How we invest

Our strategy is to be the lead and first institutional investor in innovative IT and services companies being built by the finest entrepreneurs. We primarily make investments in early companies. Our portfolio will also include de novo investments, in which we leverage our company building expertise and industry networks to found a company around an existing team or technology.

We expect to make initial investments between $0.5 and $3 million, with total committed capital of $6 to $10 million per company. We focus primarily on IT and services companies, allocating a majority of capital to early-stage and de novo investments that leverage our operating experience and entrepreneurial contacts. We reserve a portion of capital for opportunistic investments in more mature companies in industries where we have prior experience and where technology and business model shifts create opportunities for rapid growth.

The cornerstones of our investment strategy are:

• Identify and target next-trend IT technology and services segments
  
• Leverage our broad operational and venture networks to generate unique high-quality deal flow
  
• Utilize our entrepreneurial and operating experience to address early-stage growth hurdles
  
• Apply our insights and experience to start companies when the right conditions exist
  
• Employ back-to-basics capital-efficient venture investing disciplines to optimize portfolio value
  

What we look for

We look for qualified ideas and ventures within our investment focus that demonstrate the following characteristics:

• Run by strong teams who are smart, driven and have big ideas
  
• Address a specific need or pain point in high-growth, established multi-billion markets or emerging market segments
  
• Possess unique, defensible technology, which ideally would be patent-protected
  
• Offer a differentiated business proposition or advantage with the potential to be 1st or 2nd market leader in their segments
  
• Exhibit innovative and highly differentiated business models
  
• Demonstrate investment fit with partner domain expertise, experience and partnership style
  

Within our industry sectors, we look for major transitions taking place in IT, business services and software where we can leverage our deep domain expertise, successful track records and established networks to add meaningful value.

We find the following market segments attractive in our industries:

IT Security and Infrastructure:

• End-point and application security
  
• RFID
  

Technology-Enabled Business Services:

• Supply chain and operational data collection technologies (customer relations)
  
• Services companies that use proprietary content, data analysis and technology tools for the healthcare and education markets
  
• Legal Services: document management, as it is applied to high stakes and compliance-driven markets
  
• Financial Services: unique published research and technology-enhanced investment research
  

Next-Generation Software:

• Open Source software services
  
• Software as a Service (SaaS)
  

How we add value

We have found that high-quality entrepreneurs know that successful company-building requires smart strategy, excellent execution and efficient use of capital. We also know that early-stage companies must judiciously use scarce resources in growing and scaling their businesses and that discerning entrepreneurs seek out investing partners for tangible company-building assistance in addition to capital. We are committed to becoming the partner of choice in this process, providing prompt action and follow up and engaging in a manner that is open, honest and direct. We aspire to be an entrepreneurial management team’s first call when they encounter a challenge, see an opportunity or need some advice.

Our entrepreneurs can expect that our contributions to their company will include:

• Helping create, test and adapt corporate strategy
  
• Providing operational guidance and disciplines
  
• Offering guidance and support on marketing and sales matters
  
• Facilitating customer introductions, including crucial initial customer betas and relationships
  
• Facilitating introductions to potential strategic channels and partners
  
• Introducing and recruiting key executives and building out and developing management teams
  
• Advising in corporate finance, debt and equity financing strategies, M&A and exits
  
• Providing Board leadership and development
  

:: .406 Value

• Smart Strategy
• Excellent Execution
• Efficient Use of Capital

“The .406 Ventures team is able to effectively strike the delicate balance of being an exceptionally strong advocate while simultaneously being a constructive sounding board for your business.”

– Matt Moynahan, CEO, Veracode