“What do VCs value in founders?” An interview with Jean Kovacs, Partner at Hillsven Capital


Jean has more than 30 years’ experience directing technology companies, and delivering exceptional results with growing enterprises. She is currently president of the Northern California Chapter of the HBS Alumni Angels, a forum for Harvard alumni to connect with, learn about, and invest in quality early-stage companies. Her resumé includes serving as CEO and Co-Founder of Comergent Technologies, and Co-Founder and EVP of Qualix Group. She was named to the Silicon Valley/San Francisco Business Journal’s list of Most Influential Women in Business and has been profiled in Fortune, The Financial Times, Computerworld, Internet World, and InfoWorld. She holds an MBA from Harvard and a BS from Northeastern University.

Can you tell me a little more about your background before venture capital?

I worked for technology companies in marketing, product marketing, customer support, sales, applications engineering, and then went to get an MBA, thinking that I was going to go to Wall Street. I ended up deciding to come out to the west coast. I worked at Sun Microsystems, which went public, and then Frame Technology, which also went public. Following that, started a company (Qualix), which we took public, then started another company, which we sold to AT&T. I was always on the operations side until I got involved in angel investing. About two years ago I joined Hillsven as a Partner.

What do you look at when you're looking at a startup?

We typically focus on enterprise companies. We don't do a lot of marketing of our fund. We typically look for “curated deals”, deals that comes out of an accelerator that we trust or is referred to us by someone that we trust. We'll do two to three deals per year. We typically go in at Seed and lead the round. We put in anywhere from $500K-2M.

What about MetaData stood out from the rest of the investments you were thinking about making?

I should say that I was not with Hillsven when they invested in MetaData, so this is a little bit of hindsight on my part. One of the things we liked was that Gil started as an engineer then got his MBA and went on to be a CMO, so he actually lived the customers’ lives before he started the company. He had that domain expertise and could talk the CMO language. As he was being a CMO he was thinking, “Why hasn't anyone developed a product like this?”

We felt he had that unique combination of business experience, domain experience, and technical experience. That experience and vision, combined with energy and tenaciousness, were the right ingredients that lead him to start MetaData.

What are your thoughts on Alchemist?

I like the Alchemist team. They seem to have a higher bar for companies going in, which also results in a higher bar for companies who are exiting.

When I talk to entrepreneurs who have gone through the program, they all universally say that it was really worthwhile. There are a lot of incubators and accelerators. That makes for a lot of noise, but I would say Alchemist is certainly in the top percentile, based upon their results.

Is there anything you’re excited about in the future?

I just think there's a huge opportunity for what we do. We're seeing SaaS is leading to the democratization of the enterprise. No longer are business people in enterprises beholden to huge IT departments or huge ERP vendors so that everything has to go through. It's much more accepted now if you have an application that fits a need in an organization, to go ahead and get that and deploy it within your organization. It's an opportunity we're seeing for startups that we haven't seen for a very long time.

What do you think is the number one red flag that would make you pass on an investment?

We invest very early on. Our number one priority are the founder(s). If we don't feel good about the founder and the founding team we won’t invest no matter how hot the space is.

What makes a good founder?

First, it's someone who can articulate a problem and has domain expertise with that problem. Second, it’s someone who can attract and build a great team. Third, the founders and especially the CEO has to be tenacious. Probably less than 10 percent of the companies that get started have an easy route creating a product, bringing it to market and growing sales. There are always ups and downs, so we need to know that that entrepreneur is so passionate that they're going to forge ahead even when the going gets tough.

Would you be more likely to fund a very experienced team with a mediocre idea or a team of novices with an amazing idea?

It's about the quality of domain expertise and focus. If they're novice they have to be coachable, have energy, and be tenacious. We'd rather have someone come in and say, “I know this problem. Here's how you solve it and here's who I've talked to and here’s who I’ve sold to.” Having early traction in a company is really critical.

Which of your investments are you most proud of and why?

We’re proud of all of our investments!

Can you tell me about how you deal with cold emails and calls?

That’s a tough one. We’re so busy getting curated deals that it’s hard to answer cold emails/calls. We try to get to them, but they typically don’t get the attention that we give to curated deals.

Earlier you spoke about finding deals through references you trust. What makes a reliable reference?

In addition to a few accelerators we trust, we get deals from several sources:

1. Other investors who understand our model and know how we invest in and support our companies

2. Our CEO’s/Founders - They understand our model and we trust their insights.

3. Customers. We keep in touch with enterprises and are always talking to them about the problems they have. If they find a company who is young and helping them solve a problem, we want to talk to that company!

What separates Hillsven from other funds in the area?

We take a very active role. Typically, we lead the round, and always take a board seat. There are three partners here and we all have different skill sets. We’ve all been founders ourselves and our careers have been focused building companies, not just investing. We really spend time getting to know the company, and helping with what they need, whether they want to brainstorm on technical concepts or market fit.

When they’re getting ready to raise their Series A, we also spend time helping them and making introductions.

Bottom line: We view ourselves as partners with our investments, not solely as investors.

What do you feel like your role in the company is?

We’re there to support the CEO and the team. If the CEO comes in saying I'm really wrestling with this or that, we’ll pull in the right partner who can help. If we don't have a partner with experience in that specific area, we all have networks that we can reach out and find someone who knows a lot more about a specific area.

What you think is the biggest indicator of failure for a startup?

If I were to sum it up, I would say believing your own bullshit. Someone who pulls together a great pitch and says, “if we build this they will come” and not really having that tie into the market and customer prospects. When you look at Gil, he was a CMO and he knows the pain that they have. We have a company called Retail Zipline, another Alchemist company. The CEO of that came out of the retail space. She knows the pain. It really is having that passion where you say, “this is an issue that my team and I can fix, and it's a big opportunity.”

Is there any one piece of advice you would give founders that you think doesn't get shared enough?

Do your homework. Look at the VC’s web page, talk to their portfolio companies to figure out what they focus on, get your information all lined up. Then, have the tenacity to, in a nice way, keep on top of the process.

Can you tell me about your experience as a woman in Venture Capital and any advice you'd give to young entrepreneurs and investors?

I would say right now, it's a fantastic time to be a female in the venture and startup worlds. There's been so much awareness in the market, that I think people are really realizing the talent pool and are going above and beyond to access it.

Do you have any advice for mothers who are trying to grapple with motherhood and their career?

It's never going to be easy. One or the other is going to suffer and I think you just have to make peace with that. Sometimes you’re going to be more career-focused and sometimes you’re going to be more family-focused. I think as a mother you've got to just come to grips that you can't be all things to all people, all the time.

About the Alchemist Accelerator

Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley—including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.

“Breaking Down the Path to Entrepreneurship”: An Interview with Gil Allouche, CEO, Metadata

  

Gil Allouche is a tech entrepreneur whose passion for artificial intelligence (AI), big data, and growth marketing led him to start Metadata in May 2015. As the Founder and CEO of Metadata, Gil prides himself on building a customer-first company. He is part of an ambitious team that is committed to solving a major problem that B2B marketing and sales professionals face -- generating qualified, opt-in leads. Prior to Metadata, he ran marketing for Karmasphere (now FICO), Qubole and Silver Spotfire (now TIBCO).

Could you explain a little bit more about what Metadata brings to the marketplace?

Metadata is a technology software company in San Francisco. We are disrupting the B2B marketing space. We automate the marketing operations role with automation and AI. There are many tools in the B2B marketing space for tag management and email marketing automation and advertising and data vendors, etc. What Metadata does is connect all of those tools together, learn what worked and what didn't work, and then orchestrate operations from within those technologies using an API, so that people don't have to log in every morning and manually operate those tools. That's the big vision.

Today we connect about 40 different tools in paid media and do anything from sourcing audiences to getting all of their PIIs and cookies, etc. Then, we execute campaigns on social media, retarget, and optimize all of those campaigns automatically using KPIs from Salesforce and market automation from the customers. We have about 60 customers. Some of them are enterprise and some of them are mid-market and startups.

Can you tell me a little more about your background before you started your startup?

I’m a software engineer. I’ve written code since I was a kid. I moved to the U.S. about 12 years ago to do my MBA at Babson College, an entrepreneurship school in western Massachusetts. After that, I spent eighteen months running product for B2B companies. Then I moved into the marketing realm. I was a very technical marketing manager, so I relied on 3rd party contractors to do my copy and communications. But, I had complete responsibility for on demand generation, making sure that my counterparts have a pipeline to go and sell. I did that in three companies. Two of them got acquired. At the third one, I was the first business hire. I was in a small team in a tiny room, and today Qubole is a few hundred people.

After doing that for about 7-8 years I had to choose whether I wanted to continue my career as a CMO (Chief Marketing Officer) and just work for bigger companies, or switch into the entrepreneurship realm, which is what I'm interested in, and build a product that will serve those non-technical CMOs and enable them to do what I did, but much easier. I started a consultancy with Qubole becoming my first customer. Three years later, this is where we are.

What previous experience do you feel best equipped you for your role right now?

Having the experience from both sides, as the software builder as well as the marketing software user. Building systems with AI, building Web products in the first part of my career and then switching up to doing an MBA led me to understand the business side of things and which software can solve for critical business KPIs. Then choosing the marketing space I wanted to innovate in, and then working as a CMO in a B2B company, gave me both points of view. All that prepared me for building the right software and serving the customers.

