Jul
10
2020
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Operator Collective brings diversity and inclusion to enterprise investing

When Mallun Yen started Operator Collective last year, she wanted to build an investment firm for people who didn’t have a voice in Silicon Valley. That meant connecting women and people of color with operators who have been intimately involved in building companies from the ground up, then providing early-stage investment.

She then brought in Leyla Seka as a partner. Seka helped build the AppExchange at Salesforce into a powerful marketplace for companies built on top of the Salesforce platform, or that plugged into the platform in some meaningful way to sell their offerings directly to Salesforce customers. Through that role, she met a lot of people in the startup world, and she saw a lot of inequities.

Yen, whose background includes eight years as a VP at Cisco, and co-founder of Saastr with Jason Lemkin, wanted to build a different kind of firm, one that connected these operators — women like herself and Seka, who had walked the walk of running substantial businesses — with people who didn’t typically get heard in the corridors of VC firms.

Those operators themselves tend to be underrepresented at investment shops. The firm today consists of 130 operator LPs, 90% of whom are women and 40% people of color (which includes Asians). One way that the company can do this is by removing rigid buy-in requirements. LPs can contribute as little as $10,000, all the way up to millions of dollars, depending on their means, and that makes for a much more diverse pool of LPs.

While Seka admits they are far from perfect, she says they are fighting the good fight. So far, the company has invested in 18 startups with a more diverse set of founders and executives than you find at most firms that invest in enterprise startups. That means that 67% of their investments include people of color (which breaks down to 44% Asian, 17% Latinx and 6% Black), 56% include a female founder, 56% have an immigrant founder and 33% have a female CEO.

I sat down with Yen and Seka to discuss their thinking about enterprise investing. While they have a far more inclusive philosophy than most, their general approach to enterprise investing isn’t all that different than what we’ve seen in previous surveys with enterprise investors.

Which trends are you most excited about in the enterprise from an investing perspective?

Jun
18
2020
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13 Boston-focused VCs share the advice they’re giving portfolio companies

TechCrunch is focusing a bit more on the Boston-area startup and venture capital ecosystem lately, which has gone pretty well so far.

In fact, we had originally intended on releasing this regional investor survey as a single piece, but since so many VCs took part, we’re breaking it into two. The first part deals with the world we live in today, and the remainder will detail what Boston-area investors think about the future.

We broke our questions into two parts to better track investor sentiment. But, we were also curious what was going to come when things got back closer to normal. So, this first entry in our Boston investor survey covers our questions concerning what’s going on now. On Thursday we’ll have the second piece, looking at what’s ahead.

Here’s who took part:

What follows is a quick digest of what stood out from the collected answers, though there’s a lot more that we didn’t get to.

Boston VC in the COVID-19 era

Parsing through thousands of words and notes from our participating VCs, a few things stood out.

Boston startups aren’t having as bad a time — yet, at least — as area investors expected

Fewer companies than they anticipated are laying off staff for example. From our perspective, the number of Boston investors who noted that their portfolio companies were executing layoffs or furloughs (we asked for each to be precise) was very low; far more Boston-area startups are hiring than even freezing headcount. Layoffs appear somewhat rare, but as we all know cost cutting can take many forms for startups. Especially startups on the seed and early-stage side, which makes up the majority of these firm’s portfolio companies.

According to Glasswing’s Rudina Seseri, startup duress has come in “significantly under what [her firm was] expecting at the beginning of COVID-19.”

This may be due to a strong first quarter helping companies in the city and its surrounding area make it another few quarters. We might not know the full bill of COVID-19 and its related disruptions until next year.

More investors than we expected noted that their Boston portfolio companies aren’t raising this year

So what we’re gleaning from that fact is that any decline in Q2 and Q3 VC data is not because companies can’t raise, but because they don’t need to. Comments echoed a theme we wrote about in April: Boston broke records in Q1 in terms of dollars raised, but saw a dip in the number of checks cut.

