Investment Thesis 1.0 - #SupplyChainTech

Author: Brian Laung Aoaeh, CFA

Author’s Notes: 

  1. This blog post serves as a comprehensive users’ guide for startups and startup founders seeking an investment from REFASHIOND Ventures. 

  2. It is an updated version of User Manual: The Early Stage Startups I Want To Hear About Most in 2016 and 2017, User Manual: The Early Stage Startups I Want To Hear About Most in 2017 and 2018, and #UserManual – Send Us All The Early-Stage Supply Chain Technology Startups. 

  3. Certain portions of this version may be exactly the same as in the prior versions. However, there are significant differences between the prior versions and this one. There is no need to read any of the previous versions since each is self-contained.


Table of Contents

  • About REFASHIOND Ventures

  • Our Investment Thesis

  • Definitions: Supply Chain & Supply Chain Technology

  • About The Worldwide Supply Chain Federation

  • Characteristics We Look for in Teams, and Founders

  • Definitions: Startup & Economic Moats

  • Characteristics We Look For in Markets

  • Characteristics We Look For in Business Models

  • The Themes We Are Focused On

  • Our Process

  • Connecting With Us

  • Communicating With Us

  • Things We Believe Are Red Flags

  • Our Commitment To Startup Founders

  • Link to Pitch-Submission form


About REFASHIOND Ventures

REFASHIOND Ventures is a seed-stage venture fund that is being built to: invest in startups developing technology innovations to refashion global supply chains. 

We champion startups and companies refashioning supply chains - across all major industries.

In March 2021 we, Brian Laung Aoaeh and Lisa Morales-Hellebo, launched REFASHIOND Seed, a rolling fundTM on AngelList, and held our first close for the fund on July 1. 

One important thing to note is that REFASHIOND Seed is designed primarily for accredited individual investors who ordinarily would not be able to invest in a traditional institutional fund. The fund is also open to family offices, companies, institutional investors, and other types of investors. The fund is open to US and non-US investors.

We are especially keen to attract investors in REFASHIOND Seed from the ranks of supply chain and technology executives around the world. Our target is to be able to invest between $25K and $750K in up to 5 seed-stage startups every quarter, and to eventually get to the equivalent of a $10,000,000 fund per year, or $2,500,000 per quarter. 

You can learn more about REFASHIOND Seed here. 

We expect to raise a traditional institutional fund starting later in 2021. Note: We are in the early stages of growing REFASHIOND Seed, and our earliest investments will fall in the $10K - $25K range.


Our Investment Thesis

The three philosophical pillars of our investment thesis are;

  1. The world is a supply chain.TM

  2. Software is eating the world.

  3. Disruption creates opportunity.

Here is our one page summary and here is our manifesto.


Definitions: Supply Chain & Supply Chain Technology

Our working definition of a supply chain: “A network of connected and interdependent organisations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users.” — Martin Christopher, Logistics & Supply Chain Management: Creating Value-Adding Networks, 4th ed, Pearson Education Limited 2011, p4

Our working definition of a supply chain technology: “#SupplyChainTech is any technology or innovation that enables and facilitates the control, management, and improvement of the flow of materials and information from suppliers to end users in the context of a network of connected and interdependent organizations working mutually and cooperatively with one another to satisfy the needs and wants of customers or end-users.” — Brian Aoaeh, #SupplyChainTech: What is Supply Chain Technology, and Why is it the Biggest Investment Opportunity of Our Lifetime?

We believe that a perfect storm of irreversible social, economic, technological, and environmental forces, has created an urgent and critical need to refashion global supply chains. This process presents the biggest investment opportunity of the next half-century. We are building a fund to invest in that opportunity.

We’ll invest in startups in the following areas; Supply Chain Management, Supply Chain Logistics, and Supply Chain Finance - across industries. Some of the startups in which we invest will likely be characterised by other people as #DeepTech. All of them will contribute in some way to the attainment of the United Nations’ Sustainable Development Goals.

