The elevate61 companies are now in New York City! After a weekend of trying to catch up on some much need sleep & adjusting to yet another time change, they assembled in downtown Manhattan to start the morning with some legal proceedings. The day had a focus on geography; which US cities - LA, San Francisco, or NYC, are best suited for which businesses?
9am: Legal side of Enterprise Sales. Scott Smedresman + VC Panelists.
Scott’s focus is Venture Capitalism and start-ups, in the McCarter & English law firm. Scott will cover legal side of enterprise selling in NY and also has a VC panel present (names to come)
Ryan is FF Venture: generalist, software enabled and anything that is not regulated is a focus: protectable science slant focus
Morgan Rodd – Milestone venture partners – AAAS: anything as a service (health strong focus, fintech and general B2B, IT SEC – series A)
Cooper Zelnick – RRE Ventures – fintech, media, real-estate, consumer.
VC perspective on international investing in NY:
Ryan – we focus on North America (have done some in UK and Canada), it’s what we know and what we can get our gut around, will look international and be reactive with a view to anyone coming here – must be a US entity and can be done in step as part of the transition. We would invest in the parent not a subsidiary.
Morgan – we do have an allocation for outside the US – but have not done so and expect the hurdle to be higher, would want a physical presence here, need to be further along and see Atlassian as the poster child.
Cooper – invest almost exclusively in the US and for a company to enter in the US market, there needs to be meaningful presence and a compelling reason for the business to make a move to this market.
When is the right time to speak with VC about the US market?
Cooper – we invest in inflection points and we look for 10X in 5-7 years in terms of return for the partners in the fund
Morgan – compelling traction and market opportunity is what matters … what do you have in the US that is really exciting … what is the investment you are making and what is the return – have a business case
Ryan – when we look international should funding happen at home or in the US – you need to understand the difference in this and know how you are going to be successful here … show traction and people will come knocking
West coast is more data and financially driven than the east coast
Ryan – we want to be closer to the companies and be helpful
What sort of deal should you look for – debt, equity, hybrid?
Cooper – as initial investment vehicles we do equity 98% of the time, would want a formalised board, primarily series A investor and almost always take a board seat where we lead / represent the round
Ryan – we would want a board seat and we typically lead rounds so where we don’t we would be comfortable with someone else who is leading the round doing this – on governance we would want to see at least a 3 person board, audited financials (a lot of it is seeing the company develop this discipline early)
Morgan – we really don’t do convertible debt deals, same on board and governance requirements, key focus is what size should the deal be and like syndicated deals so you get more money around the table for when you hit a bump in the road … “syndicated” means venture institutional
What metrics would you want to see – NY is numbers driven
Cooper – enterprise SAAS – repeatability of sales process, and money is fuel on the fire at this stage
Morgan – understand the equations that drive your business and what variables you still need to solve for … the more you have thought about proving out your equation will give us comfort
Ryan – sales cycle with same customer with expansionary growth and repeat engagement – have the ability to grow with existing customer base and ability to grow this … need product market fit.
Ryan – don’t be distracted by multiples – focus should be on how much do you need and what are you going to do with it
Morgan – where you are going is important, right now it’s a more investor favourable market
Cooper – naturally you want a high valuation for signalling reasons but you don’t want something that is going to be too hard to grow into
Scott – small rounds can be tricky with valuations … conservatism is always a good idea is his counsel
What materials should you have for a VC customer
Cooper - A pdf please not ppt for the investor deck that tells a story for the firt meeting, who you are, what you have done, what the problem is and what your solution is and where you are in solving the problem … the more succinct the deck and story telling the better it is
Morgan – I agree with that – keep it simple and assume the lowest common denominator … there’s the deck but have everything else prepared … diligence material and until you are liquid – east coast likes models and assumptions, customer references, prepped and good, better knowledge of your business than anyone else. Your selling stock in your business so you should try to think like that … why are you a good investment
Ryan – personal references – just be prepared
How should you pick a location in the states?
Cooper – go where your customers are
Morgan – infrastructure and access to talent is also important … East is a little less “go big or go home” in their approach vs the West Coast. We work with every investment really hard as we are a small fund.
Ryan – there are a lot of cities with good breaks and opportunities outside the bay area … Canada is really good in terms of talent … go where is best for your company … founders and management teams need to be in the US. Being physically close is important.
