1Mby1M Virtual Accelerator Investor Forum: With Ron Heinz of Signal Peak Ventures (Part 1)

Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Ron Heinz was recorded in May 2017. 

Ron Heinz, Founder and Managing Director at Signal Peak Ventures, a venture firm operating mostly in the Rocky Mountain corridor, discusses what’s happening in Utah, as well as Colorado and Arizona. We’ve covered a number of companies from that area including Pluralsight, InsideSales, Steals.com, Ping Identity, and InfusionSoft. Today, there are over a thousand funded startups in those geographies. Bootstrapping runs heavy in the startup culture of the region.

Sramana Mitra: Let’s start by having you tell us about Signal Peak Ventures.

Ron Heinz: Signal Peak Ventures is an early-stage venture fund out of Salt Lake City. We also have a growth group within our organization. We have about $500 million under management. We invest in software companies mostly in Series A and Series B rounds. Our focus is typically in the Mountain West region of the United States. We define that as Utah, Colorado, Arizona, and Mexico.

We do some investing outside of the region, but that is typically on a more opportunistic basis. Maybe we have touchpoint with entrepreneurs that came in and out of Utah or Colorado. We’re mostly focused on the software market – SaaS in particular. We have different sectors, such as enterprise software, consumer group, small business, and very small business group.

Sramana Mitra: Let’s focus the discussion on your early stage SaaS investment activities. Can you double-click down and tell us a bit more about the investment thesis? What are you thinking? How are you looking at the software industry – evolution, current trend, and future? Where are you placing your bets?

Ron Heinz: First and foremost, we love the software business. It has great fundamental underpinnings. Recurring revenue streams are very attractive for us. You get more growth over several years. It’s really akin to a snowball rolling down the hill where you have revenue that just grows nicely.

The fundamentals of the software business are very attractive to us. The second thing that we really like is, there are many metrics that you can use across the software market. It allows you to measure and manage the company’s success – customer acquisition cost, lifetime value, and a number of key metrics.

The drop back for the software market is compelling. We do see businesses that have both on-premise offering as well as a cloud offering. Sometimes that migration isn’t as fast as you would think. Most of our businesses start to migrate towards a cloud offering and have a greater percentage of their business in the cloud. As mentioned, we like three different sectors in the space. My specialty is in the enterprise software side.

A few other partners have a lot of depth in the consumer software side as well as the small business and very small business. Our consumer offerings are really interesting. We have platforms that scale into the tens of millions of users. Of course, the enterprise software tends to be in cyber security, infrastructure software, data disaster recovery, and backup. We see a broad array in different sectors in the market.

Sramana Mitra: One thing that I find very intriguing is what is happening in Utah. We’ve covered a number of great companies in Utah. That includes Pluralsight and InsideSales. We’ve also covered a lot of smaller companies. Many of them have been here at the roundtable.

It seems as though there is a bit of a technology startup hub developing in Utah. Could you talk about what you’re seeing? What is the history? How and why is this happening?

Ron Heinz: That’s a great question. I moved to Utah in 1988. It’s been a while now. If you think about the root of the space, you go back to that time frame where there were companies like Novell and Word Perfect. Those are names that are no longer around but created the fundamentals of the technology ecosystems here in Utah that have continued till today.

If you fast forward over a couple of decades and look at the development in the space, you get some great fundamentals that are really attractive to people that would like to be involved in these ecosystems. Number one you’ve got a great quality of life. We’ve got beautiful mountains. We only have three million in the state. We’ve got great schools here that spawn great engineers.

We’ve got a growing ecosystem of technologists who want to live here. You now have thousands of companies that are growing and a fair amount of capital to support those companies. We’ve got some really nice emerging seed fund that are allowing your early stage efforts to get launched. We, oftentimes, attract capital from the Bay Area once companies hit a certain critical mass. You referenced a couple of them.

Once a company hits a certain growth stage, that attracts capital. To cut a long story short, we’ve got a great ecosystem here that is developing based on the universities, the history of the space, the entrepreneurial culture. There is a lot happening in Utah right now. Everybody here is feeling it. It’s a lot of fun. We’re pleased to be here. We don’t exclusively invest in Utah but 60% of 70% of the deals that we do are here in our backyard.

This segment is part 1 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Ron Heinz of Signal Peak Ventures
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