1Mby1M Virtual Accelerator Investor Forum: With Mark Achler of MATH Venture Partners (Part 4)

Sramana Mitra: We started observing the social media trend in the 2003 to 2004 timeframe. In 2007 of course, iPhone came about. The Big Data trend really picked up in the late 2000’s as well. We zeroed in on AI in just about a couple of years ago. There’s a lot of machine learning and AI.

Of course, the cyber security thread is running all the way through and will continue to run. Especially with IoT, the vulnerabilities have magnified. There is no escape from a lot of cyber security threats.

Mark Achler: We’re also seeing a lot in Blockchain. There’s an awful lot of conversation right now in all the various aspects of Blockchain. We’re working hard to get our arms around that as well.

Sramana Mitra: How do you process the current investment climate where capital is moving further and further upstream? How does a seed investor or an entrepreneur mitigate the Series A gap? There are a lot of companies that get pre-seed, seed, and post-seed but don’t really hit that velocity stride. What is the destiny of these companies? How should they go about navigating their way?

Mark Achler: Most companies fail for a reason. There are a lot of entrepreneurs and companies that are not sustainable. I’ve started four companies from scratch. One of them failed. I know how difficult it is. The answer is not that every one of them is going to succeed; nor should they. It is a really tough and hard market.

Sramana Mitra: There is a slightly nuanced perspective that I have on this question that I would like to share with you. Some of these companies would succeed as a bootstrap company but fail because they go after financing. Agree?

Mark Achler: Totally agree. I tell entrepreneurs this all the time. The very best place to raise money is from your customers.

Sramana Mitra: We have a very nerdy equation. Entrepreneurship equals customers, revenues, and profits. Financing and exit are optional.

Mark Achler: In three of my businesses, I was able to start the business without raising any money because I got it self-funded. I’ll tell you something else. We’re at the top of a 10-year cycle right now in terms of our economy and access to capital. There is more capital sloshing around for early stage. There will be a market correction. I don’t know when. I don’t know how bad it will be. Our market is at an all-time high.

We know that what goes up eventually comes down. When that happens, cash is going to tighten up. I’ve lived through the bad market phase of ’87, ’93, and the dot com crash. One of the things I would tell all entrepreneurs is if your area dependent upon the next round of funding, you should be really thoughtful about that.

Sramana Mitra: The truth is most Series A investors are looking for what you are looking for, which is velocity. If you can achieve velocity, then investors will chase you, because it’s not so easy to find companies that hit their stride velocity-wise.

Mark Achler: That’s right.

Sramana Mitra: How do you parse unicorn mania? As a seed investor, you could get buried under late-stage liquidation preferences. Even as a Series A investor, if a company is really doing well and becomes a hot company and then gets absolutely flushed with funding later on, how do you protect yourself?

Mark Achler: We worry about that a lot. Part of our investment thesis as a relatively small fund is, we look for companies that are capital-efficient. We have a couple of companies in our portfolio that have raised larger amounts of money. We worry about the more money that’s raised. Part of our investment thesis is, those companies that are capital-intensive are companies that we tend to stay away from.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Mark Achler of MATH Venture Partners
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