Unsolicited investment pitches are a lot like getting hit on at a bar. Someone comes up to you and starts telling you all of the things they think you want to hear and presenting themselves in the best, most utterly unrealistic, light in the hope that you will be charmed by them and ultimately never notice all of the bad parts or by the time you do – it will be too late – and you will be stuck with them. As a fiduciary of our investors, this should seem like a horrible way of going about making an investment decision.
At Spectrum, we take a considerably more “rational” approach, which is to say that we are often setup by friends. We are fortunate to work with a network of diligent and talented professionals, who we have built relationships with and who understand our investment model and what it is that we are looking for when we invest in companies. Utilizing our network allows us a much broader reach as we are able to access investment opportunities that we otherwise would have never heard about. Having trusted advisors as a filter also allows us to review much fewer companies and have a much higher likelihood of finding a fit as they have been pre-screened.
We also go out and look for companies on our own, this is frequently based upon an investment thesis from our team regarding a specific sector or type of company. Once we have developed this thesis, we start looking around for companies in the sector who we believe have a significant differentiation and then work to understand how additional capital would facilitate their enterprise growth.
While this more limited approach may cause us to occasionally miss out on the next big thing, we believe that it provides our stakeholders with the best opportunity to achieve long-term value creation.
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