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The 3 Things Trendlines Group Ltd Looks At In An Investment

Credit: Simon Cunningham

Earlier this month, The Motley Fool Singapore was invited to meet with Trendlines Group Ltd’s (SGX:42T) Chairman and Chief Executive Officer, Stephen “Steve” Rhodes.

Trendlines is a relatively new listed company in Singapore’s stock market, having floated its shares only in November 2015. The company is a venture capital investor based in Israel and it invests mainly in companies that deal with medical devices and agriculture technologies.

Steve Rhodes understands that investing in new startups is a risky business. That is why Trendlines is extremely strict when it comes to selecting an investment. During our meeting, Steve shared three things that Trendlines looks out for when it is evaluating an investment opportunity.

No. 1: The entrepreneur

Steve mentioned that the most important thing to Trendlines is the level of alignment between the company and the entrepreneur it is working with. The attitude of the entrepreneur and the culture of the startup needs to be aligned with Trendlines. Steve commented that he would “rather invest in a great entrepreneur with a weak idea than a bad entrepreneur with a great idea.”

Trendlines thinks this is the key to its success given that it would be working together with an entrepreneur for a long time. If there is no alignment, it could lead to conflict down the road, regardless of how great the entrepreneur’s idea is.

No. 2: The size of the market and the beneficiaries

Trendlines looks at startups that help “improve the human condition.” That is why before it invests in any company or idea, it will look at how the technology can benefit society and just how many people can be helped by the technology.

For medical devices, Trendlines wants to find startups that are able to provide better treatment for patients at a lower cost. For agriculture technologies, the startup needs to provide products that are environmentally friendly (or neutral) and improve productivity at a lower cost.

No. 3: The amount of time and capital needed to bring the product to market

Lastly, Trendlines knows that it is not a huge venture capital investor. It has limited funds and it needs to make sure it has the resources to bring its investments to fruition. The typical investment period for Trendlines is about six years and the total investment capital involved for one startup might be a few million US dollars.

Thus, if there is a technology that needs decades of research and hundreds of millions of dollars to complete, Trendlines would pass on the opportunity even if it is a great idea. This is because Trendlines does not have the resources to help the startup.

Foolish Summary

From our meeting with Trendlines, it appears that the company follows a strict process when it comes to choosing its investments. That might explain why the company only invests in around eight companies a year even when it typically evaluates more than 500 deals annually.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any companies mentioned.