Startup Investors Find Their Niches

By Mike Peña

3 min read | Feb 28, 2014

You can’t talk about entrepreneurship and not discuss startup funding. Founders have more options as incubators and accelerators seek to invest in the ventures they work with, and newer breeds of backing — such as crowd-funding sites and student-run coalitions — have come online. 

But even if investors are calling from all corners these days, at least one trend seems apparent: They are specializing and differentiating — by market sector, geography and even by startup strategy. This new generation of venture capitalists could be called upstarts in the world of startup funding, and they’re just as fired up as the entrepreneurs they target.

Take Rock Health, a youthful and ambitious full-service seed fund that focuses on startups building the next generation of technologies in healthcare. The fund was co-founded by Halle Tecco, who was included in CNN‘s “12 Entrepreneurs Reinventing Healthcare” and Forbes’ “30 under 30.” 

Tecco, Rock Health’s CEO, spoke at Stanford in January and told students about the abundant opportunities for entrepreneurs, engineers and designers to innovate at the intersection of healthcare and technology.

“I encourage all of you guys to look at the software that’s being built by the big healthcare IT companies, and you will be like, ‘I can build that better — from my dorm room, I can build that better!” Tecco said.

Then there are investors who gravitate to a specific geographic region, such as MuckerLab, a Los Angeles-based seed-stage venture fund striving to grow Southern California’s technology ecosystem. 

William Hsu, co-founder and managing partner of MuckerLab, also gave a recent DFJ Entrepreneurial Thought Leaders talk. Having earned his undergraduate degree in industrial engineering at Stanford, Hsu was very frank about Silicon Valley still being a hotbed for tech startups.

However, he also gave a glimpse into the calculus that VCs sometimes rely on when assessing an entrepreneur’s potential — a math that, as you might guess, transcends geography.

For the seed fund and incubator 500 Startups, numbers are front and center. In this clip featuring the incubator’s founding partner, Dave McClure runs through his formula for figuring out how and when to invest. He calls it the “lean VC approach,” which reflects the types of startups he focuses on. And essentially, it boils down to making “a lot of little bets, figure out which ones work” and then “double down on the ones that work.”

Bottom line: More options for early-stage funding, and that’s a win for fledgling entrepreneurs, wherever you are.

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