I started software companies before, and I'm always passionate and excelled in that type of culture, without everything set up, An unstable environment and high risk, that's where I thrive and every year we exist makes me better entrepreneur for the future.

Do you believe that having a technical background first and then understanding the business side of things is the best background to have? Or do you believe learning the business side of things first is more important?

It's hard for me to say because I'm already subjected to the way my career went and so it’s hard for me to roll back and say maybe there’s a better way. I think I'm well equipped to run Metadata because I have a technical background and then I had the customer experience. Would it be better the other way around? Maybe. I don't know many people who have done the other way around.

The vast majority of people that I know in my position have a technical background and they know what's possible to build to begin with. They build it in an amateur way using scripts, which is exactly what I did for eight years while I was running marketing. Then, after seeing it working, I built some of the tools myself, used them in my role and then built a generic solution for the rest of the market. It would not have been possible to do that the other way around because I wouldn't even know it's possible to fix using software.

If you could go back to the first day of your startup, when you were still building Metadata up, what advice would you give yourself?

Probably spend more time building the software. Maybe give delivery more time, building something small, focused, and that was more of an MVP (Minimal Viable Product). In my mind my MVP was more of a VP and not so minimal. It was more of a bunch of different tools put together. I think I would’ve focused on building something more holistic, but more minimized. It took us about a year to bridge that gap to what we have today.

I probably would have invested a little more in engineering and product earlier on. Today that’s our main focus I’d also recommend reaching out to all of your colleagues, former managers - those will be your first customers, advisors, investors and will give you friendly needed feedback. Finally - I think it’s critical you learn how to manage your own psychology. Starting a company can be a tough journey and you need to learn to forgive yourself, adapt quickly and include others in your journey.

What do you think is the most valuable thing you learned from being a part of Alchemist?

I learned a lot from Alchemist. I learned about how seed investors perceive companies. I think I'm good at it, thanks to Alchemist. I also learned how to pitch my company, self development and reaching my first paying customers using CAB.  That was very helpful and Alchemist definitely helped me do those. And finally the network, connections and practical 1:1 programming. Big shout out to Danielle and Ravi who are always there.

If you had to give some advice to someone in Alchemist right now, what kind of advice would you give them to make the most of the experience?

I think you have to come to Alchemist with something to offer already, meaning some technology or customers, and then take that raw material and build upon it. If you don't have much, I would recommend to wait a quarter or two until you do, because otherwise you're going to waste your time in the program.

Another piece of advice I have is to start the program before the program starts. Danielle and Ravi will attest that I was in touch with them maybe two or three months prior to the program starting, doing email campaigns to get investors, asking advice about evolution and about the rest of the things that I had challenges with before the program started. So, moving at your own pace with the leaders of Alchemist I think was the key success factor for me.

Finally, pick your battles in terms of what you want to participate in Alchemist and what you don’t. Running a business that already had some traction, I did not want to stop everything and attend every talk that Alchemist had. Rather, I wanted to keep running the business and use Alchemist whenever I saw fit, maybe 40 percent of the capacity or maybe 50 percent of the capacity. I don’t know if Alchemist will be happy with me sharing this, but that's how I set it up, and it was very successful for us because it allowed us to keep the business running, and then use Alchemist for the things that we actually needed help with. Versus, go line by line with a program that was not always fitted to us because some companies were in a very different stage. We already had 30K MRR. and were kind of already started.

Given your background, do you have any advice for other foreign founders?

Being in the U.S. I would say visiting the U.S. and going after local companies with what is called the customer advisory board (CAB), a tactic that Alchemist educates about, is a great idea. Coming here, doing the activities, being at the office, I think is very important. I would also say, bring your team members with you to Alchemist. You need them involved, and not just your founders. You want to bring your co-founder and whatever the team is and bring them into the program and get them involved.

I would say especially for foreign partners to begin the process of reaching out to Angels and Seed Investors prior to joining Alchemist and work hard on getting some funding prior to the demo day. We got some money at the Investor Feedback Summit and we got some money prior to the program even starting. That was very helpful for us to give us a good sign that the strategy of Alchemist works, prior to the program even starting. It was very helpful, especially for a foreigner who was not very knowledgeable about those things. That’s a piece of advice I would give someone who's coming from a different country to Alchemist.

Was there anyone in your life that helped you as a mentor and influenced you a great amount? If so, what about them helped you?

I'm very lucky to have many mentors. I think I wouldn’t be able to get where I am without them. Some of them belong to Alchemist, some of them belong to Alchemist network, some of them don't. First one that I had goes all the way back to my high school teacher who gave me confidence and belief that I didn't have in myself back then. That’s the first one, back when I had some issues in high school. Then, if I take it all the way to Metadata time, my first advisor, outside of Alchemist, was Mickey Alon, a serial entrepreneur from Israel. He helped me get started with my very first pitch decks, etc.

And then one of the other very prominent advisors I had to date, I would say my strongest advisor, was Bill Portelli. He is from the Alchemist network. I met him at an Alchemist event and he's been tremendously helpful with all things Metadata from sales to personnel issues, etc. Other wonderful advisors who constantly tell me things how they are include Boris, Derek, Jean, Bobby, Jonathan, Gary, Eli and the list goes on. Maybe that’s another important advice - get your advisory board early on and keep them engaged. They can do magic.

And I would say that Danielle has been very helpful. You know Danielle is kind of the de facto manager for Alchemist. She makes a lot of things happen and she's also very good at advice and very resourceful. I think she provided great advice and mentorship at times when I needed it.

What are you excited about for Metadata in the coming future?

Growth. We are onboarding more and more customers than ever before. The last four months have been stronger than the previous twenty-four months before them. We're seeing a good amount of growth. We're also seeing a lot of confirmation from the market that what we're doing is the future of marketing. So now it's a question of how quickly can we leverage that growth with the value, raise more capital, and then grow the company. I’m excited about the next stage of the company moving from 60 customers to 200. Having a fifteen person team to having a thirty person team. I'm excited about those challenges.

What constitutes success for you personally?

Success is to see a product that you really needed in the market being used by enterprise companies like Amdocs, Hitachi, and SugarCRM. Having companies like these use the product, successfully renew, excel, and giving us testimonials and case studies. For me that is success. That means that the initial idea that we had and the solution to that problem that we thought exists, these are confirmation for a product market fit. That's the first piece of success for a company at our stage.

The next success would be a big institutional venture capitalist standing behind us with a large sum of capital to grow, and of course reaching profitability. For me a personal milestone that I'd like to achieve. Those three things I think are the major successes in relation to Metadata.

Are there any other insights you've learned that you want to share with the next generation of entrepreneurs?

I think the biggest thing to do for an entrepreneur is to get started. To unblock your own limiting thoughts of “what needs to happen before I’m ready to start a company.” Nothing has to happen. You just have to start it and then break down the path to entrepreneurship through small wins. To put the first landing page together, talk to the first 20 prospects, talk to the first angel, put it on Facebook. Share it. Don't be secretive about your startup. The moment that you think you're ready to, if you have a problem that you're very passionate about and you have the domain expertise, you shouldn’t wait a second, you should just start it and then let it grow and let the market reject your idea or execution. You may have to switch, to change your idea, change your execution strategy, change your partners, what have you. Or if you see that it's gaining traction then just continue to roll with whatever is coming at you.

I would say that the biggest hurdle is for people to change their mind and say I'm an employee now and today I'm an entrepreneur. Nothing's doing it for you. You have to do it on your own. The best way to get it is to just start taking action. You don't have to resign from work right away, just devote 3 days or a week to it for a few months and you should be able to see some progress before you make the switch completely. That’s that's the biggest hurdle I would say for entrepreneurs.


About the Alchemist Accelerator

Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley—including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures/year. Learn more about applying today.

Seven Enterprise Business Models You Need to Know In the Age of Software


Most people never think of technology from an economic point of view. Instead, we focus our efforts thinking about the nuts and bolts of the technology. Tim Chou, a current lecturer at Stanford University, spent his career focusing on Enterprise Technology. He believes that it is important to know a variety of business models to better understand how we can sell to customers. In a talk given at Alchemist, he outlined seven important models of how software companies drive revenue, and offered further insights into the sales process.

Model One: The most typical, yet still extremely effective model: license the software to the user and then charge for support and maintenance. Tim gives the example of Oracle, which previously was a $15 billion corporation with $12 billion coming from support and maintenance.

Model Two: Make your software open source, but monetize the support and maintenance. Tim emphasizes that Red Hat is the only real example of success for this model.

Model Three: Outsource. “I’ll take over your mess and I’ll do it for less.” He explains that the amount of money to manage software is 4x the price so in most cases 75%-100% of the budget is fully allocated for the next year. Therefore, by outsourcing, you reduce the cost structure to purely human labor in China, India, Eastern Europe, etc. However, Tim goes on to outline two major flaws with this model. One, you are unable to maintain a low cost of labor for outsourced labor as workers will eventually want wages that match the workers in Silicon Valley. Two, the primary reason of system failure is human error.

Model Four: Tim explains, “The customer pays for the software and maintenance, while I’ll manage security, performance, etc. for a set price per user per year.” In this case specialization is key. If you can standardize the hardware and software then you can replace human labor with machine labor, crushing cost structures and increasing reliability.

