Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Nate Redmond of Alpha Edison was recorded in February 2018.
Nate Redmond, Managing Partner at Alpha Edison, a VC who has put trust-driven ventures at the center of his investment thesis. It’s a very interesting conversation for both entrepreneurs and investors to listen to.
Sramana Mitra: Tell our audience about Alpha Edison and yourself. Let’s introduce you to the audience. The last time we spoke, you were doing something else. You were in the middle of putting this new thing together.
Nate Redmond: Alpha Edison is a new firm. We’re about two years old. The focus and how we invest is really a function of the type of business model innovation that we look at. Unlike most venture capital investors who tend to look for and focus on either sector expertise or technology waves, we look through much more horizontal lenses that cut across traditional sectors that end up driving and shaping business model innovation. The power of that business model innovation is that it allows you to unlock new markets.
Sramana Mitra: That’s an abstraction. Can we double-click down and work on an example that illustrates the philosophy that you just outlined?
Nate Redmond: When we started the firm, we set out to answer a very specific simple question with a complex answer which is why is it that most investors miss most of their best opportunities. An investor has been very successful largely on the basis of a small number of investments that they’ve made and the companies that they’ve been a part of building.
Yet if you look back through their career, despite having invested in two or three companies that went on to be very successful, there are another 10 or 20 that were equally, if not more, successful. That’s partly a by-product of the fact that you see many companies as an investor. You turn it around and look at a company like Airbnb. Why is it that so many investors saw and yet didn’t have conviction to move forward and make an investment?
As you move forward and things become obvious, it’s reflected in the price. We really focus on the earlier stages. We look at a company like Airbnb, it’s very easy when you’re sitting 10 years later and look at how obvious things seem today. When you roll back to the start of the company, it was clear that they were looking at a market of hospitality that was quite significant.
If you look at the behaviors that they were targeting, they were behaviors that really required an individual to come into a home with someone who they didn’t know and to stay probably on an air bed. As such, it was a behavior that really appealed to or fit for a very narrow slice of the population.