Seed Capital From Angel Investors: Dave Whorton, Founder, Tugboat Ventures (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: What is your biggest investment success to date?

Dave: In my career? It probably would be SuccessFactors. When I invested in that company, it was a small team. A SaaS business, just a little over $2 million in revenue. I think the valuation was in the very low teens, and today it’s a company worth $1.9 billion and a market leader in its space.

Irina: Where were you at the time that you invested in SuccessFactors?

Dave: I was at Texas Pacific Group. That was back in 2003. That was actually a very contrarian investment from the standpoint that HR application companies were completely out of favor, SaaS was out of favor. It was a first time there was CEO from outside of Europe.

A lot of people didn’t think SaaS would even work. There was so much capital required to build it before you actually got significant revenues that you couldn’t even finance the companies.

Despite those reservations, I had strong opinions about why this could be a global business and why what it would be offering in the future would be useful to every employee in every company in the world, and they’re very much on track to prove that true, which is terrific.

Irina: What is their space? What do they do?

Dave: They provide business execution software on a SaaS basis. It’s a suite of products that help companies execute their strategies better. It includes setting objectives and having those objectives cascade through the entire organization, both down and back up; ongoing review of those goals; performance reviews at the end of the year or quarterly, if they wish to; compensation planning, onboarding, recruiting, succession planning, and inner company communications around work activity. It’s all those things that help a company execute its strategy better.

Irina: What do you think both angels and VCs could do better to help entrepreneurs?

Dave: I think the biggest opportunity is to dedicate more time and energy to the entrepreneurs they back. Really get to understand their industries well, get to understand the range of potential strategies, get to know the teams and the strengths and weaknesses of those teams; get under the skin of the business. That requires a significant amount of time and energy.

You can’t do it by making an investment and moving on to your next one. You can’t do it by just showing up to board meetings every month or a couple times a month. You really have to be in an ongoing discussion with the CEO and the team. You really have to dedicate serious energy to it. I think that it’s a tremendous opportunity to do that better by investors, whether they be angels or venture capitalists.

Frankly, I think the roots of the best of venture capital goes back to the ‘70s and ‘80s when there were venture capitalists who did exactly that. They were very engaged in their projects, meaningfully part of the development of companies.

Irina: How many hours do you spend with your companies?

Dave: It depends. It’s episodic. It is kind of an ongoing conversation either with the regular board meetings or touching base with each CEO at least once a week. But there are periods in which I’ll be talking with a CEO multiple times a day, just because of a strategic influx, a big recruiting push, we’ll have a planning and strategizing period for the business.

So, one of the things I try to do is always keep time available on my calendar for when those situations arise. Sometimes you can predict them and sometimes you can’t.

Also, I try to keep time available on my calendar so I can be proactive so that I’m thinking about things that may be developing in that company or in that industry. This way I can take that proactive stance and meet with the CEO and talk about it. I can say, “Look, I’ve been giving this some thought. Here’s something you may or may not have on your mind or considered, but it might be worth thinking about.”

This segment is part 5 in the series : Seed Capital From Angel Investors: Dave Whorton, Founder, Tugboat Ventures
1 2 3 4 5 6