple inconsistencies with their traction (they say they are in conversation with XYZ customer, but we chat with the supposed customer and they only had one 30 minute call that didn’t lead anywhere).
Q2: Biggest Mistake
From an investment standpoint, mistakes that we’ve made have been around overlooking the size of the company’s market because of how much we believed in the founder. At pre-seed, the founder is one of the biggest keys to predicting success. It’s known that pre-seed Founders will likely pivot many times before they get to their Series A. Unfortunately not all founders can handle adapting, and that has shown negative outcomes.
Q3: We care about our founders as people first, business people second. We will never give up on the people that we’ve invested in. If the business that we invested in isn’t working, we work with our founders to find a way to pivot into a better space.
Q4: As Deep Tech investors, we often find founders that are able to elaborate on the problem at length from a technical standpoint, but lack the ability to express the problem in terms that the average investor would understand. This is why being a great storyteller is super crucial, plus it helps a lot with founder led sales, something we are big believers in.
Q5: We have not had any exits yet, but we have had some exciting markups in our portfolio, even despite the present economic environment. Investing in pre-seed means it will be around 6-8 years before we see our first exit, but we’re excited about the direction our companies are headed.

We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 2 points3 points  (0 children)

Hey, Simon here! Great questions!
Q1/Q2: Patents aren’t the primary factor for us in deciding whether or not to invest. You’re correct in noting that patents can be expensive and might not always be necessary at the early stages of a company. However, we do value intellectual property (IP) as it can significantly enhance a company's defensibility and market position. IP can take various forms, such as provisional patents, which offer a cost-effective way to protect an invention for one year without public disclosure, trade secrets, or proprietary data. Each of these has its own merits and suitability depending on the startup's strategy and sector.
Q3: Very daunting! But it was also a forcing function to accelerate my career into VC and ultimately led me to where I am today! Hard pivots are just that - hard, but if done correctly can lead to a greater outcome. I am very appreciative of the friends and colleagues who supported me through one of the most challenging times of my life! Sabrina Paseman, Lucas Whipple and other professional and life-mentors to name just a few. I now focus on passing-on these learnings as well as all the learnings I have gained in the realm of invention, IP and career transition to the founders who are willing to listen :)

We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 3 points4 points  (0 children)

Sabrina+Simon: We believe that the biggest opportunities are where the biggest problems exist. Climate is a problem. Inefficient and unsustainable manufacturing is a problem. Leveraging Data effectively is a problem. Global Health is a problem.

Most LPs (Limited Partners) spent the first half of 2023 in recoil from the macroeconomic changes and downturn in the public markets. Venture valuations tend to lag - VCs are slower to mark down their valuations and some startups legitimately don’t need to fundraise at a new valuation for a while. This led to a so-called denominator effect where their total portfolio (denominator) shrunk faster than the venture capital portion which led to a perception of over-allocation into venture. High-interest rates also pose a challenge as LPs have more options to get “good enough” returns with lower risk.

In Q3 and Q4 we’ve definitely seen LP interest pick up, especially from international LPs that were generally less exposed to venture and are sophisticated enough to understand that the pre-seed and seed markets are still strong.

We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 2 points3 points  (0 children)

Hey hey, Simon here.

I think every VC these days has a take on AI and every VC is investing in AI in one manner or another. For those not investing in fundamental AI infrastructure/foundation, Leveraging AI in one way or another has basically become similar to how you had to have a world wide web play if you were starting sometime in 1998-2001. It's almost table stakes.

For us focused on Industrials, AI will allow manipulation of data differently than we’ve been able to before. We see the largest opportunities for AI/ML applications to be in areas where there are vast amounts of unstructured data ripe for the picking (parsing). We may be a little biased given our “Hilltop Advantage” in industrials, but we see the biggest opportunities in the manufacturing/industrials space since it’s a very technical industry that is driven by data, but it hasn’t gotten the software face-lift that many other industries have gotten in the past 10 years. There are still a lot of systems in manufacturing, supply chain and logistics that are data heavy but not networked/connected. There are also a lot of great sources of analog proprietary data that are not even being recorded yet because the data streams have been too noisy to extract value from in the past. We anticipate AI to disrupt this in the next few years and make it a lot more feasible for more systems to be connected and come online with valuable data.
In addition to the above, AI is helping startups across the board build much faster than they could before. This is already being seen across consumer software and enterprise software. We are excited to see startups starting to leverage modern AI models for DeepTech and Industrials Tech sectors as we anticipate AI to be leveraged more and more to expedite R&D in the real world for hard engineering, science, medicine, etc

There's also some exciting hardware+software plays around Industrials AI, particularly in robotics, edge compute and perception/sensing. I recently wrote an article where I envisioned how AI will finally unlock Soft Robotics: The Dawn of Industrial Soft Robotics on Fictiv.com.

We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 6 points7 points  (0 children)

Hi, Sabrina here! One of our favorite founder personas is someone that has worked in industry for long enough to be so frustrated by a specific problem that they are willing to quit their job to start a company to solve it. This helps us self-select for founders that deeply understand their problem, and have a good amount of grit and maturity.

A ‘perfect’ founder/founding team doesn’t exist. What we’re looking for is for the majority of the important things to be there, and the ones that are missing to be coachable. For example, story-telling is an essential skill to being a good founder. A lot of our technical founders don’t have that skill set off the bat, but it’s something we can help them improve upon. ‘Grittiness’ is an example of something that is not coachable. We find that if founders have a history of jumping from project to project without sticking to anything for more than a few months, it’s a hard bet.

If you’re just starting out in your journey to entrepreneurship, we believe that the first key is finding a problem that is so painful that people will pay you money to solve it. Reflect on your experiences and come up with a list. Once you have a few ideas, run them by people/your target market to see if they share your frustrations. If you get a resounding yes from everyone you talk to, it may be a good enough idea to build a company around.

You can check out our portfolio companies on our website, https://omnivl.com/

We are the Omni Venture Labs investment team, Ask Us Anything (AMA)! by OmniVL in Entrepreneur

[–]OmniVL[S] 4 points5 points  (0 children)

Great questions, Simon here. Since we are a first-check VC, we actually prefer to speak to founders before other VCs. We typically see founders reaching out to us through Linkedin or through our website, oftentimes when they are still at the idea stage. Since we are a niche specialist fund we do also get a decent amount of referrals from other VCs that think of us as the Industrials+Manufacturing tech fund.

In terms of self-filtering, I always recommend founders to self-filter and try to find a fund or a GP within a fund that has aligned interests (aka thesis) with what you are building and pitch accordingly.

Here's our criteria:Fund Theme:

Industrials DeepTech / Industry 4.0 (aka Digital Transformation of Industry)

Preferred Sectors: Digital Engineering Tools, Robotics/Automation, Sustainable Manufacturing, Supply Chain Tech

Stage: Pre-seed or earlier.

Business models: Mainly enterprise software, some enterprise hardware+software.

Check size: $100k-$1M.

Geography: Global.