Interview with Anthony P. Lee
The 7 Questions Interview Series: Angels and Venture Capitalists
The 7 Question Interview Series is an investigative content series where I seek out key leaders in a specific industry and/or subject matter expertise area and ask them 7 key questions that “enquiring minds want to know”. There is a twist however to these questions. I provide the interviewee with a hypothesis for each question to help frame and set context for their answer. This specific series of interviews is ideal for startup founders.
The objective of this series is to establish direct connections with VCs and Angel Investors across the globe and ask them the same set of 7 questions regarding investing in technology startups. I’d also like to know what their appetite is for investing in Canadian startups and why they do or don’t.
Interview with Andrew P. Lee, General Partner at Altos Ventures
When would it be appropriate for a startup to seek investment from you?
At Altos, we look for companies that are in the early growth phase of their business. Typically they are rapidly ramping revenues from business customers or consumers, and ideally have gone through one or two cycles of renewing these customer relationships. At our relatively early stage, we want to see more than 100% annual growth. We specialize in founder-led, bootstrapped companies that have not raised much if any prior venture capital.
What’s more important: the idea, the team or both?
We first look for a really great business in a large market. The team needs to be visionary and operationally excellent, but to paraphrase Warren Buffet, we prefer a good team in a great business over a great team in a good business.
What are you looking for in a startup team? What does a winning team look like?
About half of our team assessment focuses on the CEO, often the founder or co-founder who is the heart and soul of a startup. We like leaders who have a clear and compelling vision, killer operational instincts, ability to build systems, and constant desire to learn. We like confidence tempered with the right amount of humility and self-awareness.
What are you looking for in an idea? What does a winning idea look like?
We love great ideas, but we try to fall in love with the business rather than falling in love with the idea. So we love seeing exponential growth curves and great organic traction. There are three simple questions we try to answer when evaluating opportunities: why big, why now, why you?
Does a startup really have only one shot?
One shot to make a first impression but if that doesn’t go well, we are always open minded if entrepreneurs can come back with better momentum or market proof. And no, it is not true that bombing a venture pitch will doom a company with investor peers – most good investors don’t talk about their prospective investments with other funds unless they are trying to collaborate on a financing.
Can you describe your due diligence and investment process? What’s important for a startup to know about it?
We try to spend a lot of time getting to know the entrepreneurial team, to understand their motivation, vision and capabilities. We like to have a dialogue with the entrepreneur as if we were already investors – asking questions, making connections and offering help – to see how the give and take of the relationship might feel once we make the investment. One important thing for entrepreneurs to understand about diligence is whether an investor is doing diligence to figure out if they are interested or whether they are doing diligence to confirm their desire to invest. Obviously you want to be in the latter category.
In your view, is Canada a fertile ground for tech startups? If so why and in what ways is Canada unique and competitive in this regard? Are you investing in Canadian startups? If so, why? If not, how come?
I’m super excited about Canada as a breeding ground for tech startups. Canadians have the talent, resourcefulness and frontier mentality needed to start companies – if they are globally ambitious and connected to the proper resources. Canadian startups also tend to be more capital-efficient in building to scale. I also have a hypothesis that Canadian companies are particularly competitive in the new cloud environment. Just look at the proliferation of category-leading SaaS companies like Hootsuite, Shopify, Freshbooks, Radian6, Wave Accounting, etc.
About Anthony Lee
Anthony Lee is a General Partner of Altos Ventures, where he focuses on software and digital media investments. He serves on the boards of several high-growth private technology companies. Previously, Anthony led marketing for three start-up companies including Evolve Software (EVLV, acquired by ORCL).
He co-founded the C100, a network of top Canadian technology leaders dedicated to supporting Canadian entrepreneurs. Anthony received his MBA from Stanford University and earned a BA in Politics and Economics from Princeton University.