Model Five: You alter the payment terms of Model Four. This can mean paying monthly or by other terms.

Model Six: Every business application company since 1999 has delivered in this model. It involves removing the at-home and at-customer aspect of the model, in order to standardize and reduce cost structures even more. In justification, Tim explains that while operating in model four or five, cost structures can be taken down to about $50 to $70 a user. On the other hand, students of model six can get down to $5 per user.

Model Seven: In reality, Facebook, Amazon, and Twitter are all software companies. What’s different is the way they charge for their service, whether it is ad-based models or embedding it in the transaction. An example is buying a book on Amazon, which is essentially paying for the software. In order to justify that there is an extra step in standardization, Tim argues that Google would otherwise charge around 70 cents per user per year in order to break even for searches. He explains all of their software is extremely standardized so their cost structure is entirely reduced to power (electricity).

Understanding your Customer is Key to Choosing a Business Model

These seven models offer a wide variety of choices to founders—however, in order to know which business model is right for your customers, you’ll need to talk to them! Tim believes in this day and age, we can now target our customers by first knowing who they are instead of just throwing your product out there. We can apply Geoffrey Moore’s idea of Crossing the Chasm to people who will buy into your vision and help you cross the chasm. Tim explains, a lot of the time you can tell if a potential customer is only interested in following the mainstream if they ask, “What is your ROI?” They are not your early investors. They are only interested to see if others have bought. Customers before the chasm are not large corporations, rather, they are individuals.

How do you Sell?

Once you know your customers, the challenge becomes how to sell to them. When broken down, there are two methods of selling. Both methods of selling involve “preciseness:” low and precise selling (e.g. Amazon selling $10 books, movies, etc.), and high but imprecise selling like business software, where you need fewer sales due to high value. The challenge is sitting in the middle where selling price is still high and is still imprecise. Tim makes the analogy of big screen TVs. Just like enterprise sales, there is an education cycle before you buy where you ask friends, read reviews, and do your research. Ultimately, you find that “selling is education and education is selling”.

The challenge is that your sponsor (the guy who thinks what you’re doing is cool) is unable to answer questions to others about your software. Tim explains that the key is the art of storytelling. It really matters who is saying what. Without the right character telling the story, there is no credibility. Stories are a key part of learning as it activates a different part of the brain and your information is more believable.

There are three types of stories: Man versus man, man versus nature, and man versus self. When telling a story about your product, communicate it in 3-5 points, identify the problem, and identify the value of your solution. By comparing the situation before your product to the situation after your product, you create value.

What does this mean?

It is no surprise that in order to sell to customers, you must understand your customers. It is important to understand that while your customers’ ability to use your product relies entirely on how you structure your business model. Their role as a customer lives entirely inside the model you choose to adopt. Therefore, when analyzing your product’s reputation, you can not overlook how your model is structured. By being aware of which business models work and which ones don’t, you can begin to better understand your customers as a whole.

About the Alchemist Accelerator

Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley—including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.


An Interview with Arun Penmetsa, Partner, Storm Ventures

 Arun Penmetsa is a Partner at Storm Ventures and focuses on early-stage Enterprise software companies, primarily in SaaS, Security and Digital Health. He has extensive experience building enterprise software solutions at Oracle and Google. Arun is passionate about healthcare and using technology to improve outcomes and drive efficiency for patients, providers and payers. He is also an investor in several healthcare groups in India where he serves as an advisor on technology and population health. In his spare time, Arun enjoys spending time with family and hiking.

How did you get into the world of VC? Was it your first job?

No, to give you a little bit of background, I started out on the technology and engineering side. After college and graduate school, I worked at Google and Oracle, building enterprise products for about five years. Then I went to business school, and joined Storm Ventures right after that. It wasn’t my plan going into business school, but I got introduced into the world of venture capital (VC) when I met a lot of VC’s, mostly at startup conferences and other networking events. I was really curious, because one of the things I was trying to do in business school was to learn a lot more about other industries. I’d only worked for a few companies, so I was curious how the industry worked. I spent the summer between my two years of business school at Storm. I really enjoyed the work I did, and really enjoyed working with the Storm team, so I was happy to have the opportunity to come back full time.

Did you see yourself doing this, or being where you are today, when you graduated college?

When I graduated from college, and when I finished graduate school, I was thinking about a more tech-focused career. Like I said, I worked in engineering and product at Google and Oracle. I was trying to transition more into a startup environment, so no, I wasn’t really thinking about venture capital.

Why did you invest in 4me, the Alchemist company? What differentiated them from other investments you were thinking about at the time?

A couple of things. At Storm, we focus on enterprise software and spend a lot of time on industries that are not necessarily mainstream. So I was always interested in the service management space. Given the general level of innovation that had been happening, the service management space was lagging a bit compared to other industries, so I thought there was a lot of opportunity there. When I met Cor, the founder and CEO of 4me, one thing that really impressed me was the caliber of their team. Cor’s background in the space—having started two other businesses, and having successfully exited them really stood out. I thought the team had a unique perspective and depth of knowledge about the industry. That was one of the biggest factors for us.

We also have a broader thesis about how data flows through a lot of these industries. Historically, if you think about it, the way that a lot of technology is set up in these industries has created data problems. There are different systems and different owners for a lot of the data that is needed for these companies to manage their own workflow. As service management has evolved, and this is playing out in a lot of different industries, the need to operate across boundaries and silos has increased more and more, whether that’s geography, or technology systems, or different departments. I don’t want to get too into the weeds, but service management is broadly going through a transition where the new focus is on SIAM or Service and Integration Management. The team at 4me really built their product for that. We thought the shift in the industry really aligned with the expertise the team had, so we thought that was a good match. Plus, they were winning against the more established incumbents as a startup that was bootstrapped, so the growth was impressive. A combination of these factors led us to invest in their company.

What are your thoughts on Alchemist in general?

I think the program is great. I’ll give you a little background about Storm. We’ve been around for about 19 years, invested through five funds, and we’ve pretty much been enterprise focused for those 19 years. The last couple of funds have all been focused on software. In many ways, what Alchemist does is really a perfect fit for us. It’s definitely a sector and stage fit, because we mostly do series A investment, so that’s been fantastic. I’ve met Ravi and Danielle a few times, and I think their focus on running a slightly longer program is important, because things take longer in the enterprise space, particularly as you go into some of these deep tech industries. This helps companies get to a stage where they can really start talking about go-to-market and what levers a venture capital firm like us can bring. I think that’s critical because a lot of times, when you work with accelerators, they have great founders and great companies, but it still ends up being too early for us.\ Alchemist has set up a good model, a long enough program with good mentorship and support, where you get to a stage where a VC firm like us can add a lot of value. I think I’ve been going to Alchemist Demo Day since the second Demo Day. It’s been great working with their companies and seeing them as they grow.

What’s the size of your current fund and how does that compare to funds at a similar stage in Silicon Valley?

Our current fund is $180M, which has been about average for the previous funds as well. Funds are obviously getting bigger, just given some of the recent raises we’ve seen. We’ve decided to stay at a similar size, primarily because we really focus on investing in companies just as they’re getting to the product market fit stage and we work with them on finding go-to-market fit and scaling beyond that. We help them think about building the right sales model, building the right playbook, and thinking about what hires they should make. We can definitely make the fund bigger and bring on more investors, but we’ve found that this has worked for us. Companies that we really want to work with are in that early stage, where they want that first institutional investor. We’ll partner with them and help them scale through the right process.

What’s the typical check size and how is that typically structured?

Typically, our check sizes for the A rounds are in the $2M to $5M range. We can go lower, and occasionally we’ll do seed rounds, or we’ll do larger rounds sometimes. Storm has invested in about 150 companies, led investments in a number of cases, and we’ve co-led, so we’ve pretty much worked with everyone. We’re not very rigid in terms of needing 20% ownership, but we like to own as much as possible, because we tend to be really hands-on with our companies. We’re definitely not a fund that makes a huge number of investments. We are somewhat concentrated and would rather go deeper with our companies than just go broader.

Is there a stage you typically prefer to invest?

Series A. The sweet spot is definitely the A for us.

Do you have a specific vision or focus that differentiates you from other funds?

The emphasis on go-to-market. We spend a lot of time working within the firm and working with other organizations that we can bring in to support our portfolio. Once you’re selling your product to a handful of customers, and there’s repeatability in the use case, we can help you figure out how to scale. One of the biggest issues is that early on, getting to that $500K or $1M run rate, a lot of that comes from founder sales. It varies depending on the size of the account and other factors, but when you make that transition to a sales team and the founder steps back a little bit, a lot of times that process doesn’t go smoothly. The depth of knowledge that the founders have about the sector, the problem they’re solving—it’s hard to replicate that throughout the teams. What we try to do is really think about the go-to-market as a science as much as we can. We want to think about the right playbook, the right sales model, the right customer you’re selling to, and really building those processes out.

We spend a lot of time with our companies building out that process hands-on, so that they can effectively make that transition to scaling, and they don’t hit a speed bump when they get to that stage. When companies come to us, a lot of times we’ll see that they have a grand vision and a good roadmap, and have predictions that are up and to the right that we hope they’ll hit. But on occasion, they’ll stumble a little bit. A lot of it is making this transition, and getting your playbook down, with the right sales model. That’s one way that we try to differentiate from other firms. Additionally, we’ve been very focused on enterprise for 19 years, so we have a huge network in the space across a variety of industries, that can add value to our companies.

