Alchemy creates competitive ventures between tech hubs
We are venture investors residing in the Pioneer Valley of Western Massachusetts with an investment focus on the North East.
Like most of the rest of the country, our region is a greenfield for venture capital investment, under-indexing major tech hubs by 10-50x per capita. This is largely because it lacks the polished, ready-to-invest deals that venture investors in larger markets are familiar with. From another perspective, however, it is overflowing with opportunity, since it contains all the ingredients which make up great ventures: smart people, technology, business ideas, capital, mentors, and infrastructure.
Alchemy’s innovation is to combine local ingredients into national-quality ventures. We take talented founders, help them upgrade their business model, add differentiating technology, provide seed funding, and assign veteran executives as coaches. This yields high-potential deals with attractive returns for investors, de-risks the deals during their critical formative stages, and creates a genuine partnership with the portfolio companies we serve. It also catalyzes local economic development.
This approach catalyzes local economic development, and rallies the latent resources in our region, whether they are entrepreneurs, technologists, investors, executives, or some combination. We welcome interest and inquiries from anyone interested in playing a role in this system.
We are venture investors residing in the Pioneer Valley of Western Massachusetts with an investment focus on the North East.
Like most of the rest of the country, our region is a greenfield for venture capital investment, under-indexing major tech hubs by 10-50x per capita. This is largely because it lacks the polished, ready-to-invest deals that venture investors in larger markets are familiar with. From another perspective, however, it is overflowing with opportunity, since it contains all the ingredients which make up great ventures: smart people, technology, business ideas, capital, mentors, and infrastructure.
Alchemy’s innovation is to combine local ingredients into national-quality ventures. We take talented founders, help them upgrade their business model, add differentiating technology, provide seed funding, and assign veteran executives as coaches. This yields high-potential deals with attractive returns for investors, de-risks the deals during their critical formative stages, and creates a genuine partnership with the portfolio companies we serve. It also catalyzes local economic development.
This approach catalyzes local economic development, and rallies the latent resources in our region, whether they are entrepreneurs, technologists, investors, executives, or some combination. We welcome interest and inquiries from anyone interested in playing a role in this system.
How we work - We’re builders, not judges
We look for projects which could reach enterprise scale, run by teams who are capable (with our help) of reaching a Series A stage of maturity. Enterprise potential means that the firm has a unique approach to a core need in a multi-billion dollar market. A capable team means that they demonstrate rapid progress, that they internalize our coaching, and that any gaps which remain our team can fill. The complete project has a thoughtful fit of who, what, and how. In these ways, we are indistinguishable from all the other seed funds in the world.
The unique thing about Alchemy is how we deal with the central problem of seed investing: few projects start out being investable. So instead of being picky while combing through a large pile of deals, which isn’t an option in our market, we think of projects as starting out with some subset of the right ingredients: team, product/market, operating model, and capital strategy. When we see compelling puzzle pieces, we lay out a testable hypothesis on what the rest of the picture might be, then get to work filling it in.
This typically starts with a talented founding team, for whom we identify a larger market adjacent to the one they initially selected, map out a differentiated and technology-driven product, and add an operating model or channel strategy to tie it together. This creates a venture which is viable on paper.
We then work with the team to fill gaps, such as missing founders, and to do customer discovery. This is behavioral due diligence, and it’s mutual – we collectively decide whether to commit to the new venture, and also learn what it’s like to work together. Successful projects tend to come along quickly, as if they were meant to be, while slower ones often have something missing. Some projects fail because the hypothesis is wrong. The market could turn out to be small, or customers indifferent to the offering. More commonly, the team doesn’t fully adopt the larger goal, or adapt rapidly enough to new information, or accept coaching.
We also find that working with a team tells us more about them than any amount of diligence ever could. This mitigates the inherent risks of seed investing, since we know the teams can execute and we are on hand to help with the inevitable strategic shifts which new companies must make.
Alchemy matches funded teams with local mentors and plugs them into a pre-built back-office and legal document library. We usually help syndicate the rest of the seed round. We then coach the venture intensively, de-risking our investment by helping to rapidly iterate on market feedback and make intelligent pivot decisions. This ends up removing many of the common reasons why start-ups fail, raising our success rate.