Pillar VC’s Jamie Goldstein said that “about 15% of our companies are planning to raise capital this year,” which felt about average. Underscore VC’s Lily Lyman simply noted that, “Yes,” her Boston-area portfolio companies would hunt for new capital this year. Bill Geary of Flare Capital is on the other side of that coin, saying that “each of [his firm’s] Boston-based investments has successfully recently raised capital and will not be raising additional funds until 2021.”

It’s hard not to wonder if what happened to Boston unicorns Toast and EzCater was the exception and not the rule

 You see, Boston’s startup scene skews relatively early stage, so smaller companies don’t have high-profile cuts because, to be frank, there isn’t much staff to cut in the first place. It puts Boston in a unique setting to focus in on its early stage market, and investors all agreed that this is an important moment for the ecosystem.

The March-era stress tests are now months in the rearview mirror, and every startup has shaken up their spend and growth plans. Perhaps we have met the new normal, and it’s time to let the runway do the talking.

With that, let’s get into full questions and answers.

Rudina Seseri, Glasswing Ventures

What is the top-line advice you’re giving your portfolio companies right now?

This is a pivotal time, be efficient and drive execution. Cut costs where possible but at the same time don’t be afraid to spend for growth acceleration.

What percentage of your Boston-based portfolio companies are still hiring, not including those merely backfilling?

About 60%.

What percentage of your Boston-based portfolio companies have frozen new hires?

About 20%.

What percentage of your Boston-based portfolio companies have furloughed staff?

None.

What percentage of your Boston-based portfolio companies have cut staff?

One company that represents about 4% of the portfolio.

Are your Boston-based portfolio companies looking to raise new capital this year?

Most have raised recently, and consequently are not looking to raise at this time.

If not, are they often delaying due to COVID-19?

No, because of their recent raises, their fundraising considerations will take place in 2021.

Has duress amidst your Boston-based portfolio companies undershot, matched or overshot your expectations from March?

It has been significantly under what we were expecting at the beginning of COVID-19.

How has your investment appetite changed in terms of pace and location, if at all?

We have been very active and closed deals in this environment. Our expectation is that our investment appetite will remain the same going forward.

Are you making investments in Q2 into net-new founders and companies?

Yes, as a matter-of-fact we just closed a yet-to-be announced investment this month.

Are there particular sectors of startups in Boston that you expect to do well, aside from SaaS businesses that are benefiting from secular trends? Are there any sectors you have become newly bearish on?

Yes, those that are in our core focus areas — solutions that bring down the cost of cloud and data, platforms and tools leveraging AI, those that facilitate cost reduction, and intelligent solutions in cybersecurity that protect the enterprise.

How does the uncertainty of schools reopening impact the startup ecosystem?

This will further drive and institutionalize distributed teams and remote working as a go-forward mode of operating.

Jun
09
2020
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Enterprise investors remain flexible as they navigate COVID-19

One would think it’s a given that investment strategies would change in the strange times we find ourselves. With the economy staggering and so much general uncertainty, it seems caution would be the watchword of the day, especially in the enterprise. But enterprise investors aren’t necessarily looking at what’s going on right now.

As startups make their way into the enterprise, they often grow from a single product to a platform offering, which means such investments tend to be a long haul that can take a decade or longer to mature and exit or IPO. The bigger the approach, the longer the sales cycle, so even though sales motion could be stalling now, it doesn’t mean VCs are just giving up on these types of investments.

Savvy investors understand that this is going to be a long game, and the current situation driven by a worldwide pandemic won’t necessarily change their approach significantly.

We asked a number of enterprise investors if they have changed their approach in light of the pandemic and its knock-on economic impacts, how the current environment has changed their relationship with existing portfolio clients and how well those clients are coping with the new reality.