Morgan on different types of investors: HNWI and family offices – unsure if they are going to still be there in difficult times – so our preference is to syndicate with VC money
2:30: Overview with Elevate 61 Founders @ Work Bench
- The next enterprise vendors are being formed now and this is the focus of workbench ventures – speak the language of corporates
- Have a Friday newsletter that speaks specifically to what is happening in enterprise tech
- Focus areas – big data and analytics, security, HR, Infrastructure
- Co-investors with institutional leads – and core value is the institutional network they bring
- Since 2013 there has been significant growth in the NYC entrepreneurial eco-system – across both early, mid and late-stage – that have raised over $2b in funding – as well as a robust pipeline of exits.
- Workbench aims to be the centre of gravity for all things enterprise in NYC – provide both a physical space and community based around enterprise – 3 meet-ups a week through to 2 day conferences are hosted here
How we pick winners:
- Identify corporate pain points generalizable across multiple enterprises – corporate first mentality and very founder friendly
- Influence investment research
- Corporate validation is central to due diligence
- Greater access and returns
- HR trends – dying for and can’t get … huge desire to start leveraging analytics and data – yet to prove the efficacy of this, propensity to leave and pulse models, mobility for engagement – no break out scale yet and hard to validate the spend (e.g., pulse survey – can use survey monkey for free)
- West Coast – can’t compete with the valley for funding, East Coast – great engineers and earlier entry of institutional knowledge into the business (domain expertise) … West Coast more language of disruption, East Coast more language of partnering … valuations more realistic on the East Coast as opposed to West Coast. More focussed on problem solving here than tech for tech sakes.Most people don’t appreciate the level of sophistication required to build the new and maintain the old at the same time – enterprise tech and legacy environments – why people come to NY.
- Sales cycles are long and there are ways to accelerate them … know who the buyers are for your product … can’t pitch in a vacuum (what are they using today and who are your competitors) … you have one-shot a lot of times so make sure you don’t waste it on a landscape discussion … make it more of a conversation and build trust as its people who sign contracts and push them through procurement …
Rise of APIs leading to ability of stand-alone systems to thrive through multiple integrations into complementary applications.
- Hardware – IoT – real potential, remote activations and data analysis. Apex labs software for intelligent glass (Google, VR, AR and other solutions)
- Assessing start-up risk – inherent risk and residual risk – what is the company today and what are they going to be? Vs cost of ownership, cost of change, etc.?
- Sales representatives and service level and type of people – will depend on complexity of technology and length of the sales cycle
- Support needs to on call 24/7 and needs to reflect your customer’s requirements – seeing the rise of a customer success team – sales, account management, service and commercial skills
4pm: NYC Ecosystem Overview & Founder Mixer @ Grand Central Tech
- Think about what you’re missing – customers, employees, advisers, etc – where does that plug in?
- Understand that software sales cycle in enterprise is very different
- Thinking geographically what is best for you in terms of talent, advisers, cost of living, etc – how will you last?
- ]Networking it still a face to face activity today (despite linkedin)
- A lot of big companies going to low cost centres – most of the innovation is occurring in these big companies where there is collaboration & collision
- For certain industries, NYC is better than Silicon Valley, e.g. retail is better in NYC. I like building a startup in NYC because there is more demand for the talent (in SV, more mercenary – always looking for the next job, next SU). It is easier to attract talent here than in the Valley. Here you come here for the culture – you join a SU for the culture.
- It is a personal preference as to which city you like.
- Investors are better on west coast – better questions, better deals, etc, more institutional knowledge and experience.
- Lots of people have moved from SV to LA, from NYC to LA.
- There are hardware accelerators and media accelerators in LA.
- Fundraising – outlier experience – there is no set textbook way of funding.
- Tools to help with time mgmt, e.g. trello (proj mgmt); noting that some of these tools may be too technical for your needs.
- Offshore developers sourced from Ukraine, Romania, Poland, Jamaica (for time zones), Canada
- Always be selling!
- Due diligence – always do your homework – learn about the company, know them as a person.
- Thought leadership – cheap way for getting your company out there.
- Build your brand – build through corporate partner relationships, sales driven than marketing driven (depends on the customers), highlight 2-3 things that you want to highlight with your brand (colours & visuals are huge with our visitors – able to recognise based on the colour (then the name of the company/founder)).