Our approach looks more like a highly active, micro-scale PE firm than traditional venture capital. We put more time into fewer deals, making up the economics with dramatically better valuations. We run a super-lean cost structure, avoiding fixed expenses like offices or support staff. And most importantly, we mitigate early-stage risk by being close enough to help make the big decisions.
We’re industry and technology agnostic
We will invest in whatever we find that has local roots and a clear shot at being a $100M+ company.
Some of our projects use technology. When product function is the critical ground, and technology (rather than brand or channel partnership) is decisive, we look for technology which is already in wide use among experts. We prefer methods which are well established at the PhD level within a field, such as computer vision or differential privacy, to research in a specific scholar’s lab, such as a new algorithm. We prefer laboratory techniques, which work today, to emerging theory or models. There is value to applying emerging technologies to industry problems, and it’s hard work. We find that publishable research is, by definition, several years away from being ready to support a product or service, and while we love technology, we aren’t patient people.
We’re also practical. We look for ventures which can get to positive cash flow using seed stage capital available within our region, which is typically $1-3M per venture. This creates an option: keep growing the business using smaller cash infusions, stay organic, or go to a tech hub in search of institutional rounds. This strategy gives us access to capital markets but doesn’t slave us to tech investment fads. We can be contrarian, in other words, rather than having to chase the next blockchain. This also means we can’t participate in certain markets which require huge amounts of capital, such as drug discovery or rocket launches. We also can’t participate in later rounds. Both of these limitations are healthy, because in the first case we don’t have the expertise, and in the second case we don’t like the valuations.
Why it works
Three reasons. One is that we have unique access to high-quality ingredients. There are too many investors looking in tech hubs. Therefore the best returns are available elsewhere. This is no knock on Silicon Valley, just pointing out that it’s fully valued. It’s the difference between saying that Apple is a good company and thinking its stock is a good buy at any price. By creating our own deal flow in an under-exploited market without direct competition, we get more than our share of the most talented people, and at a valuation we can afford.
Second is that we can ensure projects pursue goals large enough to matter. Some ventures get the goal wrong. They target a small market, in other words, or an insufficiently unique product. This sets them up to fail even if they execute correctly, ending up with a small business. We mitigate this by getting the strategy right up front.
What’s left are fundamentals: whether the technology works at scale, whether customers use and like the real product once you launch it, or how the channel and competitors respond. There are always things ventures find along the way, regardless of how much diligence they do up front. Limiting our exposure to one thing – being wrong – transforms our risk profile. It’s still a business of buying lottery tickets, but at least all of the tickets get scratched off.
Build a portfolio of Pioneer Valley firms who can compete nationally against the products of major incubators such as Y Combinator or TechStars.
We spent the next 18 months figuring out how to do this. We visited university labs, sought out local entrepreneurs, interviewed doctors in local medical systems, and explored the industrial base. We looked at case examples from regions, including our own, who have tried to do this. Along the way, we learned several things.
We look for projects which could reach enterprise scale, run by teams who are capable (with our help) of reaching a Series A stage of maturity. Enterprise potential means that the firm has a unique approach to a core need in a multi-billion dollar market. A capable team means that they demonstrate rapid progress, that they internalize our coaching, and that any gaps which remain our team can fill. The complete project has a thoughtful fit of who, what, and how. In these ways, we are indistinguishable from all the other seed funds in the world.
The unique thing about Alchemy is how we deal with the central problem of seed investing: few projects start out being investable. So instead of being picky while combing through a large pile of deals, which isn’t an option in our market, we think of projects as starting out with some subset of the right ingredients: team, product/market, operating model, and capital strategy. When we see compelling puzzle pieces, we lay out a testable hypothesis on what the rest of the picture might be, then get to work filling it in.
This typically starts with a talented founding team, for whom we identify a larger market adjacent to the one they initially selected, map out a differentiated and technology-driven product, and add an operating model or channel strategy to tie it together. This creates a venture which is viable on paper.
We then work with the team to fill gaps, such as missing founders, and to do customer discovery. This is behavioral due diligence, and it’s mutual – we collectively decide whether to commit to the new venture, and also learn what it’s like to work together. Successful projects tend to come along quickly, as if they were meant to be, while slower ones often have something missing. Some projects fail because the hypothesis is wrong. The market could turn out to be small, or customers indifferent to the offering. More commonly, the team doesn’t fully adopt the larger goal, or adapt rapidly enough to new information, or accept coaching.
