Yesterday I connected with a founder friend who makes a point of mentoring and invests in early start-ups. His company is worth hundreds of millions of dollars, so he knows a thing or two about picking markets and what it takes to scale a solution. He shared his perspective on evaluating potential investments, which I found interesting.
He looks for companies that are solving boring, but complex, problems. The problem isn’t something the average person pays attention to, but it’s vital. And as mentioned, it’s complex: many nuances prevent someone from efficiently solving it manually. Think e‑commerce companies that sell nationwide having to collect sales taxes and remit and report them to various state and local agencies. Boring, critical to that company, and highly complex. Avalara, a company most people haven’t heard of, solves this sales tax problem. It’s publicly traded and as of today has a market capitalization (i.e., valuation) of $14 billion.
I like this investment thesis. I think it’s a good framework to use when evaluating companies. And I’m bullish on workflow management solutions, which aligns well with it.
I’m looking forward to working with my friend to help founders build big businesses that solve boring, complex problems.