Our initial focus is on startups based in the United States, and Canada. We will expand our geographic scope as we grow REFASHIOND Ventures.

About The Worldwide Supply Chain Federation

The Worldwide Supply Chain Federation, which we founded in August 2017, is the collaborative, and mutually supportive coalition of grassroots communities focused on technology and innovation in the global supply chain industry. Each chapter is a community of practice that connects the builders of technology innovations for supply chain with the buyers of technology innovations for implementation in real world commercial supply chains. The New York Supply Chain Meetup is its founding chapter.

The Worldwide Supply Chain Federation is the world's first, largest, fastest growing, and most active network of grassroots driven communities focused on supply chain, innovation, and technology. You can learn more here: The Worldwide Supply Chain Federation. Here is our manifesto.

You can check out our Youtube Channel here. Join our community here. Follow @tnyscm on Twitter.


Characteristics We Look for in Teams, and Founders

We look for - we will not learn this until we actually interact with you. But this is what we will be looking for;

  • Teams in which the founders have known one another for a considerable amount of time prior to launching their startup; We look for teams in which the level of trust and respect between the co-founders is high. This reflects our belief that at the earliest stages of a startup’s life, team risk is the greatest risk we must worry about.

  • Teams that will not have difficulty attracting other great people to join the startup; We look for founders who inspire confidence and loyalty from others because they are good at what they do, the kind of people we could picture ourselves working for under different circumstances. We look for people that others outside the startup can come to look up to as thought leaders in their chosen area of expertise.

  • Founders for whom solving the problem that their startup is solving has become their life’s mission and they will work to solve that problem with or without help from outside investors; We look for founders who have an unconventional opinion about the market opportunity they are pursuing, and can explain their position is with evidence that investors can analyze independently. We look for founders who are focused squarely on solving their customers' problems.

  • Teams that can focus on building a simple product that their initial customers love, and who can focus on a niche within which to launch that product. We look for teams that are judicious and frugal in how they deploy the startup’s resources.

  • Founders who value teamwork, and who can become great leaders if they desire to do so; We value transparency, honesty, and openness. We value self-awareness. We like people who are determined and tenacious, who do not give up just because the going gets uncomfortable and things seem bleak.

  • Founders who have a hard time doing something simply because it is what someone else expects them to do; We believe that most breakthrough innovations arise from disobedience. We detest arrogance. We admire confidence. We look for founders who are not afraid to be different. We look for founders who have prior demonstrable experience of good decision-making when things are uncertain and information is incomplete. We do not expect perfection in the early-stages of an innovation being brought to market. We value thoughtfulness and open-mindedness.

  • Founders who lead with integrity and purpose by leading with core values. 


Definitions: Startup & Economic Moats

Our working definition of a startup: “A startup is a temporary organization built to search for the solution to a problem, and in the process to find a repeatable, scalable and profitable business model that is designed for incredibly fast growth. The defining characteristic of a startup is that of experimentation – in order to have a chance of survival every startup has to be good at performing the experiments that are necessary for the discovery of a successful business model.”

  • The first part of this definition is paraphrased from Steve Blank, Bob Dorf, and Paul Graham

Our working definition of an economic moat: “An economic moat is a structural barrier that protects a company from competition; It is an inherent and inbuilt feature of a startup’s business model that dynamically enhances, strengthens, and reinforces its competitive position over time.”


Characteristics We Look For in Markets

We look for;

  • Large markets that could ultimately be served by the startup’s product, even though the initial target might be a small portion of the whole. We look for customers capable of and willing to pay for the product, and who are looking for and eager to find a solution to their problem.

  • Markets in which the pain is acute because the problem suppresses customers’ profits significantly, or because the problem makes users far less effective and efficient than they could be.

 

If currently the addressable market is between $1B and $10B, we want to see evidence that it is growing quickly enough to support the startup’s future goals, and the competition that we assume will quickly follow if the team is successful.

