Fairbridge Park Posts

Building a Business (Part 2/2) - Fairbridge Park Investment Criteria

January 31, 2022
David Tswamuno

In Part 1 of this series, I shared a summary of the thesis for our first fund. At Fairbridge Park, we believe that we are at an inflexion point of the effectiveness of the tools employed to build businesses and of the philosophy of the mandate for companies. We believe we will see increased harnessing of technology within commercial enterprise to tackle pertinent challenges faced by society today. In this post, I will go a step further and summarize the criteria for what we consider a great investment.

 The table below highlights the principles that differentiate our portfolio companies. While these principles are mostly straightforward, I want to provide some context for point #2:

  • Analog sensibilities: In the 2010s, we backed many e-commerce entrepreneurs. Some of our companies’ growth was stunted by skyrocketing marketing costs, poor merchandising, and absence of defensible assets. For example, to optimize for distribution, we built very narrow assortments of product e.g., offering just socks or underwear. It soon became clear that e-commerce wasn’t sufficient for venture-level scale. However, cracking physical retail proved challenging.  We realized that socks/underwear are just a small part of an apparel business’ assortment and that the economics of space ($ per sq.ft.) simply didn’t work. Other factors such as large working capital requirements, a high proportion of rising variable costs etc. piled on, reducing ROI. Entrepreneurs with “Analog Sensibilities” i.e., a deep understanding of traditional versions of their businesses, tend to be more astute operationally and commercially, and can leverage technology better. At Fairbridge Park, we believe that technology in itself is not the answer, but an amplifier of intent.
  • Defensibility: Many e-commerce organizations work with outsourced manufacturers, PR firms, digital marketing agencies -- often the same ones used by their competitors. The home office is usually a command center to coordinate vendors and to communicate and execute the positioning of the company to customers and maybe potential acquirers. Where the proposition is not sufficiently developed towards brand, there is often not much residual economic value.

What We Look for in an Investment

We love connecting with entrepreneurs who share our values and whose businesses fit our investment criteria to explore opportunities to work together!

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