Investing in Startups (Lessons from 10 Years at True)

I shared this post with our team last summer while reflecting on a number of different investments at True and after reviewing it at the beginning of this year, thought it’d be interesting to share more broadly:


Don’t fund tools or diagnostics

Businesses focused on tools or diagonstic often cost as much to build, but often aren’t able to capture as much value as therapeutics


I think this is generally true in other markets beyond healthcare (B2B, B2C) – the most value is captured in helping solve problems for end users (ie marketing automation software versus simple analytics software or sleeping pills versus sleep tracking devices)


The exception for diagnostics is for big markets where the information is incredibly valuable in being able to take an intervention (ie cancer diagnostics)

It is important to ask 1) is it actionable? 2) And how valuable is that action to the end user if they make the change (relative to how hard the change is and compared to the status quo)


Spend time understanding how much of the remaining product work is research versus development.  More importantly, work with a team that understands the difference and how it will affect their timeline


Startups are working within a fixed timeline on imperfect information. 

Urgency + ability to make decisions without complete information are important skills. Does the Founder have that mentality and can they build that culture within the team? 


Customer specifications should drive product.  The company needs to answer the question what do we need to build + why – this end result should drive the research + development roadmap.  


Meet customers where they are today.  The initial product may involve only some of the science, but greatly improve workflow.  Once you have the customer, you can slowly move them to a more and more advanced product over time


On each team, someone needs to define what to build and someone needs to know how to build it.  They are often different people. 


It is difficult to take a team that has been bootstrapping and have them accelerate as a venture backed company. The challenge is shifting company culture from a mentality of preservation to one of more risk taking

Don’t build one business to get to another business long-term – risk compounds 


Watch how people discuss those they previously worked with – if everyone isn’t up to their standards – it is probably a “them” thing versus an “everyone else” thing 


Be mindful about giving the co-Founder title to later additions at the company

It can be used as a short-term fix to get someone more engaged, but may create a number of issues in the future around compensation (equity), role (how senior), and external perception (if they leave) 


Have aligned co-investors with access to capital  


Understand the incentives of the different market participants and how the market is structured.

The buyer, the end users, and the decider aren’t always the same person and understanding what is important for all parties is essential for success

Best product or technology doesn’t always win. 


Bet bold

The best Founders with the biggest ideas will find access to downstream capital  

Investors want to fund exciting new ideas that have the potential to make a big impact

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