Investment Memo: Sourcing Companies for a VC Investment Thesis
Sections of the investment memo I outlined.
One of the most rewarding aspects of venture capital is identifying and evaluating companies that align with a firm’s investment thesis. Recently, I was tasked with finding three companies that fit a thesis of investing in businesses powered by visual technology and AI with a focus on pre-seed stage investments under $1M across Europe and North America.
The Process of Sourcing—
Sourcing companies for venture capital requires a balance between analytical rigor and creative exploration. I relied on databases, founder networks, and industry trends to uncover startups making meaningful advancements in visual technology and AI. Each potential company needed to demonstrate not only technical innovation but also market fit, scalability, and alignment with the firm's geographical and financial parameters.
The three companies I identified were Mixedbread.ai, Mermaid Chart, and Dust. Each brought unique value propositions to the table:
Mixedbread.ai (my top-recommendation) focuses on embedding generation, advancing semantic and visual search with a disruptive, scalable AI solution.
Pre-Seed | Contributing to embedding generation at the heart of modern AI, driving progress in Natural Language Processing and Computer Vision. | $855K total funding | 4 investors | Founded 2023 | Category: AI, semantic search, software, visual search | Closed its last funding round on Jan 23, 2024 from a Pre-Seed round.
Mermaid Chart is transforming diagramming for enterprise teams, leveraging smart visualization for collaboration.
Seed | Building the next generation of smart diagramming for enterprise teams. Easily create and collaborate on complex diagrams from text. | $9.6M total funding | 13 investors | Founded 2021 | Category: data visualization, information technology, saas, software | Closed its last funding round on Mar 20, 2024 from a Seed round.
Dust uses large language models and semantic search to streamline sophisticated NLP processes.
Seed | For creating sophisticated processes based on large language models and semantic search. | €5M total funding | 23 investors | Founded 2023 | Category: AI, NLP, translation service | Closed its last funding round on Jun 27, 2023 from a Seed round.
Why I Chose Mixedbread.ai —
Of the three, Mixedbread.ai stood out as the strongest fit for the firm’s investment memo. With a focus on democratizing embedding generation for semantic and visual search, this pre-seed startup embodies the core of the investment thesis. Mixedbread.ai is addressing a high-growth market valued at $9.11B in 2022, projected to grow at a CAGR of 17.1% through 2031. By targeting industries reliant on visual and semantic search, it positions itself as a critical player in the future of AI-driven innovation.
What made Mixedbread.ai particularly compelling was its alignment with the firm’s financial criteria ($855K raised in its pre-seed round) and its product roadmap, which showcased a strong focus on scaling with APIs for classification and ranking. Additionally, its founders, with roots in Google internships, bring a combination of technical excellence and startup agility, and a clear understanding of their competitive landscape.
Investment Memo—
Insights Gained—
This task highlighted how deeply interconnected sourcing and due diligence are. While all three companies presented strong cases, it was Mixedbread.ai's combination of disruptive technology, scalability, and market potential that fit the sweet spot of the thesis. However, the process also reminded me of the importance of evaluating risks, such as early-stage uncertainties and reliance on external data sources, which require thorough scrutiny during follow-up discussions.
My Reflection—
This exercise reinforced the importance of clarity in an investment thesis and the need for detailed evaluation criteria. I gained a stronger appreciation for balancing quantitative metrics like funding stage and market size with qualitative factors like team strength and product vision. As someone highly interested in Venture Capital, a core skill I learn is how to play a pivotal role in identifying tomorrow's industry leaders, and each sourcing task sharpens the skills needed to make thoughtful, strategic investments.
