As 2019 comes to a close, it can be rewarding to reflect on our progress since our angel investing fund was first established. At beginning of the year, we met many startup companies in the DC area and along the East Coast seeking investment to grow their business. We also learned that while there is plenty of capital available in the DC metropolitan area, there are a limited number of funds dedicated to
helping startups. Therefore, some DC areas startups have to fly to the West Coast to look for capital to fund their growth. We recognized the need, and we seized the opportunity to launch our GCAIA Capital fund in June 2019. We feel strongly that investment made to startup companies, if done prudently, diligently, and with patience, will reward us tremendously.
Before we discuss our investments in 2019, we would like to briefly review a couple of notable developments relevant to us. They have had an effect on the investment approach we took in the last few months.
First of all, it is evident that there is a huge gap in the valuation of unicorn companies by private equity assessment and public expectation. This became apparent when Lyft and Uber went public early in 2019 and was underscored by the WeWork IPO process. The dismal performance of these companies has caused investors to re-evaluate their investment approach. More and more private equity funds now demand a startup show not only a customer base and disruptive technology, but also the path to profitability. This transformation certainly affects many angel investors, including us, by influencing how they value a potential investment. For example, one of the companies we looked at demonstrates a disruptive technology. However, when the company could not show us the path to profitability in the next ten years, we decided not to invest.
Secondly, 2019 has seen a dramatic change in attitudes towards tech companies and new technologies. The general public and government are growing suspicious of them. This is reflected on both the domestic and international fronts. Domestically, the implicit trust tech companies have enjoyed for so long is now dwindling, which will certainly lead to broad government oversight. We expect to see more and more regulations being enacted on the tech industry in the coming year. On the international front, we have seen many restrictions placed on technology transfers, especially to those perceived as hostile actors. Many believe that the ever evolving technology landscape has reached a point that even pure commercial technologies can have ramification for national security. This is supported by numerous examples of commercial-origin technology that has had unintended consequences for national security. The current regulatory regime is beginning to adapt to this new reality, meaning that all technology related investments will be subjected to tight scrutiny in the foreseeable future.
It is against this backdrop that your fund formed its investment strategy. In particular, we believe that investing in only startups within the United States of America will insulate us from unnecessary negative geopolitical impact.
Since the launch of the fund, your managers have been working meticulously to seek out good investments. We have set a high standard for ourselves. We seek companies that 1) have an experienced management team; 2) possess products or services that provide innovative solutions or address unmet needs in the market; 3) have a credible plan for growth and exit; 4) offer reasonable terms and valuations. After reviewing and performing due diligence on about 100 companies, we invested in a handful of them. I am happy to report that all the companies we invested in 2019 are in possession of patented technologies in their fields. Except for Gemstone Biotherapeutics, which is
waiting for the FDA’s final 510K approval, they have all developed marketable products, established their own customer bases, and generated revenue. Among them, NextDroid’s revenue has exceeded $10M.
In the coming year, we plan to continue looking for quality investment opportunities. In addition, we will continue to grow our fund, seeking investment infusions from investors local and abroad. Our goal is to build a portfolio of 20-40 startups. We will not be constrained by any timeline. Rather, we will invest whenever we find quality companies that meet our investment criteria.
Thank you for placing your trust in us. Best wishes to you and your family for a happy and healthy new year.