Investment themes

Digital Noise: The Importance of Brand

From 1990 to 2008, the internet pioneers and market leading technology companies achieved success by identifying large problems or creating new markets, and then building the best products and/or solutions to solve those problems or meet the demands of those new markets.   Success was largely predicted on building the best product, and brand and market recognition generally followed success.  Competition was fierce but the cost of doing business provided some relief.  Technology products were more expensive to build than today. Sales and marketing investments were substantially greater than today, Fueled by this massive reduction in cost to start a company, the increase in the availability of early stage capital and a much larger workforce of experienced, talented people capable of starting and building a company, competition has risen. We believe that execution challenge has been replaced by a new one—the ability to build a brand and gain recognition in a world cluttered with digital noise.  

Cava will look to invest in companies that understand this fundamental change and that are actively investing in building a great product and brand simultaneously, from the start of the business.  We will look for investments in digitally branded products and services. These companies, such as digital marketplaces, e-commerce brands, and lifestyle solutions that improve the everyday life of consumers, use Internet and digital marketing technologies to build their brands and market their products and services.  Some of these companies will be technology or digital solutions.  Some of these investments maybe traditional products but marketed differently than traditional solutions, using e-commerce, social media and other digital marketing technologies to launch, market and sell.    

The Rise of the Digital Native

Cava’s opportunity and our perspective are also shaped by a significant demographic trend: the rise of the importance of the Millennial generation, the world’s first generation of true Digital Natives.  This particular generation does not know a world without the internet, without e-commerce, without on-demand content and internet services, without mobile phones, without digital cameras.  This generation barely knows a world without social networks, Twitter and tablets.  Having grown up entirely in a world where technology is a dominant force in every aspect of their life, this generation is decidedly “technology first” and looks to solve every problem and meet every need with a “technology first” perspective.  This generation also looks to technology first to advance its creative energy and to technology first to create new opportunities to make the world a better place.  Finally, this generation is 11% larger than the Baby Boomer Generation and the largest generation in United States history—leading to what many journalists have dubbed as the greatest “Echo Boom” in history on the future of the United States, its economy and its society.  We believe technology and the use of technology is one of the single most important cornerstones for this generation and thus represents an increasingly important long-term investment trend for Cava.  We believe the adoption curve for Millennials will be consistently greater than previous generations and lead to an increasing number of new opportunities for investment in the areas that Cava targets.    
   

The Shared Economy: The Rental Economy plus Collaborative Consumption

Consumers and enterprises need and/or desire access to many products and services.  The access to needs/desires is what matters, not the method of access.  There are many ways to access products/services: ownership, renting, borrowing.  Historically, ownership has been far and way the most common method of access.  Yet, ownership is not always ideal.  For many products and services, ownership is more expensive, less flexible and less efficient.  But prior to the Internet, ownership was often the only way or the only easy way to access certain products.  That was of course before the Internet and the rise of the Shared Economy where access to basic services and products trumps ownership. 
In today’s economic environment, investing in quality startups is an attractive option, but there is a clear lack of existing funds modeled to do so efficiently and in a truly aligned manner. The economics of funds are often favorable to managers but less attractive to investors who deserve more transparency, oversight and optionality in their investments. At Cava, we believe a different model is necessary to provide investors access to great deals with appropriate risk/reward returns.

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While there are many potential funding options for startup entrepreneurs, partnering with a value added investor is essential when attempting to build a high growth enterprise. In order to add value beyond capital, investors should understand and appreciate the challenges of entrepreneurship.

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