I often am approached at conferences or events by people asking me what type of companies I like to back. I could give them the usual answers … big-end markets … growing … profitable … killer teams — but who does that really help. The real answer is I like backing companies that create a product or service that people buy, NOT that a company sells.

Let me explain.

Companies that create a product or service that customers simply gravitate to are those I look for. Generally, with the right amount of sales and marketing spend, companies can find a way to sell effectively. That doesn’t mean you have a good product, but just that you’re a hell of an executer (which isn’t bad by the way). A company that can truly change the current paradigm and create outsized returns for its investors is one where product or service is so innovative that everyone wants it. The key is a product or service that people will start using in droves with limited sales and marketing spend.

This isn’t to say that spend on sales and marketing is a bad thing; at some point you will need to spend the cash to grow. At an early stage, however, it’s great to put a product/service out there and see if people simply need it. If they need it, they will buy. You won’t sell.