This is my perspective on why Tom, Parthib and I formed Companyon Ventures, and why we made our hands-on operational model the primary element of our investment strategy.
I ventured into software and startups back in the late ’90s when I partnered with a couple of other founders to get some product ideas off the ground. We were newbies and pretty much had no idea what we were doing. But we were naive enough not to know that, so we kept plodding along trying everything we can to make something work. After two quick lean-startup style failures, we finally honed in on a product/market fit that started to bear fruit.
Back in 2002, I was COO of that third startup, eEye Digital Security. After a couple of years of ramping up our revenue, we raised a $9M round from Insight Venture Partners. It was a huge milestone for us as a founding team because it spelled the beginning of our transition from a startup of inexperienced founders to an expansion-stage company hiring experienced executives and implementing real operations. And boy, were we clueless pretending to know what we’re doing.
The partner who led that investment was Scott Maxwell, who originally joined Insight as COO. One of Scott’s major accomplishments at Insight was the creation of Insight Onsite, a team of consultants dedicated to helping portfolio companies find and implement operational best practices. I was on the receiving end of that team’s work and found it to be extremely useful. My one critique of the Onsite team was that their work was generally heavy on the analytics and recommendations, and short on the actual execution of those recommendations.
As I was leaving eEye to find my next startup, Scott asked me to join him at Insight as a precursor to starting a new VC firm. We founded Openview Venture Partners in 2006 with the goal of creating a firm where our primary focus was delivering exceptional operational support to our portfolio companies by helping them scale their businesses. In Openview Labs, we created the better version of the VC-based, portfolio-centric, consulting team. And in that team, we made sure that we’re able to actually help our companies implement the best practices we espoused.
I left Openview in 2014 after we had raised our third fund. With that third fund, we doubled our typical fund size to $200M which in effect shifted our focus from early-stage Series-A/B investments to later stage Series-B/C. I left Openview because it was no longer a startup fund and because we were no longer investing in startup companies.
Which brings me to Companyon.
Our investment strategy revolves around three core components:
Company profile: we look for companies with data that supports early signs of product/market fit in a large market; leveraging superior technology to achieve competitive differentiation; a minimum of $500k in ARR; and a capital-efficient business model. More times than not, companies fitting this profile are B2B SaaS companies, but we’ve found a diverse set of non-SaaS startups who achieve capital-efficiency with some form of an unfair advantage in their customer acquisition strategy.
Investment stage: Post-seed round after at least 14 months of company tenure and traction; committed seed and/or angel investors eager to co-invest; a clear path to profitability, exit or a subsequent growth stage round. There are many flavors of post-seed financing including internal bridge rounds to extend cash runway and pre-Series A convertible notes, but we focus on leading priced rounds that provide enough runway and capital so the company can invest in growth that takes them to the point where they deep into the typical Series A milestones.
Operational engagement: Improve outcomes by engaging our platform team to help companies reach their inflection points faster with a focus on maintaining capital efficiency. When we talk about being hands-on, we mean execution resources to bring bandwidth and expertise into our companies so best practices are not just studied, but actually implemented early in our investment cycle. We are taking the model we built at Openview for Series B/C companies and implementing it for pre-Series A startups.
We invest at a critical inflection point where companies need to accelerate the operational scale and team expansion. That is why we created Companyon’s Platform Team. By involving our team of experienced startup operators, we can de-risk execution and give the founders early warning of impending operational issues. We can also augment the precious few resources available to our companies through the fractional use of subject matter experts to deliver tactical execution of work.
And this is why we formed Companyon Ventures…
Our promise to our portfolio companies is that we will never sit on the shore and yell instructions while you’re in the boat rowing hard… we will jump in and row with you. Check us out when you’re ready.