In this episode of the Kingscrowd Investment Roundtable, Brian, Léa, and Teddy explore key topics in startup investing, offering valuable insights for both investors and founders in the private markets. The team kicks off by announcing the launch of the Kingscrowd Data API in beta, which grants developers and investors access to a rich dataset of over 9,000 private companies, opening doors to new tools and analytics.
The conversation then shifts to a deep dive into pre-revenue companies, focusing on the top five currently raising capital. Léa and Teddy discuss how investors can evaluate these early-stage ventures, particularly in the medtech space, which often requires substantial capital before commercialization. They explain the importance of examining funding sources, burn rates, and de-risking factors like 510(k) clearance.
In the second half, the discussion turns to fractional offerings, with a spotlight on World Tree—a unique investment where you buy a share in a batch of trees and share in the timber profits after 8-12 years. The team also covers other fractional offerings, such as opportunities to invest in athletes or song royalties. They emphasize how these investments provide diversification and stability compared to more traditional startup investments.
If you’re looking to expand your knowledge of startup investing, from evaluating pre-revenue companies to understanding the growing world of fractional offerings, this episode is packed with practical advice and data-driven insights.
Why is it important to analyze pre-revenue companies’ ability to raise capital?
Léa: Pre-revenue companies can’t show product-market fit yet, so their ability to raise capital is key. A strong funding history indicates confidence from previous investors and signals the company’s ability to raise future capital, which is critical for companies that aren’t generating revenue yet.
Teddy: Especially for medtech companies, which often require large amounts of capital before commercialization, it’s important to look at where their funding comes from, whether prior investors are joining new rounds, and how much capital is needed to reach the next milestones.
What are key factors to consider when investing in pre-revenue medtech companies?
Teddy: It’s essential to look at the stage of the company’s development, such as whether they’re in animal or human trials. For medtech companies, 510(k) clearance is a big de-risking factor as it shows their product is similar to something already approved. Also, examine how they’re managing their burn rate and whether they’ve hit meaningful milestones.
Léa: I also look for institutional support, such as if the company is backed by prominent VCs or has gone through reputable accelerators like Y Combinator or Johnson & Johnson’s incubator. That kind of backing gives you extra confidence.
What are fractional offerings, and how do they differ from typical investments?
Brian: Fractional offerings allow you to invest in a specific class or series, such as a batch of trees with World Tree, an athlete’s future earnings with Finlete, or song royalties with SongVest. You’re investing in a piece of the asset rather than the operating company itself. This structure allows investors to participate in more niche or unique assets.
Léa: One key point with fractional offerings is that we don’t rate them at Kingscrowd because they can’t be analyzed the same way as startups. You’re not necessarily looking for 10x growth but more stable, potentially lower-risk returns.
How do fractional offerings fit into portfolio diversification?
Teddy: Fractional offerings like World Tree’s timber investment or investing in an MLB player’s future earnings offer a different kind of return, often more stable than traditional startups. These types of deals can be useful to diversify a portfolio and add less risky, steady return options alongside high-growth potential investments.
