1Mby1M Virtual Accelerator Investor Forum: With Mark Achler of MATH Venture Partners (Part 5)

Sramana Mitra: I’m reflecting on what you said in answer to my question. Blockchain is expensive stuff to build. How do you mitigate the need for doing things in a capital-efficient manner and doing Blockchain deals?

Mark Achler: We haven’t done one.

Sramana Mitra: You agree that Blockchain is capital-intensive.

Mark Achler: We are conservative Midwest VCs. I like to build real businesses with real revenue and with real customers. It’s early days for Blockchain. We’re paying close attention. We’re getting as educated as we possibly can. I’m concerned about it. That said, there seem to me some applications of Blockchain that make a lot of sense.

Take music licensing where the power of monetizing the music went from the artist to the label back to the screening company. Blockchain is the technology that would empower the musician to take better control and file through the completion of their end product. I think there’re possibilities in Blockchain through various industries that we haven’t even scratched the surface on.

Sramana Mitra: Our main philosophy is more aligned to what you are describing – capital-efficient and customers first. None of those apply to Blockchain. We have entrepreneurs in the program who want to do Blockchain. They need to raise $65 million in one of these exchanges. It’s not easy to do. Your survival depends on something that is so out of your control, and the probability of success is so low. I’m a computer scientist. If I can’t enhance the probability of your success, it makes me feel very queasy.

Mark Achler: That brings up two points. One, we think that money is just money. We’re very respectful that it’s hard for most entrepreneurs to raise capital, but it’s just money. We are operators. I was part of the executive team at RedBox where I was heading up innovation and we built it to $2.4 billion in five years. I know how to grow and scale businesses. We are deeply involved with our portfolio companies. It’s not just our money. It’s our time. That’s part of the leverage we have.

Sramana Mitra: Last question, one of my observations is that lots of stuff have been built in the B2B sphere. Nowadays, there aren’t so many wide open opportunities out there, but there are many niche opportunities. Some of these are high-velocity opportunities. Some of these businesses need to be built for very small amounts of capital – $1 million and sold for $10 million or even $250,000 and then sold for $5 million.

The assumption there is that you get to a certain amount of proof point that there is appetite in the market for something that you have identified as an opportunity, but then you really go to market with that solution through somebody else’s channel. Do you have appetite for these types of investments?

Mark Achler: Probably not. They’re great investments. They’re just not venture-appropriate investments. The typical venture model is you make 10 investments and one hits it out of the park, a couple do okay, and seven fail. That’s the classic venture model. Our model is a little bit different because we focus on sales and customers. We apply our operating skills.

Part of our investment thesis is we look for companies that have the potential of much larger returns. These smaller companies are great companies. It would be wonderful to have a smaller company that has a $10 million exit with minimal investment, but that’s just not appropriate for our investment thesis.

Sramana Mitra: We are talking to investors who don’t want to do this and there are investors who are actually specializing in that. Part of the observation from them is that the smaller TAM, maybe there is velocity. This is a category that is open. Let’s say there is $100 million TAM, that is a decent market for a large company to acquire a piece of software and sell it using their channel. That’s the thesis. People are making good bets there.

It was a great conversation. Thank you for your time.

This segment is part 5 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Mark Achler of MATH Venture Partners
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