We focus on software-driven businesses that have strong growth potential, high levels of recurring revenue, and a specific industry focus or domain expertise. We get involved before a business reaches $5 million in revenue and after its technology, service and business model have been proven viable and attractive. Typical investment levels range from $250k up to $1.5 million.
The cloud has brought with it the capability to create, deploy, scale and support software applications in ways that dramatically lower cost and allow easy to use solutions to be accessed by users over a simple browser connection. The wave of new SaaS applications continues to grow and penetrate virtually every industry and function. This trend is likely to continue for at least the next decade as almost every process and interaction between customers and vendors become automated.
With more mobile devices (including smartphones and tablets) now being purchased each year than desktops, the emergence and growth of new businesses that take advantage of these technologies are exploding across every industry and functional domain. Mobile has emerged not only as a new channel for reaching customers, but as a means of transforming how many value chains source, manufacture, distribute and collaborate with partners. The changes have just begun and we want to be part of pushing this transformation forward.
Many people think that ‘cloud’ simply means your application is hosted in a data center, not true. Data center hosting is nothing new. The cloud leverages the next generation of technology including virtual servers and many new SaaS-based software components. True cloud applications take advantage of this variable, scalable and highly efficient infrastructure to deliver solutions that are accessible anywhere, any-time with a simple internet connection.
With the explosion of new digital channels (social, mobile, email, search) and the associated points of interaction between companies and their prospects and customers, businesses are drowning in data that is 10 or even 100 times greater than what they had previously. Big data is simply the effort to capture and extract insights that allow businesses to market smarter and more efficiently from all this new data.
Experience over capital
Although we always invest capital in a portfolio company, it is our operating experience, relationships and capabilities that make us most attractive. We take our time finding not only businesses we like, but people we like and can work with, week-in and week-out. If a company only seeks capital, we are not a good fit, but if they want a partner that brings direct experience running and growing businesses similar to theirs, then our approach is compelling.
Highly defined markets
Unlike typical venture firms that look for the billion dollar markets, we seek businesses focused on specific industries or specialized functions where the products can be more defendable. We don’t expect to find the next Google or Facebook, but you don’t need that to make great returns and build exciting businesses. If you think you’re the next Zuckerberg, we’re not the right partner.
Partnership over control
We prefer to find opportunities where we can be partners with management/entrepreneurs, not small minority investors that are along for the ride. Whether we have ownership control or not, we expect to work together as a team to find and agree on the best direction. And since we generally participate in the operation of the business on a weekly and sometimes daily basis, this kind of relationship makes sense. Conflict with traditional investors often germinates from the gap in understanding between the Board and the operators regarding what the business needs. With our approach, we don’t run into this problem.
Flexible deal structure
Since almost all of the capital we deploy is our own, our objectives align more directly with management than typical VC firms that are driven by annual management fees, raising the next fund, and satisfying the investment constraints of their Limited Partners. We don’t have to slavishly follow a cookie cutter model that dictates how much we can invest in any one business, how quickly we need to exit, or what types of financing and ownership structures we must use. We are free to treat each business uniquely and structure the deal that works best for the company and its management.