Characteristics We Look For in Business Models

We look for products and business models that:

  • Will benefit from network effects and word-of-mouth marketing as time progresses,

  • Show evidence of developing communities of deeply engaged and highly committed users in either a business-to-consumer or business-to-business context,

  • Can scale efficiently and quickly once product-market-fit has been established - we recognize that this is relative, and will differ for startups with business models that are not pure-play software only, and

  • Can eventually benefit from an economic moat as the startup matures into a company, and the business model becomes established. Note that in the early days of a startup’s growth we are interested in the potential for economic moats to develop, not so much that they already exist. In the early days it is more important to make customers happy and to get potential customers to give a shit about what the startups in which we might invest are building. We think we are uniquely positioned to help accomplish this.


The Themes We Are Focused On

Notes:

  • These themes cut across different industries and sectors. That is a deliberate choice in the way we are designing REFASHIOND Ventures.

  • The technology sector evolves constantly. Accordingly, our team’s interests might adjust in response. The themes we have described below should serve as a rough guide to how we think about the universe of startups in which REFASHIOND Ventures will invest. It is not comprehensively exhaustive, nor is it mutually exclusive of themes we have not described. If the innovation you are working on fits our definition of supply chain and the descriptions above, please reach out to us.

  • We anticipate that REFASHIOND Ventures first fund will be a pre-seed and seed-stage fund. However, our plan is to ultimately build a fund that invests from pre-seed to Series A, with the ability to make follow-on investments in later rounds. 

  • Irrespective of stage, our ambition is to be the most value-add investor on a dollar-weighted basis that any of the startups in our portfolio could have.

  • We recognize that many of the startups that fit our scope of interest may not be pure-play software startups. However, we look keenly for situations in which software is a catalyst for solving the problem the startup is setting out to solve.

 

Our current investment themes;

  • Next Generation Logistics: Platforms or applications that significantly improve how logistics, transportation, and distribution networks are operated and managed.

  • Advanced Materials: Platforms or products that make it possible to research, invent, and create new types of materials at scale. We are especially interested in the conversion of large quantities of waste of different types into new materials, or the reduction of waste in processes that occur at scale. 

  • Advanced Manufacturing: Platforms or applications that make it possible to integrate advances in software engineering into traditional manufacturing processes. 

  • Data & Decision Analytics: Platforms or applications that help people or other machines to manage, analyze, interpret, make decisions, and take actions based on vast and growing amounts of centralized or decentralized data from disparate sources. Such platforms or products enable large numbers of different types of connected devices, machines, apps, and websites to communicate with one another seamlessly, and with the people managing or using them, within a secure environment. 

 

Examples of startups that most probably DO NOT fit our investment thesis: Startups creating a new brand to market, manufacture, and distribute a line of goods or products.


Our Process

Given that we are currently a core team of two people we are striving to keep our process simple and straightforward. Here are the steps;

  1. Fill out the data-intake form on our website,

  2. Either Brian or Lisa will reach out to schedule an initial call if either of them decides they want to learn more,

  3. If we want to proceed after our internal conversations following that initial call, we will schedule another one-on-one call so that the founders can have a conversation with whoever on the REFASHIOND Ventures team has not met them yet,

  4. If we want to proceed, we’ll request additional information for due diligence, and perhaps will ask for additional conference calls with us, or with other people within our network whose opinion we are seeking as part of the process, as we work through our due diligence questions - we will not initiate due diligence unless we feel very strongly about making an investment,

  5. We complete our due diligence and either make a commitment to invest or decide to pass.

Some additional notes;

  • While we do not lead investment rounds at this time, we are willing to help recruit other investors once we have completed our process.

  • We know founders would like us to state something along the lines of “Our due diligence process lasts 1 week!” That does not reflect reality. We will always try our best to work as fast as we can, and to communicate with founders transparently and in a timely fashion so that we do not become a bottleneck in the process.

