Why Investing

  1. Hard to argue with a business that went from $0 to $1MM in revenue in a year. 
  2. Super boring business model that I understand.
  3. Lean team and great margins.


I figured out how to add highlights in Gutenberg via HTML:

<span style="background-color: rgb(232, 234, 235);">
<b><i>Good: </i></b>
<i>Smile Direct Club raised $380 million at a valuation of $3.2 billion in October 2018.</i>

Master Checklist

1. Ssyndicate lead has >5 years investing and >1 unicorn investmentFail
2. A startup that is based in SVFail (Holladay/Salt Lake City, Utah)
3. Has at least 2 founders Pass 
4. Has product in the market Pass: Yes
5. 6 months of continuous user growth or revenue.Pass: Revenue grew from $0 to $1MM in 2018
6. Notable investors?Fail: Bootstrapped, heck yeah
7. Post-funding, will have 18 months of runway Pass: Yes, incurred 113k in second half of 2017, so 226k annual, raised $738k. 
8. Proprietary technology?Fail
9. Network effects?
10. Economies of scale?
11. Great branding?
Pass: (Huzzah for UX cofounder)

Seven Questions

  1. The Engineering question
    • Bad: betting on the kiosk
  2. The Timing question
    • Good: Smile Direct Club raised $380 million at a valuation of $3.2 billion in October 2018.
  3. The monopoly question
    • Bad: not sure why this would be a winner-take-all market. Should be a fairly profitable and straightforward e-commerce play.
  4. The people question: 
    • Good: Startup professionals who were both reasonably senior at exit to start this company. Bootstrapped.
  5. The distribution question
    • Good (with a catch): Smile Love is making a big bet on these kiosks. Uncertain what a growth channel this will be. Otherwise, online economics are good.
  6. The durability question
    • Bad (by default): not sure how much innovation is going on in the teeth aligning space. Unless someone comes out with a radically cheaper and/or better solution. should be durable.
  7. The secret question: 
    • Bad (by default): people want great teeth, and apparently InvisAlign (Smile Direct Club) is not the best solution.

What has to go right for the startup to return money on investment:

  1. Growth of this market continues.
  2. Either proprietary technology is developed or the company develops something more defensible. Somewhat skeptical about this kiosk, but certainly gaining a unique brand and distribution channel would be key.
  3. This company is less of a venture investment and more of a play in e-commerce. I’m 100% fine with that, but good to clear expectations. There are plenty of lucrative e-commerce plays (, Dollar Shave Club, Bonobos)

What the Risks Are

  1. Competition: will Smile Direct Club take its gigantic war chest to choke its competitors a la Amazon and
  2. Technology: whoever Smile Love’s supplier is, what’s to stop another firm from licensing the technology and doing what Smile Love is doing?
  3. Ambition: this business looks like an amazing lifestyle business, and given the governance structure, unsure what the liquidity event would be. 


Review these deal memos every time the startup raises a new round

Test if original thesis still applies

Notice trends in how you think