How do you think you differentiate yourself individually from other VC’s?

To build on what we talked about, we have built deep relationships in various enterprise sectors given the focus over many years. I’ll give you an example: I spend a lot of time focusing on healthcare at Storm. Over the last few years, we’ve built a strong healthcare practice. As part of that, we have connections to a lot of health systems across the country—including physicians, practitioners, and entrepreneurs. In that one example, we can definitely bring a lot of those connections to bear for the startup. We’ve sat in a lot of these practitioner’s offices, so we can really understand the deeper workflows, that comes with selling to major players and providers. A lot of the work that happens on the backend isn’t really visible to these companies. That’s just one example of the insight and level of connection that we can bring for our portfolio. In terms of the broader firm itself, the go-to-market is a big area, but we also bring in a lot of experts who can specifically give advice on sales and marketing. One other area where I’ve spent a lot of time is security. In fact, we have a number of CSO’s working out of our offices pretty often.

What makes an investment particularly compelling and what’s a big red flag that would make you pass?

In terms of red flags, maybe this is an obvious one. We’re looking at mostly enterprise, so if the founders have never worked in industry, I think that’s a big red flag. It’s not that I wouldn’t talk to them or not invest, but it’s something where I’d definitely want to dig in more. Especially if it’s an area like Cor with 4me and service management, it’s hard for an outsider to really get a sense of what the problems are, and what the incentives are, in terms of why these problems get created. So, it’s not always a technology solution and it’s not always that the best tech wins in a lot of these cases. We really think hard about the unique insight that these founders are bringing, and how their background and experience really leads to that.

On the flip side, things that I would definitely look for, because we invest so early and have to bet on the team, would be the background of the founders. We also look for their early ability to win customers. A lot of times, we see founders that work hard and have passion, which enables them to get customers. However, a lot of the customers are using the product for different use cases. That’s fine early on, because they’re still trying to find the right product, but we’d like to understand what’s really working, what’s the sweet spot early on, so that they can find repeatability. I think that repeatability is important because that leads to more usage and lower churn. That’s when you’ve really found a pain point worth investing in.

We also think about market transitions, and ask if there is something fundamentally changing in the market. Not just a better version of what’s been done before, but something fundamentally changing in the market that will lead people to adapt a new technology, a new product, or a new workflow. When we meet entrepreneurs, we try to already have a thesis on the market, so that we can make faster decisions about whether the idea makes sense or not.

What do you think separates a great founder from a good founder?

One of the things is the ability to hire really great people. As a founder, you have insight into a certain area, but you can’t do it all. That’s why a founding team in general needs to be well-balanced. I think the biggest thing is being able to sell people on your vision and hiring people that are better than you. If you can hire well, I think in many cases, the rest of the issues can be addressed, because you’re getting the right set of people that can work together and solve problems. It’s a hard thing to test for, so we try to spend a lot of time with our founders.

Would you be more likely to fund a really experienced team with a mediocre idea, or a team with no experience that had an amazing idea?

It really depends on the idea and the use case. I would say I’d pick the team over the idea, because it’s unlikely you’re the only one with the idea, meaning that a lot of your success is based on execution. Ultimately, you really have to hustle and execute. On the flip side, if I can add a caveat, the one area where that can be a little more murky, is when there’s a huge market pull. In that situation, a mediocre team in a market that’s really taking off can probably execute better than a great team in a market that has no momentum. If the market is really taking off, a good team can have better outcomes than a great team in a bad market, no matter how strong they are. Oftentimes, we have theses in certain areas, so we have some view on the market and how that might impact these companies.

If there was a piece of advice that you’d give to founders who are raising money that isn’t shared enough, what would that be?

Founders often focus on the current product that they’re selling today and their long-term vision, which is grand and massive if you achieve it. However, a lot of times, in the middle, there’s a big gap. Having a clear strategy for how you’ll progress beyond the immediate pain point that you’re solving today is something that people don’t spend enough time on. I think having a viewpoint on how the market evolves is critical. It’s knowing what transitions are happening in the market and how that gives them tailwind, and understanding why that is the case.

Which investment were you most proud of and why?

Obviously, I like 4me quite a bit. I don’t know if there is one I’m most proud of. Going back to the industry transition idea, where it’s critical to find the right time to make a change in the industry, some of the best companies get the timing right, where many others are too early or too late. In healthcare, there’s a company we invested in called Lexigram, that’s helping payers and providers transition to the value-based care model. They’ve done really well. In security, there’s a company called TruSTAR that’s truly leveraging how companies share information with each other and really enabling that. Those are a few.

What areas are you most excited about now and moving forward into the future?

Security and healthcare are two areas I am excited about due to the changes taking place. A broader answer is that no matter what industry you’re in, if there’s a market transition that’s happening, I would be interested in learning more. The other thing that I think a lot about is the whole idea of the data economy. Historically, a lot of data was stored in silos across organizations, team, and geographies. Any company that is truly building insights across such data is a company that I would love to meet and speak with. So, there’s not one particular area, but these are a few of the areas that excite me.

About the Alchemist Accelerator

Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley—including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures/year. Learn more about applying today.

An Interview with Cor Winkler Prins, Founder & CEO, 4me, Class 18

Cor’s professional goal is to help the Enterprise Service Management (ESM) industry reach its next maturity level by providing easy-to-use functionality for the support of SIAM (Service Integration and Management).

In 2010, he co-founded 4me to make it easy for all support domains (IT, HR, Facilities, etc.) within large enterprises to work seamlessly with each other, as well as with their managed service providers (MSPs).

In 2003, he helped the ITSM industry establish a new benchmark: the 30-day IT Service Management implementation. By using the predefined processes and detailed work instructions of the Alignability Process Model, and combining that with role-specific training material, a pre-configured ITSM application, and a standardized implementation methodology, it became possible to implement six processes within 30 workdays.

In 1999, Cor helped the IT Service Management industry move away from highly customized implementations based on different interpretations of the ITIL best practices by developing the Alignability Process Model (APM). This was the first comprehensive set of integrated IT Service Management processes that include detailed work instructions for IT professionals. The APM has subsequently formed the basis of all other ITIL-based process models, such as BMC Software's Service Management Process Model and HP's Service Management Reference Model.

What exactly is your startup bringing to the marketplace?

We provide an enterprise service management tool, which essentially is a self-help portal for enterprise employees. When they get stuck or they don't know what to do, and they need help from the Human Resources (HR) departments, or the Legal Department, or from IT, they can submit a request using that self-help portal, or use the app on their smartphone. We route that to the party that should provide that kind of assistance—and that can be an internal department, like the HR department or the IT department, or an external company, to which the enterprise has outsourced a service. For example, this might be the payroll service or the legal service. If all contracts are reviewed by an external legal firm, and that firm also uses 4me, they would link up their 4me environment with the environment of their enterprise customers. When that legal department or somebody coordinating the legal activities of the company wants to pass a request from one of the employees to get a contract reviewed, for example, then they just shoot it off to that external firm using our tool. In the background, we keep track of all the agreements that the enterprise has with the different service providers that employees in the core business rely on.

What was the motivation in creating this company?

In Silicon Valley today, there are a ton of Enterprise SaaS applications being created. Within an enterprise, the employees of the marketing department, for example, go to trade shows and they see something like MailChimp that they like and want to use. They come back and they talk to the IT Department, and then the IT Department says “I don't know, it’s a cloud solution, we’re not familiar with the cloud, and we don’t have anyone to set it up for you.” If the marketing department is persistent enough, then the IT department will hire a consulting firm that has experience with MailChimp and will ask them to set it up. They’ll do a quick security check before purchasing to make sure it meets the necessary requirements. Then, this external firm will set up the MailChimp environment and integrate it, maybe with Salesforce, or with the corporate website, which might run on WordPress.

Once it's running, everything is fine, but then the marketing department wants to do a particular campaign, and for that, they will want to create something special on the corporate website. That needs to be integrated with MailChimp again, so they need to call back the consultants. Or they might discover a bug, or they want to upgrade, but basically every time the marketing department wants to do something special, they need to rely on these consultants. Over time, these consulting firms that specialize around certain technologies like MailChimp or WordPress or Salesforce – they keep getting repeat business from the enterprise. But, as people within the enterprise run into issues with the service, or they have questions or requests, they’ll send requests to the IT department, but they don't have any expertise in how to configure or reconfigure these Enterprise SaaS applications. What they do instead is, over time they establish such a tight relationship with all these different consulting firms that they use for these different technologies that they start to demand service level agreements. This is really good for the external firms, because it means recurring revenue—very steady and reliable. What the enterprise then wants is to have an easy means of collaborating with external firms, and tracking the quality of service that they're getting from each of their external providers.

That is basically what is lacking in the enterprise service management space, a tool that can link enterprise customers to all the different parties that provide services to them. Then, the companies don't have to retype every request that they get from their employees into a different service management tool for one of their external providers. They get accurate reporting on the quality of service that they're getting, and the providers get the same information about the quality of service that they are delivering to their customers. So, when there are issues, they know that there is an issue, that the data hasn't been manipulated by either the customer or the provider, and that the data is reliable. This lets them simply concentrate on making sure that the issue does not recur.

