investor stories

Chasing Pegasus vs. chasing unicorns

A few weeks ago, a Small Bets reader replied to an article I wrote. (This is the article, if you’re curious. It actually has no bearing on today’s topic).

The reader’s name is Elizabeth Durand. In her first email to me, Elizabeth shared a lesson she learned in her early years as an angel investor. That reply led to a dialogue about what she’s building. And THAT, friends, led to my discovery of a type of fund that I wasn’t familiar with.

As some of you know, the whole reason I started writing Small Bets was to learn – in public – about investing in early-stage companies. So, when I met Elizabeth and heard about this unique fund structure, I decided to dig deeper.

Honestly, I was flabbergasted that this entity structure even existed. I thought it was interesting and unique enough to share with all of you.  

Below is a synopsis of what Elizabeth is building (or at least, what she’s part of). It’s not an advertisement, and it’s not a sponsored placement. It’s just a manifestation of my curiosity.

Chasing Pegasus, not unicorns

I spent nearly an hour talking to Elizabeth Durand about her company – Myo Impact Company – and all the entities associated with it. Not gonna lie – it’s a pretty complex ecosystem.

Here’s the part I found most interesting.

The normal VC model, as we know, is to chase unicorns. VCs will spend many millions of dollars investing into companies, hoping that a fraction of those investments will provide a 100x return … and knowing that 90% of the others won’t return anything at all.

Myo Impact thinks about investing differently. Rather than chasing a few massive returns, they’re optimizing for a higher probability of success – with lower multiples – generated from companies that are already validated.

Ok, so what does this mean?

Myo Impact Company is a fund and management company that focuses specifically on businesses in healthcare.

Elizabeth and her team invest in (or sometimes just outright purchase) healthcare-related companies. These can range from tech to medical supply companies to primary care offices to surgery clinics.

The key thing to note is that Myo Impact Company is building a portfolio of companies that are:

  1. Already validated businesses
  2. Generating revenue already

Myo Impact doesn’t just inject cash into these businesses. They bring hands-on support to increase profit margins, or build out a team (if it’s a solo founder), or whatever else is needed to make the business more successful.

So rather than chase 100x returns from early-stage health-tech companies that will probably not provide an ROI … Myo is looking for solid cash-flowing businesses that are already validated.

Healthcare, and sports management, and real estate – oh my!

Myo is also related to two other funds doing something similar but within different verticals as a product of the studio, BisonX.

One of those funds is focused on sports management, and the other is focused on real estate.

Each of these three fund/management companies run their own fundraising process, build their own portfolio, and manage their own team. And they all roll up to the same shareholding company – BisonX.

BisonX has a stake in each portfolio, and gets a return from the portfolio’s earnings, which they pour into an incubator program designed to support entrepreneurs based in the Midwest.

Oh, and people who want to invest in the three funds / management companies can do that without being an accredited investor. This is a big part of the companies’ missions: to simplify and democratize access to investing for anyone who wants to be part of their ecosystem.

Boosting the Midwestern startup economy

Here’s the thing about Myo Impact and the other two funds/management companies. Their portfolios consist of businesses in Minnesota, Montana, North Dakota, South Dakota, and Wyoming.

In a report from Carta last year, less than .8% of all VC funding went into startups in these five states in 2022.

It’s HARD to start a business in the Midwest, in large part because there aren’t as many resources to help entrepreneurs succeed (like startup programs and investors). Entrepreneurs from this area usually either move away to pursue their idea in a big tech hub where there are more resources, or let the idea wither away.

And that’s where this whole concept came from. The incubator, the funds, the management companies … they’re all designed to help midwestern entrepreneurs create job opportunities and generate revenue that will benefit local communities.

Like I said … I went deep down the rabbit hole

There was a lot more I learned from Elizabeth. Like funding strategies for each part of the ecosystem. And how the equity situation works. And why the team landed on healthcare, sports management, and real estate.

It was all fascinating, but for the purpose of this article, I’ll leave you with this ...

There is more than one way to be an investor.

Most of what we write about in Small Bets is focused on the traditional VC model, or strategies for angel investors. But there are investment strategies other than VC. And markets other than Silicon Valley. And startups other than SaaS companies.

I wonder what else is out there …