Investment Revenue Thresholds

A framework for qualifying startup investments, focusing on high-risk, high-reward opportunities that can generate significant returns over a 7-10 year period.

Core Investment Requirements

• Companies must show potential for $100M/year revenue
• Target companies should have potential to become $1B+ businesses
• Looking for 5x return minimum over 7 years (~20% IRR)
• Portfolio approach: 2-3 winners should make everything else a rounding error

Investment Strategy

• Make small checks across many companies
• Focus on maximum return potential vs median returns
• Target 5-10 investments per year
  • 5 investments is the sweet spot
  • Can do up to 10 if time permits
• Expect 3 out of 30 companies to drive 95-99% of returns

Risk-Reward Profile

• High risk requires massive potential upside
• Two major downsides that need compensation:
  • Extreme risk of failure
  • 7-10 year illiquidity period
• Success examples:
  • $25k checks can turn into $25M
  • Target 4-5x minimum return over 7 years

Investment Example: Lambda School

• Clear path to $100M revenue:
  • $25k revenue per student
  • Need 4,000 students to reach $100M
  • Started with 81 graduates
• Differentiating factors:
  • Online vs in-person format
  • 9-month program vs 3-month competitors
  • 80-90% completion rate vs 5% industry standard
  • High job placement rates

Non-Financial Benefits

• Front row seat to the future
• Learning opportunity about:
  • Business dynamics
  • People assessment
  • Decision making
• Better than public market investing for learning, though potentially lower returns