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Dean Donovan: The Power of Cost-effective Speed To Build a World Unfettered by Geographic Constraints

DiamondStream believes in the power of cost-effective speed to build a world unfettered by geographic constraints. By investing in aerial mobility and related businesses we help build new transportation models and a more efficient economy. We invest in companies with the potential for accelerated, technology-driven growth; solid growth prospects in existing markets, and attractive valuations.

Tell us about yourself?

I started in manufacturing management software in Silicon Valley and then moved to Bain and Company where I ran the auto practice and the aviation practice at different times. In 2004, I was a founder of Volaris, Mexico’s largest airline based on the low cost carrier model. My partners and I have been investing in travel, aerial mobility and transportation for over 20 years.

If you could give one piece of advice to other investors, what would it be?

In our space, unit economics are the most important driver of success. Those economics span the platform and the network.

If you could give one piece of advice to startup founders looking to get funding from you, what would you say?

Make sure you have a handle on the issues you can control and admit to the things you don’t know yet. Don’t let your vision distract you from the immediate realities of building momentum.

What do you look for in the founding team of the startups you invest in?

Motivation to build a great company, economic insight about the core transportation economics behind the company, ability to sell the value.

Is there a trait you have noticed predicts success in your investments?

Energy, persistence, and flexibility drive success. Building new businesses requires continually reassessing and adjusting and overcoming serious challenges. CEOs who have those qualities have the best chance of building a great business.

How has COVID impacted your investment strategy and existing investments?

Covid has created opportunities by accelerating behavior changes that create opportunities for next generation aviation and aerospace. These changes along with technology changes associated with electrification and autonomy will change the aerial mobility landscape. For example, remote work creates opportunities for long-distance commutes via air. The acceleration of goods purchase (vs. services) has created demand for new types of aerial delivery services in the last mile. Significant opportunities in mid-mile freight will shorten truck routes and in certain cases replace trucking entirely. Over the next few decades the aviation and aerospace sectors will grow faster than automotive and eventually surpass automotive in scale by the 2050s.

What do you see as the emerging areas of technology that you are looking to invest in?

We see five core uses cases to next generation aviation: light drones and robotics, regional aviation with fixed wing aircraft, urban air mobility, delivery drones and tourism/leisure as well as the continuing evolution of commercial aviation. The core technologies driving change are electrification and autonomy although there are many other facilitating technologies. We invest in both the aerospace and aviation sides of these use cases and technologies. We like technologies and companies that can serve markets that exist today and grow new markets.

How do you source new investment opportunities?

We spend time at conferences, judge pitch competitions, write for major journals, and get a lot of leads from those who call us directly.

How do people get involved/buy into your vision?

We always like to speak with people in the aerial mobility space. Our core motivation is to move the space forward successfully and that means ongoing dialog. We will consider deals at any stage, but usually focus on companies with some commercial traction. We like to see a concise set of materials describing the company’s proposition or a warm introduction before we set up a meeting. We like to build relationships with the teams we invest in over time. That often means we take meetings even if the company is too early stage for an immediate investment.


Written by Mark Kendall

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