In 1999, Mike Walsh cut his first check as a hobby venture capitalist to a little-known cloud startup called Salesforce.com. He used the company’s product as a customer first, and liked it enough to invest.
Almost two decades later, Salesforce does over $8 billion in revenue annually, and has a market cap of $94 billion. Walsh gave half his stock to his dad, a plumber, as a birthday present and sold the other half after the company went public in 2004. He continued to write angel investment checks while also running a software company that provides social networking services to enterprises.
Lightning struck twice when Walsh, still a startup CEO, signed on as one of the first investors in Uber in 2010 and saw massive returns, which encouraged him to focus full-time on venture.
“I was two for two,” Walsh told Business Insider.
Today, Walsh helps run Structure Capital, an early-stage venture fund that he started in 2013 with some of the earnings from his Uber deal. The fund invests almost exclusively in sharing economy companies whose goal is to reduce waste by putting under-utilized assets — such as people, spaces, and vehicles — to work. He manages the firm alongside partners Jillian Manus and Jacob Shea.
Structure Capital has invested in roughly 140 companies, ranging from Wag, an “Uber for dog-walking” app, to Honk, a company that provides on-demand roadside assistance as fast as Uber hails a car. Walsh shared with Business Insider his technique for sourcing deals that blow up.
How to pick a winner
Walsh had built a reputation for spotting billion-dollar-plus “unicorns.” In the early days of Structure Capital, he was already receiving around 100 pitches per month. At first, he only took meetings with sharing economy companies, simply as a way to “filter” his inbox, Walsh said.
One of the first thing he asks himself when he’s evaluating a startup is: “Do we think we know a thousand people, socially, who will use this thing?”
Later, Walsh and his partners settled on 10 criteria for deciding whether or not to invest in a company. These include market size, differentiation, and what he perceives as founders’ grit.
He asked, “What will it take for the founders to give up? When will they quit?”
Ultimately, Walsh said as much as 75% of the decision comes down to a gut check.
He asks himself if the founders are “people we want to hang out with” and, most importantly, people who “treat people the way we think people should be treated,” Walsh said.
He said if there’s a “gigantic opportunity and we just don’t like the founders,” Structure Capital won’t make a deal. The opposite is also true: They’ll invest if the opportunity is marginal but the founder shows enthusiasm, strong values, and a commitment to giving back to the community.
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