Pre-IPO Profits

Investing in Startups Without Traction

Investing in Startups Without Traction
By Adam Sharp
Date December 22, 2020

As a general rule, I prefer to invest in companies that are growing quickly. That means startups with plenty of traction.

However, sometimes I do break that rule — and doing so recently produced a great outcome.

Back in 2016, I invested in a company called I made the investment through Zach Coelius’ syndicate on AngelList. Even back then I could sense that Zach had access to incredible deals. He was relatively unknown at the time — but after investing in a few of his deals, I could tell he was going to do well.

So I backed Loom, which specialized in making realistic “avatars” (digital personas that resemble your real self). At the time, Loom planned to license the technology. But it didn’t have any clients yet. Still, it was a high potential deal at a fairly low valuation. Zach explained how amazing the technology was, so I took a shot on it.

That shot paid off. Just this week Roblox — one of the world’s most popular video games platforms — purchased Loom in a cash and stock deal. It was a nice return just on the cash part of the acquisition. But more importantly, I got shares in Roblox. So now I’m a (tiny) shareholder in one of the world’s fastest-growing tech companies.

The lesson here is that you CAN take shots on companies without a lot of revenue. But it helps if you’re investing alongside quality angels and/or VCs — and that the company has serious potential.

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