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Investing Guidelines

Summary

You should make high-conviction investments behind teams or markets you know well—no spray and pray. Look for opportunities with generational potential (ideally capable of 100x-1,000x+ return). Invest exclusively in bona fide technology companies and maintain a heavy bias towards models that scale efficiently with high margins and moats. Aim to be “first money in” and buy 1% of the company with your initial investment. Text the Powerset team as you find opportunities—we’ll share pattern recognition and help you calibrate.

Full Guidelines

  • Stay focused on your company and back teams or markets you know well. If you’re investing outside of your domain, you should be close with the founders and know they’re exceptional.
  • Look for opportunities with generational potential (ideally capable of 100x-1,000x+ return). You have limited time to support other companies—choose wisely.
  • Invest exclusively in bona fide technology companies and maintain a heavy bias towards models that scale efficiently with high margins and moats. Specific categories to avoid: CPG, pure e-commerce, pure media and lifestyle businesses. You should also avoid pure therapeutics and pure gaming.
  • Focus on Pre-Seed and Seed rounds and target an average pre-money valuation below $20M. Aim to be “first money in” and buy 1% of the company with your initial investment. That said, exceptional companies can justify higher valuations or lower initial ownership.
  • Don’t chase companies just because other people are investing. Trust your own conviction.
  • Approach bridge rounds with caution; they’re often a sign of weakness. If a company is actually exceptional, insiders will get greedy and try to box out new investors.
  • Make sure companies will have at least one year runway with your investment. After you invest, de-risk companies by helping them secure Tier-1 follow-on capital.
  • Text us as you consider investments to stress test your thinking.
  • Ask for pro-rata rights. You can take pro-rata from your fund while it still has capital—and we have additional capital available for breakout companies in your portfolio.
  • Invest in standard corporate structures (e.g., U.S. C Corps). Maintain a preference for Safes or preferred equity instruments. Convertible notes are okay, but not ideal since they increase transaction costs and slow down rounds.
  • Don’t invest on uncapped terms; it’s bad for alignment and rarely works out well.
  • Don’t chase companies you met at demo days; ideally, you should invest as early as the incubators themselves.
  • Inquire if you’re considering investing in a foreign corporation or other non-standard structure.

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