For most sectors, there is a small set of investors that specialises within that space. Such investors are easy to identify by virtue of their historical investing pattern, which shows a large percentage of total investments in a given sector. In the below post, we distinguish between sector familiarity and specialisation (while also explaining how B2B Software is a unique mega sector).
Familiarity vs. Specialisation
Investors that are familiar with a given sector are ones that have made several investments in that space. As an example, investors that have made a minimum of "3" investments in Fintech are familiar with that sector. Such investors can be easily identified using the "Minimum # of Investments in Selected Sectors" filter.
Investors that specialise within a given sector are ones that are concentrating their overall investments portfolio within that space. As an example, investors that have made 10%+ of their total portfolio investments in Fintech are specialising in that space. Such investors can be easily identified using the "Minimum % of Investments in Selected Sectors" filter.
Our product documentation brings further clarity on how to identify and when to pursue investors that specialise in a given sector (versus ones that are familiar with it).
Historically, founders have relied on word of mouth to identify sector specialists. As the venture landscape matures, founders are increasingly relying on empirical data to determine sector specialists. This is best achieved via two distinct methodologies.
Pursuing Sector Specialists
In our conversations with thousands of founders that are actively raising, we observe a pattern whereby founders report high-fidelity and high-context conversations with investors that specialise within their sector. This trend seems to be most prominent with founders that are building in niche sectors (I.e. robotics, productivity software, etc.). Below, we have shared examples of sector specialists that have deep expertise within their spaces:
- Goodwater Capital: With more than 30% investments in Consumer, Goodwater is best known for deep expertise and specialisation within Consumer.
- QED: With over 40%+ investments in Fintech, QED brings deep expertise within Fintech (enabling them to lead 50%+ of all Series A rounds in which they invest).
In most scenarios, founders find it particularly useful to engage with sector specialists that really understand the space and can engage from a position of deep industry knowledge. In some cases, however, it may become critical to pursue sector specialists:
Recommended Treatment for B2B Software
Historical data on venture activity shows that about ~70% of all rounds over the past decade came from companies building in the B2B Software segment. In the realm of B2B SaaS, companies should be able to target a broad variety of investment firms (as most investors are open to investing in B2B SaaS).
Within B2B SaaS, however, there may be specific sub-sectors that require or benefit from sector specialisation. Examples may include enterprise software or productivity software whereby there may be important attributes that are unique to that sub-sector. Therefore, B2B SaaS founders might be best off considering investors that specialise within a given sub-sector.
