1Mby1M Virtual Accelerator Investor Forum: With Bruce Cleveland of Wildcat Venture Partners (Part 3)

Sramana Mitra: Our customer validation methodology is completely about customer immersion and getting as much feedback even before you write a line of code. What about geography? Are you investing only in Silicon Valley?

Bruce Cleveland: Our partners come from different parts of the country. That makes it interesting. Bryan Stolle comes from Texas. He actually sits on the Board of University of Texas. He represents our southwestern investing. Katherine Barr is a consumer investor, and she comes from Canada. We have a number of Canadian investments.

Bill Ericson and I have a number of San Francisco-based investments, but also we cover the Pacific Northwest. Bill spends a lot of time in Seattle. I have invested in Oregon and Seattle. We don’t have coverage in the MidWest. For the most part, we cover from the East Coast all the way here. In Wildcat, we have an investment in a company in London which is a pretty cool investment. We’re not just limited to the geographical US. For the most part, that’s the range.

Sramana Mitra: A couple of trends questions before we go to the traction gap framework. You said you’ve invested in about 22 companies already. What are those companies? Give us some highlights and some analysis of why you’ve chosen those companies.

Bruce Cleveland: We did some portfolio construction. I think it’s important for venture firms. When limited partners make investments, they have a lot of concerns about time to liquidity. You need to be conscientious of that. When we did our portfolio construction, we do some later-stage investing. The reason we do that is to generate some earlier returns so that it pays the management fees, it gets some liquidity early on.

There’s a reason for why you want to construct a portfolio that has some later-stage stuff. The preponderance of our investing is in this traction gap period that we’ll talk about. Then some in very early stage around seed. The way we look at companies is to look at the stage as we construct the portfolio. We invest in systems of intelligence that are being created both for consumer and for businesses that allow companies to prospect, refine, and monetize digital oil.

Digital oil is nothing more than data. Wildcat is built off of Wildcatter. In those days, Wildcatter used data to determine where to drill. We use data to determine where we want to invest but we also use data as a future currency that companies can monetize through different business models.

One vector is systems of intelligence designed to allow companies to prospect, refine, and monetize digital oil. That can be in a variety of markets – FinTech, EdTech, MarTech, digital health, or workplace innovation. All of those use technologies like Blockchain, AI, ML, and IoT.

The underlying computer science are those technologies and then the markets that we invest in are the ones where we are subject matter experts. That allows us to do early-stage investing where we have domain expertise and we could actually be, in many case, a member of the operating team to help them understand the market better and maybe sell the companies.

Sramana Mitra: Largely enterprise software?

Bruce Cleveland: We do consumer. We have a number of consumer investments. Catherine does most of those investments. I’ve worked for a number of years at Apple. What I realized at Apple is that consumers are fickle. It’s easier to identify big white spaces in the enterprise and to figure out a way to solve for those white spaces.

Sramana Mitra: In the last 12 months, what key trends have you seen in your deal flow?

Bruce Cleveland: Quite a bit or robotics deals are materializing, but we’re a little cautious. There’s a bunch of different things that have to happen. We don’t have to go through some regulatory issues, but there are a number of issues that you have to be concerned with around hardware that requires a lot of capital. While we’re very interested in those things, I think that we’re also very cautious about it.

One of our associates is a Mechanical Engineer out of Carnegie-Mellon. He’s doing a lot of our robotics research. The other thing that we’re seeing a lot of is digital health. We’re not very bullish on wellness but other things that change the model of healthcare. These can be challenging because it’s a very difficult to market to sell into. Fortunately, Bill has a long history of being involved in the healthcare market. We got some very interesting investments there. Those are the two things that we see in terms of what to invest in.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Bruce Cleveland of Wildcat Venture Partners
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