1Mby1M Virtual Accelerator Investor Forum: With Mackey Craven of OpenView Venture Partners (Part 4)

Sramana Mitra: There’s another dynamic, which is a lot of these seed stage investors who are working in the very early stages are exiting into those kinds of mega rounds that come in Series B and C. That is a very healthy trend because I think these two segments are different. It could take a long time to traverse the full spectrum from friends and family all the way to something that is actually scaling at a significant pace. You can’t have small funds taking positions all the way through.

I also have some mixed feelings about this over investment in the seed and post-seed stages. In many of these cases, these companies don’t have either the velocity or the TAM to be venture-funded companies, but the entrepreneurs are setting themselves up with expectations that they’re going to be venture-funded companies. 

If they were setting up their mental model such that they’re going to be bootstrapped companies, they would be a lot more successful.

Mackey Craven: I couldn’t agree more.

Sramana Mitra: It is creating a very unhealthy dynamic.

Mackey Craven: There’s a confluence of reasons. Founders and media are often idolizing raising large rounds of capital and getting certain valuations as milestones of success as opposed to building large businesses and building businesses that have sound economics.

What we see are younger entrepreneurs idolizing the process and outcomes of raising capital and the valuations associated with those raises as opposed to individuals building really successful businesses. We certainly see it. There are some entrepreneurs who are looking to fight the tide.

If I could go back to my pre OpenView time, we had a company called Zappier which allows anyone to connect individual SaaS applications to work together. They just released their numbers. That’s the only investment they took – $1.2 million. They’re now a $35 million SaaS business generating cash. It’s more stories like that getting out of entrepreneurs building quality businesses as opposed to focus on the amount of capital they can raise and at what valuation.

Sramana Mitra: Talk about a few of your portfolio companies. In particular, I think it’s very interesting to hear from you about some of these companies abroad that you are investing in that are expanding in America.

Mackey Craven: I’ll talk about several in our portfolio. Over the last four years, I was very focused on the generational transition in enterprise infrastructure from on-premise, inflexible, and slow environments to flexible infrastructure. The entire stack needed to be rewritten.

Also there’s cultural change in development from agile to rapid, to continuous delivery. Many of the investments I’ve made over the last several years fall into those themes and, principally, in and around helping companies bridge the transition. The reality is, we’re still in the relatively early innings of that infrastructure transition. One great example of a company that is founded outside of the United States that is now building up is a company called logs.io.

We led the Series B in October of 2016. We just recently doubled down on the business and led the Series C as well. It’s a log management and analytics provider. What they’re able to do is take in the individual pieces of data from connected devices and help process that data. They make it available for every developer and for folks who are customer-facing in technical products. It’s a really interesting layer of machine intelligence.

Sramana Mitra: Where is this company from?

Mackey Craven: They were founded in Tel Aviv and they have a second office now in Boston.

Sramana Mitra: Israel has been at the forefront of this trend of founding companies in Israel and then bringing them to America. Are there other geographies from which you are seeing successful scaling?

Mackey Craven: Australia is a great one. Last year, we invested in a company called Deputy. The way to think about Deputy is, it’s workforce management and communication platform for hourly or shift-based workers, which is north of 60% of the global workforce. It allows everyone from an individual to local enterprises to manage shift-based workers around the world understand who works best with whom, handle all the scheduling, and put that scheduling in the worker’s hands so they can trade shifts and better manage their own work lives than they could with a legacy application or some time track.

That’s a company that was bootstrapped up until our investment in the business to several millions in annual recurring revenues. They’re based in Sydney, Australia and have customers all over the world. Folks were able to find the product, start using it, become successful with it.

Sramana Mitra: We know Deputy very well. We’ve covered the company extensively in Entrepreneur Journeys. They came to our roundtable as a guest.

That was a company that bootstrapped to about $10 million ARR before you guys came in. Yes, I’m very aware of that. I like that company very much actually.

Mackey Craven: It’s one of the largest market opportunities that’s still untapped for software.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Mackey Craven of OpenView Venture Partners
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