Investing via TinySeed
It has been a long time since I’ve written about angel investing here on the blog.
While there have been a few new, small investments, my main focus for the last 18 months has been much more on following on with existing investments. I am fortunate that many companies I am an investor in have been raising new rounds*. Fundraising is of course only a milestone on the journey to building a sustainable business, but still it is a good validation for a very early stage investor like me when late (usually institutional) investors come on board to help a company grow. Sadly such fundraising can also eat up a lot of time - not least with Spanish companies that require a tedious trip to a notary. My strategy is almost always to follow on when possible - though there are also times when I’m unable to for various reasons.
Still, this year I did make one less traditional investment; I became a limited partner (an LP, in the jargon of the trade) in TinySeed. TinySeed is a fund that invests in bootstrapped start-ups, mainly those with a SaaS business model. The TinySeed model is very different than most venture capital firms in that they invest a relatively small amount ($120-200k depending on the number of founders) in companies at a very early stage. Typically it is founders who have been working on their business as a side project who use the funding to move to full time on the business. There is no expectation that future funding rounds will take place, ideally the money will be used to get the business to break even. Besides the money the TinySeed team provides a lot of advice and tactical help, the founders in the first cohort all seem to be getting a lot from the experience.
This is an interesting rapidly emerging model (TinySeed is not the only player in the space), and a great indicator of the changing dynamics of digital entrepreneurship. Software services have made it simpler and less expensive for very small teams - typically based in much more affordable places than the expensive tech hubs like SF - to build high-quality (and highly profitable) businesses serving a global customer base.
So why have I invested
The fundamental trend that TS is riding is one we live daily on the SaaS start-up I am involved in: OpenCage. I can see how powerful the model of low costs and recurring revenue is.
Every investment is fundamentally a bet on the founders, TinySeed is no different. One of the co-founders of TinySeed is Rob Walling, one of the organizers of MicroConf. I met Rob when I spoke at MicroConfEU two years ago in Lisbon and have been a long time listener to his Startups for the rest of us podcast. Rob has a unique skillset and audience for making TinySeed a success.
Fundamentally becoming an LP was also just a much more scalable way to get investment access to many more great companies than I could reach on my own.
The current TinySeed portfolio is a fantastic mix of interesting businesses. Some I know well (I am delighted my friend Craig’s podcast hosting startup Castos is on the list), others I know only from their website. By the nature of the investment thesis, most are niche businesses, so I can’t really try all the services out. But, in the niche is gold. Hopefully I’ll be able to meet a few of the founders at the next MicroConfEU in Dubrovnik in a few weeks.
Good luck to all the TinySeed founders (if you’re reading this, of course feel free to ping me if there is any way for me to help your businesses). Two of the founders - Matt Wensing, of Summit, and Peter Suhm, of BranchCI - have a podcast called Out of Beta which I’ve enjoyed listening along to. Give it a listen if you want to learn more about their experiences in TinySeed. Also good is this interview with Einar Vollset, the other TS co-founder, where he explains a bit more the business opportunity the fund is targeting.
On 1 November, applications will open for the second TinySeed cohort. I encourage you to apply if you are in the target audience.
* I’m delighted to report that Flock, Localistico, GetAgent, Abi Global Health, Hubtype, AVUXI, Perkbox, and Storage Made Easy have all raised additional funds since my initial angel investments (possibly I’ve overlooked a company, if so, sorry, certianly not intentional).