We also find that working with a team tells us more about them than any amount of diligence ever could. This mitigates the inherent risks of seed investing, since we know the teams can execute and we are on hand to help with the inevitable strategic shifts which new companies must make.
Alchemy matches funded teams with local mentors and plugs them into a pre-built back-office and legal document library. We usually help syndicate the rest of the seed round. We then coach the venture intensively, de-risking our investment by helping to rapidly iterate on market feedback and make intelligent pivot decisions. This ends up removing many of the common reasons why start-ups fail, raising our success rate.
Our approach looks more like a highly active, micro-scale PE firm than traditional venture capital. We put more time into fewer deals, making up the economics with dramatically better valuations. We run a super-lean cost structure, avoiding fixed expenses like offices or support staff. And most importantly, we mitigate early-stage risk by being close enough to help make the big decisions.
We’re industry and technology agnostic
We will invest in whatever we find that has local roots and a clear shot at being a $100M+ company.
Some of our projects use technology. When product function is the critical ground, and technology (rather than brand or channel partnership) is decisive, we look for technology which is already in wide use among experts. We prefer methods which are well established at the PhD level within a field, such as computer vision or differential privacy, to research in a specific scholar’s lab, such as a new algorithm. We prefer laboratory techniques, which work today, to emerging theory or models. There is value to applying emerging technologies to industry problems, and it’s hard work. We find that publishable research is, by definition, several years away from being ready to support a product or service, and while we love technology, we aren’t patient people.
We’re also practical. We look for ventures which can get to positive cash flow using seed stage capital available within our region, which is typically $1-3M per venture. This creates an option: keep growing the business using smaller cash infusions, stay organic, or go to a tech hub in search of institutional rounds. This strategy gives us access to capital markets but doesn’t slave us to tech investment fads. We can be contrarian, in other words, rather than having to chase the next blockchain. This also means we can’t participate in certain markets which require huge amounts of capital, such as drug discovery or rocket launches. We also can’t participate in later rounds. Both of these limitations are healthy, because in the first case we don’t have the expertise, and in the second case we don’t like the valuations.
Why it works
Three reasons. One is that we have unique access to high-quality ingredients. There are too many investors looking in tech hubs. Therefore the best returns are available elsewhere. This is no knock on Silicon Valley, just pointing out that it’s fully valued. It’s the difference between saying that Apple is a good company and thinking its stock is a good buy at any price. By creating our own deal flow in an under-exploited market without direct competition, we get more than our share of the most talented people, and at a valuation we can afford.
Second is that we can ensure projects pursue goals large enough to matter. Some ventures get the goal wrong. They target a small market, in other words, or an insufficiently unique product. This sets them up to fail even if they execute correctly, ending up with a small business. We mitigate this by getting the strategy right up front.
What’s left are fundamentals: whether the technology works at scale, whether customers use and like the real product once you launch it, or how the channel and competitors respond. There are always things ventures find along the way, regardless of how much diligence they do up front. Limiting our exposure to one thing – being wrong – transforms our risk profile. It’s still a business of buying lottery tickets, but at least all of the tickets get scratched off.
Build a portfolio of Pioneer Valley firms who can compete nationally against the products of major incubators such as Y Combinator or TechStars.
We spent the next 18 months figuring out how to do this. We visited university labs, sought out local entrepreneurs, interviewed doctors in local medical systems, and explored the industrial base. We looked at case examples from regions, including our own, who have tried to do this. Along the way, we learned several things.
- There are incredibly deep pools of technology available. Many are hiding in plain sight, outside the university’s licensing department, and haven’t yet been applied to big industry problems.
- Business ideas are also plentiful. There are more viable opportunities floating around than any of us will get to in a lifetime. And it’s not that hard to come up with additional ones.
- The best diligence is working with teams towards a shared goal. The best risk mitigation is to be alongside teams when they make their most critical decisions.
- Rigid theses screen out the most interesting deals. Every one of our investments, for instance, broke one of the guidelines we started with. The only question which matters is: with our support, can this be a world-class company?