What do you think is the most challenging matter that your company is facing right now?

In the enterprise space, there are a couple of things that you really need to have sorted out well. The first thing is security. That extends immediately to privacy, particularly if you're doing business globally like we are. You have to take very strict privacy regulations into account, particularly in Europe where the GDPR came about last year. That has a huge impact on providers like us. We need to make it easy for our customers, who store, for example, HR data—which is very sensitive. We need to allow these large organizations to prove to auditors that they are doing everything that can reasonably be expected to keep their employees’ data secure. When something bad happens, they need to know how to respond, and how to coordinate that, and they can use a tool like ours for that. Most of our customers in Europe do so. But, there are additional things that our tool needs to be capable of, because of the GDPR. For example, in our tool, a lot of focus has been put on being able to audit what has happened in the past. The GDPR on the one hand demands exactly that, but on the other hand, if an employee, for example, demands from the company that the data is erased, which is “the right to be forgotten” in the GDPR, then the tool needs to be capable of removing the entire history, the entire audit trail.

Most enterprises, they demand that their providers are SOC compliant. Services like ours, and many Enterprise SaaS applications, process data from these organizations. We need to be able to prove on a regular basis that your tools are being submitted to advanced security testing, penetration testing, by a reputable firm. We need to be able to provide the audit  reports that our customers require. It's all pretty standard for large enterprises. For us it means that we pay a significant amount every year, simply to stay compliant for our large enterprise customers. Their auditors will come and check. It is very costly to do that, but it’s necessary to play in this space.

Can you tell me a little bit more about your background before you got started and how that prepared you for what you're doing now?

I've been in this industry, the service management industry, for more than 22 years. I grew up with a new methodology, a new set of best practices that were initially published in the U.K. This set of best practices is called the IT Infrastructure Library (ITIL). It quickly became popular worldwide, but the thing that we started to do is to build tools to support those processes. The first company that I helped set up, together with our CTO, Laurens Pit, a co-founder of 4me, sold to Hewlett-Packard. For us, that was the first time that we went through this cycle. Later on, me and Laurens both went our own ways. I started a company focused on service management, more on how to properly deploy service management in very large organizations on a global basis. We licensed intellectual property on that to specialized consulting firms around the world. We sold that company to BMC Software, which at the time was the leader in the service management space. Laurens later sold his company to ServiceNow, which had then just become the leader in the service management space. By combining our experience, we decided that we had sufficient background to take on these more established players, like ServiceNow and BMC Software.

We found that they were completely missing the boat on the cloud, although ServiceNow would definitely disagree with that, of course. They should be applauded for getting organizations onto the cloud with their service management solutions. However, they did it in a way that did not fully make use of all the capabilities that the cloud offers. Essentially what they did is provide a separate infrastructure for each of their customers. It's virtualized, but it doesn't allow for collaboration between organizations, which  is where they are now lacking. When we saw that misfit, between what was happening in reality, with enterprise companies selectively outsourcing more and more of their services, and what the service management tools on the other hand were providing and the direction that these tools were going in, we thought that this was silly. Because in a couple of years, there will be organizations who run into a wall because they simply won’t be able to manage the large number of providers they have to deal with on a daily basis using their traditional enterprise service management tools.

What made you want to apply to Alchemist?

We had been in existence for a few years before we applied to Alchemist. We bootstrapped the company and were not in need of additional funding, because basically we had sufficient customers to cover our costs. Whenever we signed up more customers for our service and had more revenue coming in, that’s when we would add more people to the organization, not before then. So, we were not making a profit because we were reinvesting every dime that we received from customers into the growth of the company. The reason why we decided to join Alchemist is because we wanted to establish a narrative for investors. Ultimately, the goal for us is to do an IPO. At that time it has to be a logical narrative for future investors. We’ve identified a number of stages in our path from where we were at that time to IPO. On the investment side, we realized that we needed to get some funding to accelerate. Particularly in the areas of sales and marketing, where we had little experience, we needed to bring some people in.

What we decided is that we’d sign up with Alchemist, which is very well-respected in Silicon Valley by other venture capitalists (VC’s). They would be able to open the door with other VC’s. Neither myself nor my cofounder went to Stanford or MIT, and we needed a way to establish more context in Silicon Valley. That’s what we were looking to Alchemist for, and that has been very successful. Even before we graduated from Alchemist, we were able to secure a funding round from Storm Ventures, which also specializes in Enterprise SaaS.

How would you describe your experience at Alchemist?

I really enjoyed it, and I learned so much. When you’re working with your product, mainly on a day-to-day basis, and trying to get more customers and look at features that set your product apart, you really have to switch your mindset at Alchemist to think about growth. Not just from one customer to the next, but thinking in broad strokes. In thinking of ways to get there, you’re thinking about funding as one way of helping you, but when you have funding, you need to find out what you’re going to do with it. You don’t have time to think about that during the day. Having certain topics addressed on Thursday evenings was really nice, because it helped us look at our company from a different angle, which always sparked new ideas.

What do you think would define success for you and your company in the next 12 months?

We’re trying to gain market share, and we primarily measure our growth by  the number of users on our services. We track our ARR, and in the past few years, we’ve been pretty consistent in growing at about 50% ARR YoY (year over year). Ideally, if we do things right, we should grow a bit faster than 50% this year. That is always what we’re shooting for every year – that we get our sales and marketing so well-organized that we manage to sign up more customers, more quickly.

What insights would you want to share with foreign founders, and the next generation of founders more generally?

I believe that the focus on SDR’s (Sales Development Reps) – sending out emails, hiring sales reps, setting up sales calls to make appointments for demos, etc., no longer works. A few years ago, when it was new, it worked. These days, people get so many of these calls that they’re no longer effective. That has been a focus to some extent during the sessions at Alchemist, but I think it’s time to start looking at alternatives, like teaming up with industry analysts, seeing how you can use trade shows, seeing how you can carve out your niche. That is something Alchemist helps with quite a bit. There were a few sessions that focused on that, and gave us some great ideas.

For the foreign founders, I believe that it is essential to be in the Bay Area. I don’t think it’s wise to think you can get VC funding here, while not being here. I always tell foreign founders that they also need to be a Delaware C Corp. I also tell them that it’s basically impossible to hire someone in the Bay Area if you’re living abroad. If you do manage to hire them, why didn’t they already have a better offer? It’s better to source talent in Eastern Europe, where people are super well educated, and not cheap, but affordable by Bay Area standards. If the founders are from India or Europe, and have a good understanding of the local culture, they should be able to manage people in their country of origin, from the Bay Area. The other thing to keep in mind for foreign founders is that it’s really hard to get visas. I’m a green card holder—I had to renew last year, and it was incredibly painful and time consuming. If you’re traveling with an expired green card, even if you applied for renewal at the right time and have a temporary extension, it becomes painful every time you re-enter the US. Why not just work remotely with your colleagues so they do not need to come to the US?

What are some highs and lows you’ve had in the last month?

One of the highs recently was an email I received from the legal department of a large managed service provider (MSP) that we’ve been working with to establish a partnership. We’ve been working with them for over a year already, and it’s taken a lot of time to go through their incubator process of looking at new technologies that they can use to get a competitive advantage. The email included a signed reseller agreement, which was the major milestone we’d been hoping for. A big low would be when one of your people who you’ve been training and investing in, leaves because they can earn 150% of their salary with another, bigger company. I don’t blame that person at all, because we can’t realistically match the offer, but it does set you back. The highs and lows come on a daily basis. You need to be able to stay in the saddle, particularly during the first few years, which can be an emotional rollercoaster—but also the fun part. Some people thrive on that, the adventurous nature of startups. That’s one of the things I really enjoyed about Alchemist—you could tell when one of the founders in your class had a rough day or a rough week. It was so helpful for someone to be able to tell their story and feel the support from the group, even just the emotional support. As a founder, you can really feel alone sometimes, especially when the rest of your team is abroad.

What skill or lesson has been the hardest to learn, and has there been anyone that really helped you become a better founder?

Pitching. I was not good at providing a decent pitch. At Alchemist, it was super helpful, not just to get practice, but also tips about what to do and what not to do. It extends not just to pitching VC’s, but also talking to customers. At a certain point in time, when you’re talking to CIO’s or C-Level Executives, they don’t care about the functionality of the tool anymore, they care about the vision. When you can paint that vision for them, if they get grabbed by it and feel like joining you on that journey, it’s wonderful. Alchemist has helped with that a lot.

At Alchemist, the book recommendations were also really helpful. Each and every lecturer had something to teach us, some little nugget that we could take home with us and stew over, in addition to all the other things we learned. It opened a world that I hadn’t paid much attention to. I really enjoyed developing a new skill, like pitching, and it was definitely worth improving in that area. The experience was certainly worth it.

About the Alchemist Accelerator

Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley—including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures/year. Learn more about applying today.

Joint Press Release - Alchemist Accelerator & BASF

By investing in Alchemist Accelerator’s digitally-focused fund, BASF Venture Capital promotes innovations at the intersection of chemicals and technology.

