Sramana Mitra: Are you chasing unicorns?
Kerry Rupp: No. The other thing about our business is that we are looking for capital-efficient companies that aren’t likely to need a Series C and maybe not even a Series B to get to their exit. We are expecting these companies to be able to see an acquisition exit in a three to five-year window. It’s really in the range where most exits happen. The data will show you that despite all the excitement of unicorns and the potential of the few that make it, most exits happen between $40 million and $70 million.
We’re looking for companies who can see a pathway to being large enough that they can be appealing acquisition targets for $100 million exits in a three to five year period. Our model knows that it’s ambitious. Maybe it’ll take five to seven instead of three to five. Maybe the exit will be more like $40 million to $70 million instead of that $100 million that they can see the pathway towards.
That’s one of the reasons why we aren’t taking that binary technology or science risk. We’re looking for companies that have execution risk only. We know there’s an opportunity there and it’s just whether they do it right. We can, therefore, get a good fund return but it’s more balanced rather than all of that coming in from the one deal and nine failures.
Sramana Mitra: Given the sector that you’re focusing on, you must have a list of potential acquirers in mind. Who would those be?
Kerry Rupp: One of the things that comes full circle with why we think we can have these exits in a short period of time is that you probably know that most millennials and women are looking to cleaner and greener products when they’re making decisions in the consumer landscape. A lot of them don’t have a lot of faith in the known big brands that have been out there for a long time.
Many of the big consumer companies and the Big Data technology companies are looking to acquire companies that can establish that brand of credibility around cleaner and greener things with customer base as they make those decisions. We see big consumer packaged goods companies that are not traditionally known for their sustainability, and therefore it’s all the more important to them to start establishing a track record in those areas.
On the healthcare side, it can often be the data that you start to collect that becomes interesting over time. It can be technology companies that are acquirers but there are also models where on the healthcare side, it’s still the healthcare provider systems who do the acquisitions even if it’s a consumer play because it’s going to affect so many of their patients or clients. All of our companies are targeting acquisition pathways rather than IPOs. Our impact focus is on their ability to gather up consumers who care about the issues.
Sramana Mitra: Thank you for your time.