  • Theresia Gouw, Acrew Capital
  • Diane Fraiman, Voyager Capital
  • Casey Aylward, Costanoa Ventures
  • Hope Cochran, Madrona Venture Group
  • Leyla Seka, Operator Collective
  • Max Gazor, CRV
  • Navin Chaddha, Mayfield
  • Matt Murphy, Menlo Venture Capital
  • Soma Somasegar, Madrona Ventures
  • Jon Lehr, Work-Bench
  • Steve Herrod, General Catalyst
  • Jai Das, Sapphire Ventures
  • Ed Sim, Boldstart Ventures
  • Martin Casado, Andreessen Horowitz
  • Vas Natarajan, Accel
  • Dharmesh Thakker, Battery Ventures

[Editor’s note: Our prior enterprise survey failed to include any responses from female VCs and did not meet TechCrunch’s standards for diversity and inclusion. We regret the error.]

Theresia Gouw, Acrew Capital

With the pandemic having such a huge impact on the economy, how has this changed your investment approach and the types of companies you are more likely to invest in?

We remain committed to our five core thesis areas: security & infrastructure modernized, financial services rebuilt, work reimagined, data interconnected, and community activated. We break out each of our thesis areas into anywhere from 10-20 sub-sectors.

We have been continuously reprioritizing which sub-sectors will likely see business growth as well as opportunities to make a positive difference to a world grappling with COVID. There are still many unknowns and we closely watch company formation and funding to see where there might be particular concentration of entrepreneurial activity, which we take to be a positive sign that a market is robust and ready for significant investment.

Within enterprise software, we’ve unsurprisingly seen an acceleration in enterprise demand for communication and collaboration software. We’ve historically maintained a thesis that enterprise communication is an untapped, shadow set of data about workplace productivity and knowledge. With swaths of workers working remotely, capturing insights from these conversations provides a significant opportunity. This applies to industry verticals as much as it applies to functional software that sells across industries and focuses on a particular type of communication. We believe the key is that both employees and employers find these insights to be beneficial.

Lastly, we’ve also seen a growth in software and data that help enterprises navigate disruptions in supply, demand, or other aspects of their business.

May
21
2020
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12 VCs share their thoughts on enterprise startup trends and opportunities

Compared to other tech firms, enterprise companies have held up well during the pandemic.

If anything, the problems enterprises were facing prior to the economic downturn have become even more pronounced; if you were thinking about moving to the cloud or just dabbling in it, you’re probably accelerating that motion. If you were trying to move off of legacy systems, that has become even more imperative. And if you were attempting to modernize processes and workflows, whether engineer- and developer-related, or across other parts of the organization, chances are good that you are giving that a much closer look.

We won’t be locked down forever and employees will eventually return to offices, but it’s likely that many companies will take the lessons they learned during this era and put them to work inside their organizations. Startups are uniquely positioned to help companies solve these new modern kinds of problems, much more so than a legacy vendor (which could be itself trying to update its approach).

Venture capitalists certainly understand all of these dynamics and are always dutifully searching for startups that could help companies shift to a digital future more quickly.

We spoke to 12 of them to take their pulse and learn more about the trends that are exciting them, what they look for in an investment opportunity and which parts of the enterprise are ripe for startups to impact:

  • Max Gazor, CRV
  • Navin Chadda, Mayfield
  • Matt Murphy, Menlo Venture Capital
  • Soma Somasagar, Madrona Ventures
  • Jon Lehr, Work-Bench
  • Steve Herrod, General Catalyst
  • Jai Das, Sapphire Ventures
  • Max Gazor,  CRV
  • Ed Sim, Boldstart Ventures
  • Martin Cassado, Andreessen Horowitz
  • Vassant Natarajan, Accel
  • Dharmesh Thakker, Battery Ventures

Max Gazor, CRV

What trends are you most excited about in the enterprise from an investing perspective?

It’s abundantly clear that cloud software markets are bigger than most people anticipated. We continue to invest heavily there as we have been doing for the last decade.

Specifically, the most exciting trend right now in enterprise is low-code software development. I’m on the board of Airtable, where I led the Series A and co-led the Series B investments, so I see first hand how this will play out. We are heading toward a future where hundreds of millions of people will be empowered to compose software that fits their own needs. Imagine the productivity and transformation that will unlock in the world! It may be one of the largest market opportunities we have seen since cloud computing.

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