Our Thesis

Since it has been some time since we first addressed this topic, made when Fundamental Financial was founded, we feel an update is in order.

The Opportunity Today -- and Beyond

In the spirit of getting straight to the highlights, here is the summary of how we see the landscape today:

 

  • Great business ideas and exceptional entrepreneurs are as plentiful as ever
  • Traditional venture capital remains on its “grander is better” track and has effectively left the scene for all but a handful of what these investors see as the “biggest” ideas.
  • Banks are still effectively off the scene for many of the rest. They are itching for growth, but the regulatory leash remains tight (quite appropriately so, in our view).
  • The most progressive and professionally run finance companies are increasingly becoming the “go-to” financial partners for many emerging and high-growth companies. Angels are also doing their part when equity is genuinely needed.

 

Many of the entrepreneurs that run emerging and high-growth companies are delivering that growth in spades -- through innovation, execution, and determination. But they need capital to make it happen. They need a reliable financing partner.

Fundamental is, of course, a finance company -- and we remain firmly committed to being the leader through the intersection of progressive and professional. We continue to be focused on providing the most creative working capital solutions available anywhere: Lines of credit, asset-based loans, venture debt, and accounts receivable and inventory financing, to name the core.

The opportunity today looks remarkably like the one we saw in 2008 -- when we started Fundamental.  Here was our first thesis, from our original business plan.

 We are even more excited about what we see today than we were back then.

 

The Companies We Back

We still direct our money based primarily on the same three straightforward criteria:

 

1. Exceptional Entrepreneurs

For us, it starts with the person or people behind the business. We think the evidence is overwhelming that the best companies are those run by the best entrepreneurs. Very often, venture capital and private equity will make lofty distinctions between founders and managers -- that the role of a founder should “evolve” over time, and that it is necessary to bring in professional managers to make the trains run on time. We don’t see the world being so neatly organized.  There are certainly plenty of success stories spawned by professional managers.  There are also many founder ones. Take a quick mental test of the companies you admire most. Do the ones best run by the founder(s) more easily come to mind? They do for me -- Apple, Google, Amazon, the list goes on.

We seek to back exceptional entrepreneurs, whether others call them founders, managers, both, or neither. There is a lot that goes into to being an exceptional entrepreneur.  Here is a post on what being an exceptional entrepreneur means to us.

In the end, we back the entrepreneur more than anything else.

 

2. Equally Exceptional Value (For the Entrepreneurs We Back)

We are experts on growth capital for emerging and high-growth companies, particularly those with a large working-capital component (i.e. companies that have a lot of accounts receivable and inventory). We often come across entrepreneurs (and even sometimes the investors who are backing them) who have decided (often unequivocally) that our solution is exactly what their company needs. Just as often, however, we come across entrepreneurs and investors that have concluded our solution is not what their company needs. Many times, these entrepreneurs have judged correctly, and many times they have not. The difference comes down to those that have taken the time to understand the type of capital they need. The ones that have a large working-capital requirement and understand that it both can be leveraged (under certain circumstances) and is the most efficient way to finance it is by using one of the products we offer. We are able recognize our view of the right answer regardless of the entrepreneur’s predisposition -- and know whether or not Fundamental can add value and if it is the best option for the entrepreneur’s company.

We understand that the phrase “adding value” and “best” can mean different things to different people. So we will clarify what it means to us -- that the solution offered by Fundamental is the “superior” alternative for the company, as compared to all others available at the time. By “superior,” we mean from the financial point of view of the entrepreneur and his/her investors. Adding great value to the companies we back -- from their vantage point -- is what adding “equally exceptional value” means to us. Here is an entire post dedicated to the details of Equally Exceptional Value. This highlights how we determine whether or not we can add value -- and if we can add a lot of it.

Simply put, if we can add a lot of value to entrepreneurs and their companies, we’ll be very interested -- and persistent.  If we can’t, we won’t.

 

3. Where We Work

Building a great business is nothing if not a competition. So further describing the “where we work” notion (i.e. the companies we can best help) is pretty important.  You already know how important it is for us to partner with exceptional entrepreneurs and do so in situations where we also feel we can add equally exceptional value. If I had to offer and expanded description of the companies we back and do so in only one sentence, it would be this:

"We back exceptional entrepreneurs building emerging and high-growth B2B companies that are generating $500,000 to $50 million in revenue, located in the United States and Canada.”

There are, of course, other things we consider, but this statement covers it pretty well. For more details on where we work, read more about Where We Work.

 

An Optimistic Outlook

Taken together, this is our thesis and we’ve never been more optimistic about our ability to make a real difference for the entrepreneurs we back than we are today.

For more information on Fundamental Financial -- and how we may be able to help your business -- check out our About page, as well as our company blog.

And let us know if you have any questions. We’re always happy to talk. You can reach us by calling 866-442-4040 or emailing us at fundamental@fundamental.com.  We look forward to hearing from you.