Key investment themes

By boris, July 11, 2013

Every venture capital firm narrows its investment focus one way or another…perhaps by geography, sector, and/or stage. In some cases, it’s the result of conscious planning; in other cases it’s a natural evolution as a fund starts making investments.

For example, at version one ventures, we’re focused on early-stage (seed and Series A) opportunities in e-commerce, SaaS, and marketplaces/platforms across North America. Even that categorization covers a rather large swath of today’s start-ups, and it was only natural that this broader focus was narrowed down to several particularly strong opportunities and areas of interest.

Looking back at the past 18 months of version one’s activities, five key themes have emerged:

1. Vertically integrated commerce (investments: Julep, Frank & Oak): Last September, I wrote an article for TechCrunch outlining why vertically integrated retailers represent the next wave in e-commerce. By controlling the entire supply chain, these companies bring products directly to consumers from the factory without the bloat of the traditional retailer. This translates into high-quality products (whether eyeglasses or t-shirts) at significantly lower prices and better margins. In addition, a unique product lines means no competing with Amazon.

2. Vertical SaaS (investments: Frontdesk, Jobber): In the new era of enterprise software, the winners will be purpose-built, vertically sliced tools. Why? The vertical approach helps companies capture market share more quickly than if they were trying to build out a broad, all-things-to-all-people solution. It also means lower customer acquisition costs and lower capital requirements.

3. Online education (investments: Top Hat, Talentbuddy): There’s a big opportunity to disrupt the current education market. Mobile and social product experiences are making learning more affordable, efficient, engaging, and effective for all involved.

4. The hardware renaissance (investments: Upverter, Tindie): Hardware start-ups have long taken a back seat to software, but today it seems that everybody is talking about the Maker Movement. Numerous innovations (like Arduino Robot Kit, UDOO, and Spark Core) are making it easier than ever to develop hardware. Today an entrepreneur can walk into a VC meeting with a prototype from a 3D printer and proven market interest on Kickstarter. While version one hasn’t directly invested in a hardware start-up, we’re focusing on the platforms that are powering this hardware revolution.

5. Mobile marketplaces (investments: Clarity, Instacanvas, and one soon-to-be-announced investment): The near ubiquity of mobile is reshaping the way marketplaces are created and operated. As Matt Cohler noted, mobile devices make it “vastly quicker and cheaper than ever before to ‘wire up’ both sides of a market.”

I am still excited about the potential of all five themes, but it’s inevitable that in the coming year, some areas will evolve and new ones will be added.  Stay tuned…

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  • I like the segmentation of these themes. Mobile is the new Web.

  • bwertz

    Agreed. Over half of V1 portfolio companies are mobile-first or mobile-only.

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