BASF’s investment into Alchemist Accelerator promotes digital innovations in the chemical industry 

  • Alchemist will fund digital startups driving growth of the chemical industry
  • BASF accelerates its outreach towards technologies like artificial intelligence, internet of things and robotics

    San Francisco, California, and Ludwigshafen, Germany, February 20, 2019 – BASF Venture Capital is investing $2 million into Alchemist Accelerator’s fund, allocating at least half towards investments in 3D printing, agtech, material informatics, nutrition and, technology game-changers. This investment supports BASF’s strategy to leverage digital technologies to drive business growth.

    “Alchemist has built a strong reputation for attracting the best in the digital ecosystem. We are thrilled to officially join Alchemist as a Limited Partner”, said Markus Solibieda, Managing Director at BASF Venture Capital. “Digitalization represents unprecedented opportunities to create value for our customers and develop new business models. By investing in a digitally-focused fund, we promote innovations at the intersection of chemicals and technologies like artificial intelligence, internet of things and robotics”, Solibieda continued.

    Since Alchemist’s debut in 2013, 24 companies funded by Alchemist have been acquired and over a hundred have gone on to raise significant funding rounds from the top venture capital firms in the Silicon Valley – including Andreessen Horowitz, Bessemer Venture Partners, Draper Fisher Jurvetson, Foundation Capital, Founders Fund, Greylock Ventures, Menlo Ventures, Redpoint Ventures, Social + Capital Partnership, and True Ventures.  

    “It is an honor to welcome BASF Venture Capital as a Limited Partner with Alchemist. Some of the most exciting innovations we are seeing, are at the nexus of the digital and material – few partners are as equipped to bring expertise in that area as BASF. We are thrilled to officially welcome BASF into the Alchemist family”, stated Ravi Belani, Managing Director at Alchemist.

    The Alchemist Accelerator seeds 75 startups per year and provides a structured path toward their first customers and fundraising. The 6-month program offers privileged connections to the top enterprise coaches, early adopter customers and investors. Alchemist just debuted Class 20 on January 23, 2019 to over 200 customers, partners, and investors at Juniper Networks in Sunnyvale.


    About Alchemist Accelerator

    The Alchemist Accelerator is a new venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. The accelerator seeds around 75 enterprise-monetizing ventures through three programs per year. Over 50% close institutional rounds within 12 months of their Alchemist Demo Day. Ventures, Menlo Ventures, Redpoint Ventures, Social + Capital Partnership, and True Ventures. 

    For more information on the accelerator, please visit www.alchemistaccelerator.com.


    About BASF Venture Capital

    BASF Venture Capital GmbH (BVC) was founded in 2001 and has offices in Europe, the U.S., China and Israel. The aim of BVC is to generate new growth potential for BASF by investing in new companies and funds. The focus of investment is on chemical products and new materials, software and services as well as innovative and digital business models in the broader field of chemistry.

    Further information at www.basf-vc.com.

     

    About BASF

    At BASF, we create chemistry for a sustainable future. We combine economic success with environmental protection and social responsibility. The more than 115,000 employees in the BASF Group work on contributing to the success of our customers in nearly all sectors and almost every country in the world. Our portfolio is organized into six segments: Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care and Agricultural Solutions. BASF generated sales of more than €60 billion in 2017. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA) and Zurich (BAS).

    Further information at www.basf.com.


    Media Contacts: 

    Alchemist                                                       BASF

    Danielle D’Agostaro                                        Inga Franke

    Phone +1 415-527-0158                                 Phone: +49 173 3099242                                 

    danielle@alchemistaccelerator.com                inga.a.franke@basf.com

    “Founder-friendly” ...until you stall


    Founders who are in the midst of their fundraising roadshow will pitch VCs who say they are “founder-friendly” in regards to how they work with founders to help them build their companies. Here are 3 tips to connect the dots between the self-proclaimed founder-friendly VC’s mindset and the tough, but fair, conversations they will have with you when your business hits some road bumps.

    Tip 1: “Friendly” might not mean what you think it means

    If your startup has multiple founders, it is typically the CEO co-founder who is the point person to negotiate the term sheet. As the CEO co-founder, you need to have the self-awareness to accept that the VC acts as the corporate stewards in the best interest of the company, their LPs, founders, and employees. The rubber meets the road when your startup has a critical business issue. It could be the business is not performing at the hockey stick growth level, or that the company's brand was hurt by a devastating Human Resources (HR)-related issue due to company culture problems.  

    Great CEOs have self-awareness. They understand everyone is friendly when you are hitting your sales targets. But when you miss two consecutive quarters of revenue, or when your startup is on the front page of the WSJ or TechCrunch for a HR issue, there are consequences. The way the CEO leads and the speed it takes to navigate the startup out of the storm will dictate how long the relationship remains friendly.

    Tip 2: Deal Terms exist to de-risk, not to offend

    VCs and founders work with law firms to deploy billions of dollars a year in venture funding. There are few bad actors and no two term sheets are exactly the same. There are also many deals that fall apart. That is why founders are encouraged to get multiple term sheets. But a term sheet with a lower valuation than you expected or aggressive downside protection doesn’t mean the VC is not founder-friendly. It means that your traction, net revenue, growth, and maybe the A team, is not in a place to give you leverage in the negotiation. That is what is reflected in the term sheet deal terms.  

    The more uncertainty the Venture Fund has in your business, the more they will want to protect their downside and their LPs’ investment. Traction and revenue growth will drive better terms. Be willing to re-engage with investors who have passed on you in earlier rounds. Plenty of VCs miss deals that they wish they could redo.  

    Tip 3 The intersection between founder-friendly and board governance

    The CEO co-founder is the only founder who reports directly to the board. It is the board’s role to hire and fire the CEO. This is an interesting dynamic when you have multiple founders. No matter how you package it, the lead Series A Partner will sit on your board and will have the power to be not-so-friendly when the business is not performing. Again, this doesn't mean they can’t empathize with the sacrifices founders have made. At the end of the day, the board needs to ensure the company is growing and that CEO is the right person to make that happen.

    About Darren Kaplan


    Darren Kaplan is the Managing Director of The Last 90 an early-stage venture fund that invests and operates companies that are redefining the future of work. Prior to that Mr. Kaplan was the co-founder of hiQ Labs, a data science company, informed by public data sources, applied to human capital to make work better. Mr. Kaplan is an Alchemist Accelerator Selection Committee Member and Mentor.

    About the Alchemist Accelerator

    Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The Accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley—including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The Accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.

    The Math Behind Product/Market Fit


    What is a best-practice, repeatable process for validating product market fit? This is one of the most common questions I am asked. As an Alchemist start-up mentor, I help founders build a sales process to close their first 10 paying lighthouse customers. During my office hours, I am lucky enough to coach technical founders who are brilliant when it comes to math and process, but still sometimes need guidance when it comes to fine-tuning strategy.

    The most impactful way to determine product-market fit is a strategy I call the “1x3 Discovery Process Strategy”. For every 1 hour you code, you should spend 3 hours on discovery calls to understand, validate, and be able to apply your understanding of the market.  

    The “1x3 Discover Process Strategy” will reduce cycles and increase the speed at which you can prove you are on your way to market validation and traction objectives. Here’s how:

    1)  Discovery calls gather actionable data to make sure that you build what people will pay for
    Discovery calls are about data. The better and more effective the questions you ask, the better the data. If you have bad data, your product market fit hypotheses will be flawed.  Your code also has a high probability of being worthless, meaning no one is using what you are building. Since, by definition, product/market fit equates to being in a good market with a product that can satisfy that market, solid data is all about confirming and ensuring the best path.
    2)  Open-ended questions are crucial. Here’s where founders get it wrong
    1x3 questions lead to great product data. Product market fit discovery questions need to be open-ended.  There is no data value in “Do you have x problem (yes or no)?” More impactful questions are:
    • Tell me about your current situation.

    • Why is this a problem now?

    • What have you tried in the past to solve it?

    • Why is this a priority now?

    These questions are gold when it comes to understanding product/market fit. Because they are open-ended, they give the buyer/champion or influencer you are speaking with the opportunity to be thoughtful in their response. Your buyer is able to reflect about their current day and tell you, in their words, stories and examples about the problem from their point of view. Rather than asking a question that implies you know the answer or that direct the answer, an open-ended question creates the opportunity to hear answers around topics you may not have anticipated. Great founders understand how their customers think about their problems, the impacts and value of a solution to their problem, and how your solution fits within their workflow.

    3)  Finding market fit

    Finding market fit means that people you don’t know will pay for your solution and renew it when you increase the price. An ineffective question like “Did you like what I showed you? yes/no” doesn’t add much value or drive any understanding.  Better questions are:

    • Tell me about your ideal solution.

    • What do you like/dislike about your current solution?

    • How does what we want to do compare with your current tools?

    Remember these questions are designed to ensure you validate that the prospect will PAY for your solution to their problem.

    4) Charting the path for coding what customers will pay for

    As tech-cofounder, coding is your superpower. Your kryptonite is your enterprise sales experience.  With the right discovery questions, you can code in half the amount of time and ensure you incorporate the right features your target wants and will buy.    

    The 1x3 Discovery Process Strategy is a process to ensure you manage your time. Better data will always set you apart from your competitors. By asking the right questions, and adding to your knowledge and insights, you will come to understand the customer better than they understand themselves. Coding, from this vantage point, becomes the easy part.

