Disruptive Capital for Disruptive Ideas
Cottonwood Technology Fund is a top-decile performing early stage venture capital fund. Cottonwood Technology Fund is active on two continents (USA & Europe) and has offices in the USA and in The Netherlands. Cottonwood Technology Fund provides disruptive capital to disruptive technology businesses. Cottonwood’s investment approach and focus is on hard science, pre-seed, seed and early stage funding (Series A).
Typically Cottonwood invests between 1M and 3M from the start (mostly pre-revenue / pre-customer) as lead investor from the start to the end.
This stands in contrast to the dominant VC model, which focuses on later stage consumer and niche technology companies which creates limited big winners and low average returns with many losers.
Cottonwood invests primarily in the Southwestern USA and Northwestern Europe. The Cottonwood team screens around 400 – 600 technologies & companies per year, but invests only in 2 to 3 new disruptive companies per year (0.5% of all opportunities). In total we lead 8 – 10 investments per year (including Series B, C, D, E, F follow-on rounds).
Our investment criteria:
- Compelling idea/compelling market
- Is the technology advancement significant / disruptive?
- Is there a sizeable addressable market ?
- Multiple markets or multiple product lines possible ?
- Difficult to duplicate?
- Is the technology protected by patents and/or difficult to duplicate?
- Cottonwood’s value-add
- How do we leverage our network?
- What resources can we call upon to assist the entrepreneur?
- Syndication partners
- Is there additional value-add funding with industry expertise available?
We are enterprise builders and roll-out our companies on a global scale.
Key Success Factors
Cottonwood Technology Fund
- Screening & scouting: proprietary deal-flow
- A larger first round (connect technology partners & attract top management)
- Attracting board members from the corporate network
- Technology assessment with corporates before investment
- Hands-on mentoring, active on the board
- Opening doors within our worldwide corporate network
- Focus on capital for follow-on rounds
- Global network with technology partners & ecosystems
- Investment criteria: focus on disruptive technology which can be used in multiple markets and/or in different product lines & technology which is difficult to duplicate (focus on strong IP)
- An excellent venture capital team
By the numbers
capital raised in total
~ 1 : 11
Photonics & Optics
High Tech Health
Clean Energy & Robotics
We would not exist, or certainly not in New Mexico, if it were not for Cottonwood. Until Cottonwood got involved we struggled to get attention from other capital providers. Cottonwood has been a real catalyst, beyond their money, to upgrading our management team, opening doors to potential strategic investors and customers and focusing on our market entry strategy. Cottonwood has been a great partner in driving our success in every area. I truly believe they wake up every day looking for ways and ideas that can support our success.
— Justin Eisenbach, President and CEO, Bayotech Corp
Cottonwood invests more early money € 1 – 3M (not 200 – 300K). With the extra money we syndicate to add technology expertise and adding key management (board members with industry expertise and top management) and reaching value inflection point milestones.
Cottonwood is active on the board (“we roll-up our sleeves”), providing guidance, recruiting additional capital, potential strategic partners and key customers. Cottonwood has a unique global ecosystem and relevant top-level contacts with more than 60 corporates.
Focus on follow-on capital
From the beginning we start to focus on raising a Series B round (average 5-10 million). After raising the B-round we start preparing the C-round (15-30M+). We succeed in > 50% of our investments in raising a B-round. In 2018 we leveraged with more than 110M additional capital for our portfolio.
“Money is the fuel behind exponential growth!”
Success in building initial enterprise values by more than 1B. 6.0X increase in portfolio value. 17 investments, 40M invested, total capital raised in total > 440M, around 11X investment leverage.