Investing in Bold Entrepreneurs — Stat Zero Ventures
By: Stat Zero
Tags: Stat Zero Ventures, Impact Investing, Stanford Usc Grad, Govtech, Regenerative Investing

Investing in Bold Entrepreneurs — Stat Zero Ventures

Stat Zero Venture Investment Process Explained by Stat Zero General Partner and Vice President Jessica Salinas. Stat Zero Apr 23, 2020·6 min read

By Jessica Salinas, MSC.

As a public sector fintech, Stat Zero Ventures (an LP/GP) has the ability to reach its grand goal of achieving zero — zero poverty, zero disease, and zero pollution — by supporting solutions in one of three ways:

Financing Commercial R&D Investing in Bold Entrepreneurs Co-investing in Ecosystem Building Micro Funds

The Stat Zero team is tasked with making responsible investments to optimize for returns and impact, a tall order. As such, we have developed a structured process to elevate and select competitive opportunities in each of these categories.

To help founders navigate fundraising, we are providing insight into the Stat Zero Investment Process for Investing in Bold Entrepreneurs below.

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Our investment process can be divided into three major phases:

Screening Diligence Investment Case

Phase I: SCREENING

The screening stage is divided into the following subphases: deal review, venture pipeline meeting & initial diligence.

Deal Review

We have established relationships with various ecosystem partners globally, including accelerators, universities and angel groups, who along with our investor network, scouts and advisors, help us identify entrepreneurs who align with our investment thesis. Additionally, founders can access the Stat Zero Startup Intake Form on our website. To reduce bias, we ask that the intake form, which asks for a startup’s pitch deck along with other key information, be filled out before our team considers the startup, regardless of the referral source.

Once the information is received, someone from our investment team reviews the submission and filters opportunities for the Venture Pipeline Meeting.

What we’re considering:

Do we have sufficient information on the company?

Does the startup align with our sourcing criteria?

Does the startup have a tech component?

Are they raising a pre-seed/seed/series A round?

Does the startup have an impact potential?

Artifacts: Startup Intake Form, Pitch Deck

To note, our team will provide a response to all submissions ASAP. We are a small team, so please be patient as we review.

Venture Pipeline Meeting

Our weekly Ventures Pipeline meeting takes place on Tuesday afternoons. During this meeting, the Investment Team, consisting of Investment Principal, Analyst, Venture Partner(s), and investor network, review elevated deals.

This is an opportunity for the investment team to discuss deals and receive raw feedback with the initial information at hand. Subsequently, the team filters for opportunities that align with our segments — zero poverty, zero disease and/or zero pollution — and decides which deals to move forward to Initial Diligence for equity investment consideration or for commercial R&D financing consideration (to be discussed in another post).

At this point, a startup is assigned a point of contact from the investment team, who will communicate with you moving forward.

What we’re considering:

Does this startup align with a Stat Zero segment?

Is this company interesting enough with info we have to look into more?

Based on segment POVs, does it fit a Partner’s strategy?

Are the initial financials sound (valuation, revenue, etc.)?

Initial Diligence

Once in initial diligence, we request a 45–60 minute meeting with the startup. Since the intake form has already been filled out, this meeting’s main purpose is to get to know the entrepreneur(s), view a demo (if applicable), and answer additional questions that have come up and/or that we need to complete the Startup Snapshot (see below) in preparation for Partners Meeting. Be succinct and clear, but let your passion and story shine through!

At this stage, we also send the Internal Impact Intake Forms. At the founder level, this form asks about each founder’s background and measures “distance traveled.” At the organization level (if applicable), this form asks for readily available data to gauge the team’s DEI and wellness.

Concurrently, the investment team conducts initial market, financial and competitive research to assess the business. Ultimately, the investment team compares to existing deals and selects the top deals to present at Partners Meeting.

What we’re considering:

Does the business model make sense?

Is there a large market potential?

How does this startup solution compare to others in this market?

What is their internal impact?

Are founders responsive and thoughtful about answers?

Artifacts: Internal Impact Intake Form (Founders), Internal Impact Intake Form (Team)

Phase II: DILIGENCE

The diligence stage is divided into the following subphases: partners meeting & due diligence.

Partners Meeting

The Stat Zero partners meeting is held weekly on Wednesdays. In preparation for this meeting, the leads of the investment team complete the “Startup Snapshot” (see below) for each opportunity that is being presented to the partners.

Partners review the elevated deals and ask questions, provide feedback, share initial opinions, identify risks, and pinpoint areas of concern. Based on collective feedback, the partners decide whether a) to support and move the startup to due diligence, b) more research is needed before deciding, or c) to pass on the deal.

What we’re considering:

Can Stat Zero Ventures add value? If so, how?

Does this company have a relatively strong internal impact score?

Is the market unique/big/untapped?

Does the startup align to a segment play?

Do opportunities exist to partner or work with government entities?

Does a partner feel strongly enough after feedback to move forward?

Artifacts: Startup Snapshot

Due Diligence

The due diligence stage is a meticulous process to determine whether Stat Zero will invest in a venture. During due diligence, we conduct an in-depth evaluation, consisting of product tests, customer and investor calls, financial modeling and analysis, external impact assessment, data room access and a review of legal aspects of venture.

All of the information gathered during due diligence is compiled into a memo and/or deck to make a strong investment case. If the venture clears due diligence, the memo and/or presentation is finalized and prepared for the Investment Committee.

It’s important to note that although most startups make it through due diligence, some will not. This process is meant to serve as a stringent final filter to move forward only the best deals for Stat Zero, which goes beyond financial goals and includes vision and values alignment. If during due diligence, any red flags are raised and we must pass, our team will communicate the decision promptly.

What we’re considering:

Do we believe in the product/technology and market?

Is this the right team to execute on the mission and vision?

What is the financial assessment?

Does this venture have potential for high external impact?

Is this a good financial deal (terms/valuation)?

Does it pass legal review?

Are there any red flags?

Artifacts: Investment Committee Memo/Deck

Phase III: THE INVESTMENT CASE

The investment case stage is divided into the following subphases: investment committee & capital deployment.

Investment Committee (IC)

When a venture makes it through due diligence, an Investment Committee (IC), consisting of Stat Zero Partners, advisors, experts, and an investment team member, is formed, and the IC meeting is scheduled, during which the final IC memo/deck is presented.

After the presentation, the IC discusses, assesses, and decides on the investment opportunity (majority vote). Within 48 hours of the IC decision, the lead follows up with the founder regarding next steps: a clear yes, a clear no, or a “we want to do more work on XYZ.”

If there is follow up due diligence to be done, the lead will reach out to startup founders to complete. If the IC decision is positive, the startup moves on to the final subphase, capital deployment.

What we’re considering:

Do we move forward with investment?

Are there final points of clarification?

Artifacts: Final IC Memo/Deck

Capital Deployment

After formal due diligence is finalized and the investment decision is communicated to the startup founders , the parties engage in capital deployment activities.

If Stat Zero Ventures is leading a round, our legal counsel drafts term sheet to send to the startup. If Stat Zero Ventures is following in a round, the term sheet is requested from the startup to invest in the round with wiring instructions.

The transaction must be approved by the Managing Partner, after which a non-binding offer is drawn up and the term sheet is reviewed and approved. At this point, our legal counsel prepares the transaction, closing documents and necessary resolutions, and the funds are wired.

… And this is where the partnership with Stat Zero truly begins!