Sramana Mitra: Do you want to do another case study?
Keith Bank: Another one is called Hammerhead Technology based in New York City. I made a small angel investment in this individual several years ago. His name is Pete Morgan. He’s an avid cyclist and had an idea that there was a way to create a better bike computer.
His vision was to create an iPhone-like device to be placed on the handlebars. This is for people cycling outside as opposed to indoor cycling. He came up with a hardware and software combination with turn-by-turn directions, ability to compete with people across the workout, and workout tracking.
We just launched our version two product called Karoo 2. It just had an incredible demand. As part of our Series B financing, we brought in Lance Armstrong and his fund to invest. While he is a polarizing figure to many, he is the gold standard for cycling and cycling knowledge.
We also brought in some other very interesting co-investors. That company is about to take off. What we saw was just a super passionate team and very knowledgeable about the space.
Sramana Mitra: My last question is what are you looking for by way of exit? Are you looking for unicorn-style companies or small capital-efficient businesses and early exits?
Keith Bank: We typically will not invest unless we make at least 10x our money within a five to seven year horizon. That means that you got to look for companies that can scale to nine figures in revenue in a relatively reasonable period of time. We’re looking for those outliers that can provide those returns.
As everybody knows, three out of ten businesses get their money back, and you get pennies on the dollar for seven out of ten. We have a much better track record than that. We’re looking at 15% to 30% ownership stake. We almost always take a Board seat.
Most of the deals we do are single-digit million pre-money valuation for the most part. Sometimes we break that rule.
Sramana Mitra: I think I’ve got what you’re doing.
Keith Bank: The space we’re in is a kind of niche and small although more and more people are getting into it. If you would have tried to do a sports tech fund five to six years ago, people would not have been interested. We look forward to continuing to be one of the leaders in the area.
Sramana Mitra: Just like entrepreneurs look for product-market fit, they also need to look for investor-entrepreneur fit. Sports tech is a very specialized area where not a lot of people have this domain knowledge.
Keith Bank: I always counsel entrepreneurs who are looking for money that as much as we interview you and want to about you, you should want to know about us. I’ve seen situations where investors and founding teams get at loggerheads.
Sramana Mitra: Thank you for your time.