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Beyond the check — what entrepreneurs really want (and need)

Jason Illian, managing director of Koch Disruptive Technologies, describes our unique approach to investing in entrepreneurs — going beyond funding and helping entrepreneurs succeed as a business.

March 6, 2019

min read

Conversations in the startup community typically hover around large funding rounds, valuations and the next big thing. And it’s certainly important to make sure you have enough capital to build a formidable, long-lasting company. But the best entrepreneurs aren’t just looking for the biggest checkbook. They’re looking for a partner who can help them accelerate their business beyond the check and unlock long-term value. 

In the past, investing was about giving an entrepreneur money and then trusting they would be able to grow the company, develop products and services that customers wanted and benefit society at-large. But for the most part, the investor watched on the sidelines as an advisor or a fan. The future is about investors taking the field as a partner with the entrepreneur, bringing extensive operational knowledge, resources, and experience to the table in addition to money.

Disrupting the Funding Model

We are in an era where disruption and digital transformation are at the heart of business. But disruption requires entrepreneurs’ big ideas and the resources and knowledge to transform those ideas into reality. Capital is one resource, but great entrepreneurs recognize that much more is needed to build a transformational platform.

When searching for the right capital partner, talented entrepreneurs have many options including angel investors, family offices, hedge funds, VCs, CVCs, and more. All of these options have potential upsides, but also carry trade-offs. The key is about aligning incentives with all parties involved. An investor who seeks quick payouts or facilitates onerous term sheets may not be the best option for a company with a long-term vision. 

True disruption means constantly evolving a business model, and this is as true for investors as it is for entrepreneurs. From a funding standpoint, it means creating alternatives where entrepreneurs can (1) accelerate the growth of their company and (2) build flexibility into their model so that the company can quickly adjust and think long term. It makes sense for a company to be acquired or go public when the offer exceeds the long-term value of the company staying private. But if more value can be unlocked in the private markets or with unorthodox capital structures, entrepreneurs should have viable options.

At KDT, we are working diligently to bring the best entrepreneurs unique capital solutions, which includes sizable checks and a breadth of capabilities. We have access to large ecosystems of knowledge, connections, and capabilities across multiple industries that can help entrepreneurs scale up their businesses faster and deliver disruption sooner. Our first three investments have spanned a wide range of industries, from medical devices to cloud computing to additive manufacturing. But the common thread in all these investments is KDT’s commitment to mutual benefit and identifying ways to help these companies accelerate their growth. With INSIGHTEC, the non-invasive focused ultrasound company based in Israel, our unique capabilities have supported their manufacturing, commercialization and regulatory efforts. With Desktop Metal, the metal 3D additive manufacturing company in Boston, Koch is both a customer and a supplier, and we are exploring how we can help in a variety of other ways. And with Mesosphere, the hybrid cloud and edge computing platform, we are running a number of pilots on how they can assist with Koch’s migration to cloud, edge computing, data and analytics. At The Montgomery Summit in March, alongside Mesosphere president Will Freiberg, we highlighted how our partnership aims to accelerate the growth of both companies, helps Mesosphere refine its product offering, and extend its global footprint.

In all fairness, KDT is not the only investor bringing additional resources and capabilities to the table alongside the check. There are a number of talented venture groups and investors — many of whom we work with — who are evolving as well. But having deployed over $17 billion in tech-related businesses in the last six years, we believe Koch is a unique partner, capable of bringing our 130,000 employees across 60 countries to bear with any technology platform.

Disrupting Ourselves and Creating a Better Tomorrow

At KDT, we believe disruption starts with our own companies. We have to disrupt ourselves, and we have to partner with the best entrepreneurs and investors to do it. If we don’t shoot ourselves in the foot, the market will gladly shoot us in the chest.  While change can certainly be painful, it is an absolute necessity.

Because our vision is to drive disruption and support principled entrepreneurs who are solving large challenges, we believe it is critical to think and act differently. So, in addition to capital, we are always exploring how we can be a customer, a solutions provider, a tech validator, an experimentation partner, a knowledge source, or a capability provider. 

The best entrepreneurs don’t want guarantees — they want opportunities. And they deserve partners who embrace a mutual benefit and long-term thinking mindset as well. We don’t do this perfectly, but like the companies we desire to invest in, we are constantly iterating and striving to create a situation where everyone wins.

Jason Illian is the managing director of Koch Disruptive Technologies.