How investors choose startups: an interview with Chasing Rainbows
In the fast-paced and cutthroat world of entrepreneurship, where startups emerge as the catalysts of innovation, investors bear the critical responsibility of identifying the next wave of groundbreaking ventures. The process of selecting startups for investment is an intricate dance between art and science, guided by a unique set of criteria and instincts honed through experience. Our team from privateequitylist.com asked Patrick Driscoll, General Partner at Chasing Rainbows, about how they choose their ventures.
Tell me about your fund, what do you focus on?
Chasing Rainbows is a venture capital firm led by the LGBTQ+ community, passionately dedicated to investing in early-stage startups also led by LGBTQ+ entrepreneurs with proven traction. Our distinctive focus on the LGBTQ+ community serves as a powerful catalyst, generating a flywheel effect that propels success for our investors, portfolio companies, and their employees, fostering generational wealth and a lasting legacy.
Why do you think it's important to support such businesses?
The LGBTQ+ community currently receives less than 0.7% of VC funding, and sadly, many face obstacles in raising funds from friends and family due to bigotry after coming out. Nevertheless, LGBTQ+ founders bring remarkable tenacity and resilience due to the adversities they have overcome, resulting in exceptional leadership, innovative ideas, and groundbreaking startups.
Remarkably, companies like OpenAI, Palantir, Paypal, Madison Reed, SiriusXM, Presi, and Turo have all been founded by talented individuals from the LGBTQ+ community. At our core, we aim to identify and support the next generation of visionary leaders who will revolutionize the world through their game-changing tech and services. Together, we can foster an inclusive and empowering environment for innovation to thrive!
Top-3 reasons why you say "no" to startups
- The idea is not venture backable
- The market is too small
- The founders don’t fit our thesis
Tell me more details about the close you're working on. What business is it? Why do you believe in them / choose them? Some technical details: ticket size, for how long have you been negotiating?
We are currently engaged in negotiations with FULL Community, a company specializing in AI-enabled carbon capture technology to address climate volatility. Our strong belief in the company is predominantly driven by the impressive founder's track record, notable successes, and extensive industry connections, which inspire confidence in her ability to drive significant positive change.
Moreover, we recognize the global potential of her offering, as the total addressable market is substantial, offering ample opportunities for scalability. The company's traction is equally noteworthy, with several significant deals already closed, and promising prospects of securing international contracts in key regions such as Europe and India.
We are genuinely excited about the possibilities this partnership holds, as we continue to explore opportunities to support and collaborate with FULL Community in their mission to make a meaningful impact on the global climate challenge.
Why did this company choose you as their investor?
Gold Hood, the founder of FULL Community, stumbled upon Chasing Rainbows during a Google search for LGBTQ+ investors. Taking a leap of faith, she reached out to us, and fortunately for us, our team promptly connected with her. At Chasing Rainbows, we make it a point to engage with founders, whether they come to us through warm referrals or cold inquiries.
Having collaborated with Gold and becoming the first investor in her company, here's what she had to say about her experience with Chasing Rainbows:
“Early-stage success is very dependent on the founding team having the right connections, the right advice, and the right personal support. Chasing Rainbows was critical to our rapid growth, from suggestions to introductions. We flat out couldn't have thrived without the interactions with Ben and Patrick which made all the difference. There's no one I'd rather have on my cap table,” - Gold Hood, Founder and CEO, FULL Community
What can you say to those who would like to get investments from you?
We love to ask about the three T's: Team, Traction, and TAM (Total Addressable Market). As a founder, you should be ready to cover each in-depth and be ready to answer questions about them.
Additionally, to ensure your company's success, it's crucial to possess a crystal-clear understanding of why you are the best person for the job. Cultivate self-awareness, acknowledging both your strengths and weaknesses, which will empower you to make informed decisions and maximize your potential.
Deep knowledge of your industry is paramount, and continuous curiosity drives growth. Never shy away from asking numerous questions to stay at the forefront of developments.
When presenting a vetted or strong pipeline, substantiate it with Letters of Intent (LOIs) to demonstrate genuine commitment and progress. Don't overlook completing a comprehensive competitive landscape and market analysis, as they offer valuable insights for strategic decision-making.
Remember, being well-prepared is vital. If I can quickly find information about your competitors during our conversation, and you aren't aware of them, it can raise concerns. Emphasize the importance of being informed and proactive, as it positively impacts your company's image.
Top-3 advice you can give to those who're looking for funding
- To ensure you and your team are well-prepared to pitch your company successfully, start by conducting a SWOT analysis for each key player, including yourself. Understand the team's strong suits and be clear about why each member is the best fit for one another when discussing your team with potential investors.
- Craft a compelling narrative that precisely conveys your company's vision, problem statement, solution, and other essential aspects of your pitch. Test your pitch on someone in your personal network who has no ties to the company and ask for feedback. If they struggle to grasp your message, work on clarifying and refining your presentation to make it more compelling and understandable.
- In your Go-to-Market strategy, express a clear vision of the future. Outline potential exit scenarios and your goals for different time frames: 6 months, 1 year, 3 years, 5 years, and beyond. While these goals may evolve, having a well-thought-out plan for scaling and growth demonstrates your strategic thinking and long-term vision for the company's success.
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