When Does Lateral Capital Look to Invest?
Lateral Capital aims to fill the “growth gap” between Friends and Family (F&F) investors and the point the company takes in investments from institutions – generally strategic investors or Venture Capital. Based on what we have learned from entrepreneurs, this is the hardest money to raise. The companies we look for have used their F&F money to develop a product and get positive response from at least one customer. When Lateral invests, it is generally to help the company take the next step towards expanding its product, typically behind marketing and sales efforts in a targeted vertical market.
In some of our investments, this “next step” is still in a research and development context – with a “research” customer. For example, we invested in a company that makes an optical measurement device for evaluating brain injury. Their “first customers” were the IRB (Institutional Review Boards) at several hospitals. With the success of their prototype device in real world conditions, we were able to “tick the box” that the product actually worked.
Net, we bend over backwards to find investment opportunities which are “on strategy” from a timing perspective, even when the company doesn’t have traditional customers.