Entrepreneurs - 10 Commandments of SEI Investing
10 Commandments of SEI Investing
1. Product Need: Thou shalt invest in companies that have an in-depth knowledge of their customer’s usage, habits and needs. Thou shalt forsake all “nice to have” products or services for entrepreneurs who address a “burning customer need”.
2. Sustainable Differentiation: Thou shalt invest in companies that have advantages such as patents, first-mover position, exciting new technologies, proprietary processes, and/or key customer contacts.
3. Market Size and Trajectory: Thou shalt invest in companies that have large and/or rapidly growing market or can realistically create such markets.
4. Business Plan: Thou shalt insist on a business plan that addresses the technology, customer acquisition, and competitive challenges of the company and that establish the business with realistic gross margins, unit volume, return on capital invested and a realistic exit strategy.
5. Management: Thou shalt invest in good management that demonstrates an ability to execute the business plan rapidly, provide sound cash management, raise additional cash, lead the organization, and adjust the business plan when necessary. Thou shalt seek leaders with industry expertise that are passionate about their mission.
6. Board of Directors: Thou shalt invest only in companies where the majority of the Board is comprised of strong outsiders who possess solid business expertise and wherever possible industry expertise. The said Board of Directors shall push the company to execute the business plan rapidly within cash constraints and shall insist on management changes if needed to accomplish the plan.
7. Access to Capital: Thou shalt identify and establish relationships with sources of capital with a history of investing in like kinds of businesses in the amounts needed for the company. Thou shalt work with these co-investors for the betterment of the company and all investors.
8. Technology Risk: Thou shalt have sufficient technical expertise at the table, or through thy trusted contacts, to evaluate all product and technology claims before committing thy resources. Thou shalt invest in companies with a low risk of market loss to alternative technologies.
9. Investment Execution Risk: Thou shalt have established the ability to influence key company decisions, create and link milestone to capital rounds, and seek early customer learning, as through the use of prototypes. Thou shalt receive fair valuation of thy investments and not release investment funds until the full round is raised. Thou shall stay involved and work with companies to assist-aggressively if necessary-in their success. Thou shalt invest only in those companies that provide a clear exit strategy for thy investment.
10. Investment Evaluation Risk:Thou shalt ask tough questions of the company, listen to the market, and discuss the company with other investors. Thou shalt make certain that the entrepreneur appreciates OPM (Other People’s Money) and recognizes the company’s first responsibility is a return to the shareholders. Thou shalt always speak the truth with thy fellow members and be loyal in voicing any opposition or apprehension now and forever and ever.
Researched by Daniel J. Steininger from American Angel Investing
10 Commandments of SEI Investing
1. Product Need: Thou shalt invest in companies that have an in-depth knowledge of their customer’s usage, habits and needs. Thou shalt forsake all “nice to have” products or services for entrepreneurs who address a “burning customer need”.
2. Sustainable Differentiation: Thou shalt invest in companies that have advantages such as patents, first-mover position, exciting new technologies, proprietary processes, and/or key customer contacts.
3. Market Size and Trajectory: Thou shalt invest in companies that have large and/or rapidly growing market or can realistically create such markets.
4. Business Plan: Thou shalt insist on a business plan that addresses the technology, customer acquisition, and competitive challenges of the company and that establish the business with realistic gross margins, unit volume, return on capital invested and a realistic exit strategy.
5. Management: Thou shalt invest in good management that demonstrates an ability to execute the business plan rapidly, provide sound cash management, raise additional cash, lead the organization, and adjust the business plan when necessary. Thou shalt seek leaders with industry expertise that are passionate about their mission.
6. Board of Directors: Thou shalt invest only in companies where the majority of the Board is comprised of strong outsiders who possess solid business expertise and wherever possible industry expertise. The said Board of Directors shall push the company to execute the business plan rapidly within cash constraints and shall insist on management changes if needed to accomplish the plan.
7. Access to Capital: Thou shalt identify and establish relationships with sources of capital with a history of investing in like kinds of businesses in the amounts needed for the company. Thou shalt work with these co-investors for the betterment of the company and all investors.
8. Technology Risk: Thou shalt have sufficient technical expertise at the table, or through thy trusted contacts, to evaluate all product and technology claims before committing thy resources. Thou shalt invest in companies with a low risk of market loss to alternative technologies.
9. Investment Execution Risk: Thou shalt have established the ability to influence key company decisions, create and link milestone to capital rounds, and seek early customer learning, as through the use of prototypes. Thou shalt receive fair valuation of thy investments and not release investment funds until the full round is raised. Thou shall stay involved and work with companies to assist-aggressively if necessary-in their success. Thou shalt invest only in those companies that provide a clear exit strategy for thy investment.
10. Investment Evaluation Risk:Thou shalt ask tough questions of the company, listen to the market, and discuss the company with other investors. Thou shalt make certain that the entrepreneur appreciates OPM (Other People’s Money) and recognizes the company’s first responsibility is a return to the shareholders. Thou shalt always speak the truth with thy fellow members and be loyal in voicing any opposition or apprehension now and forever and ever.
Researched by Daniel J. Steininger from American Angel Investing