7 Powers by Hamilton Helmer. This book helped inform Witt’s framework and process for analyzing companies.
What do you look for when investing?
We start by understanding the needs of the industry. That means speaking with stakeholders to understand the problems in the industry and what the future could look like.
It’s also very important that you have an opinion, especially at the early investing stages because things aren’t obvious.
What questions do you ask to remain self-critical?
You’re playing the meta game, so you have to create a process and constantly refine it to generate objective thinking. You need to build out this process in advance.
There are specific questions that I’ll ask myself every time I look at a deal. If I’m conflicted about something, uncertain, or want to watch my blind spots, I’ll call someone I trust and lay out the problem, how I’m thinking about it, and get their opinion.
Honestly, it’s not feasible that there’s always someone to “check-in” on your thinking. The thing that you really need to be cognizant of when investing (and life in general) is time. It’s the most limited resource you have, and you need to be critical with how you use it. That’s why building a process where you don’t need to rely on outside people is critical.
What does your process look like?
I like to write things out. I’ll write out all the potential risks associated with a deal. Some people will do a press release of why it failed, that’s a great one.
I also think of what needs to go right for the company to be successful and if it doesn’t go right, what does the future look like for this company?
It’s like playing a game of chess against yourself.
How do you source companies?
Finding companies is hard. You need to have industry sources – a network of insiders who see a lot of things and know what’s going on.
Have relationships with other investors – technology investors, CPG, restaurant space, etc.
Proactive outreach – be thinking and reading about the space all the time. Keep your eyes and ears open. Also make your outreach personalized because people are more likely to respond.
Who are typically the founders of these companies?
On the brand side, many people were previously baristas or cafe managers.
The people building the tech powering the coffee industry are typically not from the coffee world. This creates friction because there’s a disconnect between the people creating the product and the people purchasing the product.
We like to see these two groups mixing and cross-pollinating. Tech companies want intros to people in the coffee industry so they can better understand their customer/ build a better product. On the flip side, people from the coffee industry want intros to more traditional financial folks or technologists. Fostering these connections is a critical part of our firm’s strategy.
Given that you work at a VC firm that invests in the coffee industry, you must have some good coffee recs. Can you give us some?
Funny enough, I wasn’t really a coffee drinker before working at Bar 9. It’s definitely a rabbit hole that is fun to go down.
I’d recommend Dark Matter Coffee, a Chicago-based brand that has amazing coffee. They’re pretty unique because they have several coffees that are either barrel-aged or fermented in atypical ways. For example, they’ll add champagne yeast to create a unique flavor or cask condition it in alcohol barrels which makes it absolutely delicious.