The Calm Company Fund is a new approach to investing in technology companies with a completely different risk profile to traditional venture capital. We call it Early Stage Value Investing.
The Calm Company Fund is a growth-focused fund investing in entrepreneurs building profitable software and software-enabled businesses. We invest across the early stage (post-launch, with revenue, roughly comparable to early “seed” stage) to later stage ($2-10m in annual recurring revenue) via two distinct funds. Our Calm Company Fund III invest $100k-350k in early stage companies and targets a mix of equity value appreciation and profit-share income via the Shared Earnings Agreement structure we created. Our Founder Liquidity Fund invests $500k - $2m (where founders can take as much of that “off the table” as they prefer) in mature profitable software companies ranging from $1m - $10m in annual recurring revenue and uses a similar structure to target a blend of returns via an exit or dividends.
The best way to think about our approach is investing in great sustainable businesses, with a much lower failure rate than traditional angel/VC investing, with strong upside for growth but with a pathway for investor returns if companies become a profitable cash cow.
It’s a broad term for the vast vast majority of businesses that for various reasons are not a fit for the narrow Venture Capital profile, that are building towards profitable sustainable growth for the long-term. A classic example would be B2B software serving a niche industry where a great business can be built, but there isn’t a plausible path to a $10B+ company serving that market.
Despite the fact that founders overwhelmingly prefer to build calm companies over hyper-growth companies, and despite representing the best approach for the overwhelming majority of entrepreneurial opportunities, founders of calm companies have very few options for capital, community, and mentorship. Our over-arching goal as a firm to is to listen to this vast and vastly under-served group of entrepreneurs and build what they actually need to help them succeed.
I believe all allocation decisions effectively boil down to: Why this? Why them? Why now?
World class assets. Recurring revenue, high margin, profitable software companies are some of the most valuable economic assets in the world. But valuations in the private markets for software companies that fit a Venture Capital profile have gone off the rails in recent years.
Unique opportunities. Our unique thesis and strategy for investing in calm companies, allows us to invest in companies the rest of the tech investing world simply cannot. This allows us to find genuinely novel opportunities and to broadly invest at much more reasonable valuations. For the vast majority of our investments, the founders are considering working with us or bootstrapping, that’s it.
A strategy that can scale, re-invest, and compound for the long-term. Calm companies represent a market opportunity that is almost by definition an order of magnitude larger than the entire Venture Capital industry. We have built a model that can generate reliable returns even as we scale up to the opportunity. But while hyper-growth companies are almost never able to “pivot to profitability,” calm companies absolutely have the potential to unlock a hyper-growth trajectory in the right conditions. While we are explicitly not “unicorn hunting” in our portfolio construction, every new bet we make contains the implicit upside of potentially being the next Atlassian or Mailchimp (both bootstrapped).
If you want to have exposure to the vast long tail of tech and tech-enabled companies, with less downside risk and faster liquidity than other tech investing strategies, this is one of the only opportunities in the market to do so.