Welcome back to The Sunstone Way.
If you go to the Sunstone Management, Inc. website, you’ll see that the first premise of our investment philosophy is that we are Founder Focused. Even before that, it says in the very first sentence of “Who we are” that we invest in early-stage technology entrepreneurs.
And we do it. Earlier this month, PitchBook’s second quarter rankings put Sunstone 18th in the country of most active venture capital firms, and the seventh most active in the early-stage investment category.
Just what do we mean by early-stage, and why is that where we put our resources? That explanation will help me illustrate the Sunstone Way – the why and how we do what we do.
Opportunity for Greatest Impact
In general, the greatest opportunity for impact is at the earliest stages of any new endeavor. Whether it is learning to walk or starting a new business, the early stage is often the most difficult but also the most rewarding. Energy, excitement, progress and growth are often most tangible at the early stages but begin to level off over time. Impact is greatest at the early stages which is why so many of us remember our middle and high-school teachers or coaches as having the greatest influence on the trajectory of our lives.
The same holds true for the economy. At Sunstone we believe that we can have the greatest impact on businesses at the beginning, and help the economy in the process. As we have shared in previous weeks, small businesses create the most growth in the American economy—as measured by new businesses and new jobs—but just as we need help learning to walk at the beginning of our lives, our new business owners need the most help finding resources—capital, technical assistance, and community—to get off the ground, and get back off the ground when they fall down.
Where It Comes From
Our founder, John Shen, long has made it his goal to help entrepreneurs in the very early stages of their journey. He explains in his book “Crossing The Swamp” that desire to help comes from the help he received early in his own journey, especially before founding the first of our group of companies, American Lending Center.
“Sometimes even the most proud and experienced entrepreneur must turn to parents, friends, or relatives for help,” he writes in the book. “This is both a curse, because you have borrowed money, and a blessing, because it reinforces the pressure to succeed.”
We all need help from time to time all along our journeys. But we need it most, and help makes the most difference, early.
Making A Difference
When someone is starting a company, a little bit of help goes a long way. Our emphasis on startups as they enter accelerators (the Long Beach Accelerator and Lair East Labs in particular) with modest investments has proven that. When these entrepreneurs can bring on a marketing expert, coding star, engineer, or other partner, that can sometimes double their workforce and rapidly increase their capacity to expand.
That same modest investment made two or three years into a business’s development, has a much smaller impact. While we continue to support our partner companies as they grow, the emphasis remains on the early stage.
And we’re committed to continuing that approach even when the venture capital world as a whole is pulling back.
Investments Made by Sunstone by Year
According to PitchBook’s Q2 2023 US BC Valuations report, “Persistent headwinds, such as the lack of available liquidity and high interest rates, have continued to trickle in and add pressure to the early stage.” Yet, with just more than half the year gone, Sunstone is on track to match or increase the number of deals made in 2022 (see chart, courtesy PitchBook).”
That’s the Sunstone How, and The Sunstone Way.
John Keisler
CEO & Managing Partner
Note: We refer to early-stage technology entrepreneurs as Founders. Information provided here is to inform about the types of small business start-ups that have been selected for participation in certain programs in which Sunstone participates. Information provided here is aspirational and there is no assurance of success. Early-stage investing comes with an inherently high degree of risk. The information provided is neither an offer to sell or an inducement to offer to buy interests in any Sunstone sponsored fund that may have invested in the Founder.
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More About Sunstone Management
Sunstone Management is a diversified private capital management firm with headquarters in Southern California that provides a range of early-stage venture capital, real estate, and fixed income funds to qualified and accredited investors. The firm delivers new and exciting options for economic growth through innovative public-private partnerships, making use of its unique experience across government, education, and private sectors. Identified by Financial Times as one of America’s Fastest Growing Companies three years in a row. Ranked 18th in the United States on the list of most active venture capital firms by PitchBook.
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