    About Darren Kaplan

    Darren Kaplan is the Managing Director of The Last 90  http://www.thelastninety.com  an early-stage venture fund that invests and operates companies that focus on the future of work. Prior to that Mr. Kaplan was the co-founder of hiQ Labs (www.hiqlabs.com), a data science company, informed by public data sources, applied to human capital to make work better. Mr. Kaplan is an Alchemist Accelerator (https://alchemistaccelerator.com)

    About the Alchemist Accelerator

    Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley—including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.

    An Interview with Na’ama Moran, CEO of Cheetah, Alchemist Class 2

    Na'ama Moran came to the US from Israel to study economics, math and political science at Cornell. After school, Na'ama joined NYC’s emerging markets hedge-fund, Greylock Capital Management, as an analyst. She left finance to pursue her dream of building products that make people's lives better with technology. She moved to Silicon Valley where she concurrently took classes in Computer Science at Stanford and co-founded Zappedy, a services platform enabling local businesses to close the loop between online marketing and offline sales. The company was acquired by Groupon in 2011. While working at Zappedy, Na'ama encountered a large variety of restaurant owners and food entrepreneurs. She discovered the hardships of running a restaurant and was surprised by the lack of transparency and ease-of-use in such an important marketplace. She decided to do something about it. Na'ama met cofounder Peretz Partensky while camping together at Burning Man. The two started working on what would eventually become Sourcery and raise $5M in funding. Her experience at Sourcery  led to her founding Cheetah Technologies to be the easiest, fastest, and most affordable way for small-medium businesses to get their daily supplies and services. In her spare time, Na’ama loves to practice yoga, hike the beautiful Bay Area trails, and read science fiction books.

    What exactly is your startup bringing to the marketplace today?

    My company today is like an Instacart for small businesses. We enable businesses to order their daily supplies from their mobile phone, anytime and from any place, and connect to a large network of local and national wholesale suppliers.

    What was the impetus behind starting that? What made you think this is a good idea? What was the inspiration behind this venture?

    I've worked with small businesses for the last couple of years, initially with restaurants in my previous business, Sourcery. What was really interesting about this market is the lack of transparency and the lack of a convenient way for small business owners to manage their daily purchasing and know product  pricing in advance. The way they manage their businesses is very antiquated. By accessing wholesale suppliers that are priced transparently on our app, and building this alternative supply chain, we’re enabling small businesses to have access to both local and national vendors, and benefit from a very convenient same day or next day delivery.

    Can you talk a little bit about your background before the startup?

    I worked in finance in a hedge fund for a couple of years right out of college. Then I moved to the Bay Area and I've been doing my own startups since then. For the last couple of startups  I've run, I've been working with small business owners primarily in the food service space. That gave me insight into the types of problems they were having.

    Is there any previous experience or situation, either personally or professionally, that you felt helped prepare you for this startup? Was that working in finance or working with food services? Is there one thing that helped prepare you for what you're going through today?

    I don't know if there was one thing. I think it's the connection of all the different businesses I’ve been doing for the last ten years. All of those startups taught me something different about finding product-market fit, building a scalable business, building and scaling a team. At my previous company Sourcery, which is the company that was enrolled in Alchemist, is when I got most familiar with the problems of small restaurants and small businesses in the food service space. It gave me deep familiarity with the problem and the impetus to come up with a solution.

    On the topic of Alchemist, what made you apply to Alchemist?

    I really like Ravi and his focus on the B2B space.I thought they had a very strong network of mentors.

    Now that you've gone through Alchemist, what do you think was the most valuable thing you took from going through it?

    It has a very strong network of mentors and alumni that is valuable for early stage startups. Especially people who are creating very large businesses in the B2B space and have a lot of knowledge and experience to share. The preparation for the demo day was very useful as well.

    What is the most challenging matter you guys are currently facing? Fundraising, talent recruitment, product development?

    I think recruiting in the Bay Area continues to be a very challenging endeavor, because the environment is so competitive. I would say being able to recruit top talent continues to be our biggest challenge. Our business is operations heavy and therefore, the various challenges we are facing have to do with scaling operations.

    Can you talk through one of the highest highs and lowest lows of the last month?

    We've grown our topline by more than fifty percent on a quarterly basis, compared to last quarter. This is definitely one of the highlights. One of the low moments we had, had to do with  recruiting. We gave offers to people that we really wanted to bring onto the team and they we were not accepted. This was pretty disappointing.

    Looking to the future, what constitutes success and what are your goals in the next twelve months?

    Being able to meet or exceed our goals would be a strong indication that we had a successful twelve months. We have certain projections and they're pretty aggressive so being able to, as they say, “meet them or beat them” would be really good.

    What entrepreneurial lesson or skill do you think took you the longest to learn or are you still continuing to work on?

    I think there is a skill in finding product-market fit. Unless you get lucky, you need to develop this skill in a very methodical, focused way. I believe I have been able to develop this skill over time, but I'm sure there is still a lot to be learned. Today, with my current company, I think we have a proof that we have found product-market fit and the biggest challenge is to scale the business very rapidly and be able to confront very strong competition in our markets. The challenge is different. The challenge is really about scaling a business and being able to sustain it, rather than figuring out if we have product-market fit.

    And so if you could hypothetically go back to yourself on the first day of your startup, what advice would you give yourself?

    Be able to let go of bad ideas and bad people faster.

    Is that similar to the Silicon Valley saying, “Fail quickly, fail often”? Is it better to get through a bad idea and move on to something good than to hold on to it?

    Yes. Being able to let go of bad ideas or bad strategy or bad people a lot faster probably would have made me successful faster than I have been.

    Do you personally have any advice for founders who are not from the US?

    It’s all about the network you build here. For people who are not from the US, it might be a little bit harder to build their networks. Being able to build a network as fast as possible is probably the biggest advice I can give.

    Has there been anyone specifically that helped you get to where you are today, that you think you wouldn’t be here if it weren’t for them?

    There are various people like that. Some of my investors have been incredibly supportive and informative in helping me to get where I am. There have been people I work with and colleagues that have been instrumental in helping me get to where I am today. I don't think there is one person. There are multiple people, between investors, colleagues and mentors, that I can point to.

    How did you get in contact with soe of these people and develop that relationship? That is something a lot of founders struggle with, building networks and trying to get to know these people. They find it really hard.

    It’s a good question! It's just a matter of always trying to make connections or initiate meetings. Even if the meeting doesn't necessarily work out to provide you what you want, ask the person to introduce you to other people that could be useful. Just constantly build that network with every meeting that you have. Be able to build a network through friends. I went to Stanford for a certain period of time, I met some people there. I went to Alchemist and YC, these are networks I am a part of. All these different organizations are ways to build those networks.

    Of all the jobs you can have, startups are more on the intensive side. The types of people that start companies, tend to have a passion for it. For you, whether it be five or ten years from now, what constitutes success for you personally and this venture? What would make you feel this was all worth it at the end of the day?

    I think it would be the impact I end up having on the lives of my customers and employees. Hopefully, I will see some significant monetary return for my efforts as well. I'm doing this  to really have an impact and change the way people are doing business, and change the way our employees are living their lives. Creating wealth for both my customers, employees is my number one goal and inspiration.

    About the Alchemist Accelerator

    Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley—including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures/year. Learn more about applying today.

    An Interview with Scott Raney, Managing Director, Redpoint Ventures

    Scott invests in entrepreneurs at the seed, early and growth stages with a focus on cloud infrastructure, open source and SaaS. He’s especially interested in the rise of distributed computing and developer-facing businesses. Scott serves or has served on the boards of Guild Education, LaunchDarkly (an Alchemist company), Hashicorp, Platform9, Sourcegraph and Twilio, and led Redpoint’s investments in Stripe and Collective Health. Past investments include adap.tv (acquired by AOL), Cloud.com (acquired Citrix), Heroku (acquired by Salesforce), Jumptap (acquired by Millennial Media), and RelateIQ (acquired by Salesforce).

    Prior to joining Redpoint, Scott was responsible for new products at NorthPoint Communications, a data CLEC providing nationwide DSL services. Prior to NorthPoint, Scott worked at Bain & Company helping clients in the private equity and technology industries.

    Scott, how did you get into the world of Venture Capital?

    I’d worked as a developer, product manager, and business development manager at a variety of companies including a couple of startups. I had a passion for entrepreneurship and technology, and I had an opportunity to join Redpoint as an associate a number of years ago. I’ve been lucky enough to get promoted a number of times and be in a position to work with a lot of really great entrepreneurs over the years. It's been a lot of fun.

    You said you were a developer. Is that what you graduated college with?

    I graduated with a B.S. in Electrical Engineering and had done a bit of software development as a part of my academic career. Then I joined, what at the time was called Andersen Consulting, but is now Accenture, as a software developer and, among other things, worked in their Advanced Technology Group. I did a lot of software development there at the dawning of client-server, and also got exposed to networking and communications and really fell in love with that.

    Is your background in software development what led to your investment in LaunchDarkly?

