Bloomberg Investing Manual

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   Operating Manual ================ ## Contents ### [Our investor, Bloomberg L.P.]( ### [What we look for in a startup]( ### [The deal terms]( ### *Our “products,” or, models for how we work with founders+(https://gi ### [How we support our companies]( ### [Finding us]( ## Our investor, Bloomberg L.P. Bloomberg L.P. is our sole investor. We appreciate many things about our investor: Bloomberg is a very different kind of company. Bloomberg is a pioneer -- it created one of the srcinal SaaS businesses, the first professional social network, and invented many practices that are now widely adopted by startups. We hope startups will be inspired by Bloomberg’s example, as we are.  Bloomberg knows and respects technology and technology companies, is set up to be independent-minded, and builds toward long-term value. Bloomberg was created 30 years ago on a then-controversial idea -- that information in financial markets should be more widely shared. Bloomberg has reached global scale and influence, with more than 15,000 employees in almost 200 locations -- and yet it is still a private company, held by its founders.   Why did Bloomberg L.P. create Bloomberg Beta? Bloomberg wants a window onto the world of startups to understand meaningful trends early, and know founders and companies long before it becomes obvious that they will be significant. To do this, Bloomberg wants a way to support founders and collaborate with them that doesn’t involve an ordinary commer cial relationship. (Many startups are not ready to partner with Bloomberg -- or any established, larger company -- until they’ve grown, settled on a direction, and decided to make a partnership a priority. That can take as long as a few years after the company is founded.) Bloomberg L.P. invested in Bloomberg Beta to open that window to startups, and set it up with a structure that is rare for a corporate-sponsored firm -- a true fund that invests for financial return, not an “operating division.” Bloombe rg knows that great founders want investors whose interests are fully aligned with their own. So Bloomberg Beta is set up to choose its own investments, and back companies solely on their merits and financial potential, regardless of whether they have (or intend to have) a business relationship with Bloomberg. We do focus exclusively on areas that are of relevance to Bloomberg -- we wouldn’t invest in a videogame, or a consumer e -commerce site for example. One way to think of our focus: we look at the worl d of work. If you’re focused on making leisure or family life better, we’re probably not your people.   Ultimately, Bloomberg L.P.’s founders have succeeded at doing what we hope to help other companies do -- create something extraordinary. ## What we look for We recognize that seeing early signs of greatness is hard, and nobody’s cracked how to do it reliably. That said, there are a few things we do look for: certain qualities of a founding team, an early product, and the right moment in a company’s life.  We also focus on investing in areas where we think we can be helpful. ### Founders We look for a reason to believe a founding team is extraordinary. Not that they have the perfect skills or experiences to match the business they want to build (which is where the “team” slide in the deck tends to focus), but that they have the capacity for greatness.  What gives us a sense the founders could be extraordinary? Often times, they just have an unusual psychology -- they think they are exceptional, see grand patterns others don’t, they are indifferent to norms, and they may have an exceptionally high pain threshold. We are inspired by Michael Dearing’s description of the *cognitive distortions of founders]( So much of backing founders is about trust -- many of the companies we’ve backed are led by people who we’ve known for years, and grown to trust. If we don’t know you ourselves, we prefer if someone we trust knows you. Otherwise we find it hard to trust our impressions of you after a meeting or two; first impressions are so unreliable. That said, we’ve backed founders who we only  just met -- sometimes you “just know.”   We have passed on companies because we didn’t think the founders were cr azy enough -- they seemed too textbook. (And we don't mean their appearance or background, we mean their level of extraordinary determination, willingness to try, or insight.) We also are committed to diversity and especially encourage founders of underrepresented communities to speak with us about their companies. We believe that a community of companies is stronger the more different viewpoints come to the table, and we're happy to speak more about our record in this area with founders who are interested. ### Product We prefer to see products that are intensely successful in some initial market, over products that grow to large numbers but don’t play an important role in the lives of their users. We like for a product to be the most important service to at least some of its users. We like products we ourselves would use and understand. We’ve been technology buyers, software developers, founders, entry-level employees, and of course consumers of many types of media -- so the range of products we might use and understand is broad. If a product is launched, we care about how well it is doing -- the famous “traction” -- but we tend not to focus on absolute numbers. We focus on month-over-month (or, in earlier-stage cases, week-over-week) growth, ask questions about how different cohorts of users behave, and try to understand the per-user behavior (how much does any one user really value the product). ### Stage  We strongly prefer to be the first money into a company, and to invest as early in the startup's life as possible. If a startup incorporates itself to take money from us, that's great. This isn’t so much a rational investment calculation (arguably there is less competition to write bigger, later checks) -- but it’s a matter of our style. This just h appens to be what we like. We make exceptions when there is some other good reason (a founder or company we just couldn’t resist).   “First money in” doesn’t necessarily mean lead investor -- sometimes we are the only ones at the table, sometimes one of many. Sometimes the founder sets the terms, sometimes another investor does, sometimes we do. We don’t think that matters.  We are more than happy to invest in companies that might take a very long time to prove they are on to something -- our investor, Bloomberg, has a decades-long view and is willing to build for the long-term. We do not have a fixed time horizon to expect our companies to return capital. In fact, we prefer companies who are building for permanence. In a world of small add-on ideas, we prefer the truly meaningful ones. ### Geography Greatness can start anywhere, but we can really only help if we’re nearby. We are heavily biased toward investing in companies we can see in person. That means San Francisco and New York since our team is in both of those cities. Our team has deep roots in both places so our ability to bring in local folks that can help is greater there. This isn’t to say that we won’t consider an investment elsewhere (for example if an area has a deep specialty, as some regions do with security startups), but we’re very careful to choose companies where we can be disproportionately helpful, and being local is a real part of that. We have invested outside of San Francisco and New York a couple of times (Seattle once… and we’d consider Boston and Washington, DC), though it is rare. ### Sources We find investments in many ways, but our favorite is for founders we have already backed to refer other founders. Founders are our customers, and we believe in doing more than waiting to be introduced to them -- we want to get to know them early. So we have developed a model in partnership with Mattermark, to predict who are the people in Silicon Valley and New York statistically most likely to become

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Jul 23, 2017
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