  • We do not believe in making commitments before we have built adequate conviction, given our analysis of the data and information we believe is necessary to understand the investment opportunity and to form a sound and reasonable basis for our decision; We have seen too many situations in which a commitment to invest is withdrawn at the worst possible time, with devastating effect. When we say yes to a startup, we want that team to know we have their back, and that we believe in them with deep conviction.

 

Connecting With Us

In order to streamline our process for managing the inflow of information about potential investments, we require everyone that wishes to speak with us about a potential investment from REFASHIOND Ventures to fill out and submit the data intake form on our website. 

We do not encourage sending information about a potential investment by email. For people who are coming to us through a warm intro, there’s a question on the form that asks if someone we know recommended that you reach out to us. 

The best time to start communicating with us is before you are raising a round because we believe it is important to build trust and understanding before entering into the kind of working relationship that exists between startup founders and their early stage investors.

That also gives us sufficient time to understand the problem you are solving, so that if REFASHIOND Ventures invests, we are doing so with conviction. Time enables us to become a more effective advocate on your startup’s behalf when we have discussions about you with other investors we know, and who we feel would be a good match for the round you are raising.

The only exception to this, is that if you are meeting us through one of our venture partners or someone who knows us really well - that person may choose to supplement your submission on our website with a brief note to us letting us know that they have spoken with you and given us a bit more context about you and your startup.

Communicating With Us

We review submissions to REFASHIOND Ventures on a rolling basis. Due to the small size of our current team and the accompanying constraints on our time, we can’t respond to everyone who makes a submission. However, when we have had an introductory phone call with a founder, that founder can expect to hear from us within 3 to 5 business days.

If you have submitted your information, but have not heard from us, you have the option of following up with us once or twice - by submitting additional information that will be appended to the original information you submitted previously.


Things We Believe Are Red Flags

  1. Exploding rounds: An exploding round comes with a caveat like “Seed round in ground-breaking tech startup closing in 1 week!” We need some time to do our own homework.

  2. Lack of control over core technologies: We try to avoid situations in which the startup has a product that has been launched to the public, but the startup’s team has no primary responsibility for actually building the core product. If there’s IP we’ll spend some time trying to understand who owns the IP.

  3. Founders who are mainly focused on invention: Some founders are born inventors. That is not a bad thing. However, as early stage venture capital investors we have made a choice to invest in founders who intentionally want to build potentially big businesses: This includes inventing a product; Recruiting and developing a team; Discovering a scaleable, repeatable and profitable business model; Performing customer development; Searching for product-market-fit; Formulating go-to-market strategies, and; Growing the startup to achieve venture scale outcomes. For the startups and founders that give REFASHIOND Ventures the privilege of becoming an investor on their cap-table: We will be a source of capital; We will be a source of counsel and support especially when things seem bleak, and; At the direction of our startups’ founders we will roll-up our sleeves and help where we believe we can be additive to what the core team is already doing. 

Our Commitment To Startup Founders

Based on Gil Dibner’s VC Code of Conduct;

  • We will be transparent.

  • We will respect your time.

  • We will not ask you for material we do not need.

  • We will not string you along.

  • We will let you know about any competitors in our portfolio.

  • We will be transparent about conflicts of interest.

  • We will not share any of your material without your permission.

  • We will not speak with your customers without your permission.

  • We will educate before we negotiate.

  • We will be honest about what standard terms are.

  • We will not issue a term sheet unless we have made a firm decision to invest.

  • We will reflect the term sheet in the final legal documents.

  • We will not seek an unreasonable equity stake.

  • We will avoid surprises.

  • We will always act in the best interests of the startup.

 

Without doubt, there will be times when we fail to live up to these ideals. When that happens we hope founders will let us know. That is the only way we can get better.

In addition to the code of conduct outlined above, Brian Aoaeh, a co-founder, general partner and co-managing partner of REFASHIOND Ventures is a member in good standing of the CFA Institute, and adheres to the CFA Institute Code of Ethics and Standards of Professional Conduct.

You can find us online:

Additional Reading