    I'm going to take it back a few years to 2007 and the launch of Amazon Web Services. As a former software developer, I saw the impact that would have on development, but also the emergence of this trend called DevOps, that we all know and love today. I met the founding team of Heroku, which was building the first PaaS (Platform as a Service.) Through that experience, I developed a deep admiration for entrepreneurs working on building products that developers love. You’re not selling products to developers, but you're selling through developers to organizations to solve big business problems. Heroku is near and dear to my heart and I learned a lot about the power of developers through that time. After that, we invested in companies like Stripe and Twilio and another company called Sourcegraph that's working on “code intelligence” again to help developers accelerate writing software. Through these experiences I was lucky enough to meet Edith and hear what LaunchDarkly was doing. It felt like it was the perfect continuation of that trend. It’s a piece of technology and a solution that helps developers, but ultimately unlocks so much value across an organization and could have a profound impact on how they think about their business.

    What separated them from the other investments you were thinking of making in the space?

    The things I look for when we find these developer-facing businesses are indicators that the projects have impact not just within the development organization, but with other functional areas. By changing the software development lifecycle, these companies can end up having repercussions that affect product, marketing, and even senior level decisions how a company runs its business. LaunchDarkly was an amazing example of that, through the idea of feature flagging: the ability to transform the velocity at which you could release product; the ability to give product managers control to deliver specific features to individuals; the ability for marketing to be able to provide early looks on functionality. These are interesting, profound capabilities that span across an organization. Maybe the most exciting thing to me is, we talked to one of their early customers during the due diligence. It's a very successful, large company today, a brand name. We talked to the CEO who was not only aware of the impact LaunchDarkly was having on the organization, but talked about how it impacted the way he managed the business. It changed the way he thought about what his team could do. I was incredibly excited when I heard that, because that’s the way you create massive value and have the opportunity to build a significant business.

    What are your thoughts on Alchemist in general?

    I love what Alchemist is doing. I think it’s clear that when Alchemist got started, there was a dearth of opportunities for entrepreneurs thinking about enterprise businesses to find mentors and advisors and organizations that could them to help them grow those ideas.  Ones that understand the nuances associated selling to enterprise buyers. There were things like this available to consumer and more consumer-like enterprise businesses, but there were very few people that could act as a resource for entrepreneurs who wanted to build traditional enterprise businesses. I've heard time and time again from the people that go through the program just how much value they're getting out of it. I don't want to suggest here that building a consumer business is easier than building an enterprise business, far from it. They're very hard, but they're very different. As a young entrepreneur, when you think about selling to businesses, there's some realities you just have to know. You have to understand what it means to build an enterprise-grade product. You've got to understand what it takes to market to enterprise buyers, and you have to understand what it takes to build and manage a sales force that can sell to enterprise buyers. Having an organization that helps young entrepreneurs understand the importance of all those things and what it means to do that is invaluable. I view it as a pretty unique entity in terms of what it's doing. The entrepreneurs that have been a part of the program say it was incredibly helpful.

    What’s the size of Redpoint, and how does it compare to other funds of similar stage in the Valley?

    We’re a unique animal in that we are always actively putting money to work out of two funds simultaneously. We have an early stage fund that is $400M focused on Seed, primarily Series A and occasionally Series B. We also have a $400M early growth fund that is focused on Series Bs and Cs. As a result, we span from Seed all the way through mezzanine financing with these two funds totaling $800M.It makes it a lot of fun for us. Our approach in the way that we we work with entrepreneurs, is they do not need to worry about which fund the money is coming from. Here we're going to work every deal exactly the same with an identical approach to thinking about engagement with entrepreneurs and the value that we want to add to them. We just have two pockets we can pull from.

    What size checks do you typically write and how is that structured?

    It's a hard one to answer given our stage-agnostic approach.  We write seed checks of a few hundred thousand to grow checks well north of $30M. The most important thing for us is to not try to force an entrepreneur to raise an amount of money that isn’t in the best interest of their company.  Ultimately, we want to do what is in their best interest and the good news is we have the flexibility to support a couple of smart people with an idea all the way up to a company well on its way to an IPO.  

    What stage do you prefer to enter into, if there is a preference?

    The earlier we can be involved with great entrepreneurs, the better, but again we are primarily interesting in working with great companies regardless of stage.  

    Does your fund have a specific focus?

    Broadly speaking, Redpoint invests in disruptive ideas across both enterprise and consumer technologies. That being said, with the rise of things like artificial intelligence and what's happening within SaaS and cloud, we're finding ourselves moving into adjacent markets. We've been spending time understanding how things like machine learning can transform the drug discovery process and the delivery of healthcare. We are spending time in areas like space and robotics. We have a pretty wide aperture. The common denominator is we are looking for bold ideas.  Companies that are building innovative technologies and that have the chance to fundamentally transform a market.

    How do you think your fund differentiates itself from other funds?

    First and foremost, it starts with entrepreneurs. Few jobs are as challenging as that of a founder creating and scaling a business; our team’s job is to work collectively for our founders and help them build successful companies. We view ourselves as going to work for the entrepreneurs, as opposed to them going to work for us. It’s a privilege.  

    As a firm, we’re very collaborative in nature and we take a team-based approach. Most of our team have been former operators or founders ourselves and we have a deep empathy for the entrepreneur’s journey. We try to operate like a startup ourselves with a small and nimble team. Our firm’s 19 + year legacy gives us a fair amount of experience, perspective and connections, as well as a foundation for doing what’s right for the entrepreneur.   

    The last thing I would say is that we really have deep domain expertise and we invest a lot of time and energy in building the networks and relationships around the thematic areas we invest to make sure that we can make a difference. This allows us to see over the horizon, and help our companies do the same.

    How do you think you individually differentiate yourself from other VCs?

    I try to be the best possible partner that I can be. I've been lucky enough to be a part of a lot of great companies and to have had a chance to work with a lot of great entrepreneurs. I hope that when they sit down across the table, they'll say “This is somebody who helped me, who had my best interests at heart, and who was great to work with.”

    The other thing is just try to be a good human being. This is a long term relationship and we’ll be working with these folks for many, many years. The last thing that an entrepreneur needs is to be dealing with somebody that isn't 100% aligned with them and has their best interests at heart. I try to make sure that I'm always looking at the world through their eyes and trying to be as helpful as I can.

    What makes an investment compelling for you?

    It starts with the team. We spend a lot of time in our diligence process assessing whether or not we think a team has the opportunity to build something really differentiated and transform whatever market or industry they're part of. That is top of our list, bar none. We want to work with good people that we think are going to do things the right way. Second, we look at the markets the companies are operating in. We want to be going after big markets and taking bold bets. The last thing is we look for products and technologies that are differentiated and will create defensible moats making  it difficult for other people to replicate.

    That used to stand primarily on the basis of high quality products and good technology. Increasingly, a lot of businesses we look at have other moats like network effects that can be extraordinarily powerful for businesses. In enterprise increasingly there are communities that get built up around some of these technologies. We put that all together and try to find things that are special and where we feel we can add value.

    Bottom line is, we want to work with great people, and they come in all different shapes and sizes and all different experience levels. We've been fortunate to work with a lot of folks who are building amazing businesses as their first job. We've also been very fortunate to work with experienced executives who are doing it for the second, third, or fourth time. In the end, we don't think that talent comes in one shape or size or profile. At some level, to be a great entrepreneur, it’s some magical combination of intelligence, grit, determination, and experience. There's always a different combination of all those things, but in the end we think that people that have a vision for the future and have the ability to get it done are what matters the most.

    Is there was a piece of advice that you could give to founders fundraising, that doesn’t get shared enough, what would it be?

    The more honest and open and transparent you are, the more likely you're going to find somebody who is investing for the right reasons. I encourage everybody to make sure that you're not trying to manage the conversation. As an entrepreneur you need to be able to sit across the table from your investor and lay it all out there - the good and the bad - and get an honest reaction. It gives me great comfort when founders name the issues or challenges in their business because I don't feel like I'm being managed and I don't feel like there are things I don't know. Obviously, things are not always going to be going up and to the right. Every company has things that need to be worked on. Once I know what the issues are, it's much easier for help the entrepreneurs. There are a number of founders in these conversations that feel like they need to come off as infallible and “we've got this, it's all good.” No business is like that.

    Which investment are you most proud of and why?

    I love them all the same! But Heroku is special to me because it was my first investment.  It wasn’t obvious at the time, but I loved the founders and their vision.  Seeing their success was incredibly gratifying. As with all our founders, I am forever grateful to have had the chance to work with them.  

    What areas are you excited about now and in the future?

    It's a broad question and I don't think I'll be exhaustive in my answer. I will tell you where I spend a lot of time personally. I believe in this move-the-cloud-native movement - this move away from traditional monolithic to microservices and from on-premise to the cloud.  These moves are having profound repercussions it has in terms of software development, deployment, and operations, and also the impact it has on a company’s ability to move faster than ever through software. You can look at every tier of the application stack and realize that they're going to be fundamentally changed. Many already have been, but there are many things left to do. I'm a big believer in things which help organizations move to the cloud. I’m a profound believer in the power of the public cloud and the long term trends there. All the solutions that help companies begin to make that migration, I'm very excited about. We continue to be interested in SaaS in the way that it’s moving beyond broad horizontal applications and into more vertical solutions that do more than just automating a business process, but really help people do their jobs better by delivering insight. We continue to be excited about the long term trend trends there. And as I mentioned earlier, we're very interested in broad applications around AI and ML and in particular how these technologies might disrupt industries typically not addressed by venture capital.