1Mby1M Virtual Accelerator Investor Forum: With Curtis Feeny of Silicon Valley Data Capital (Part 2)

Sramana Mitra: In other words, you are okay with companies that have some customer validation but not necessarily revenue?

Curtis Feeny: Absolutely. We have a few more deals where we put $250,000 to $750,000, take a lower ownership position, and bet on that team to get to final product. Maybe they have an alpha product or maybe early beta but no revenues. It’s not even necessarily a price round. We might do a convertible note with a cap on it just to give us access to the deal and the team and then hopefully, make a core investment.

Sramana Mitra: What about geography?

Curtis Feeny: We have a West Coast bias. As you get further away from the West Coast, the bar gets higher. We have one small investment in New York. We’re seriously looking at one investment in Boston. Those will be exceptions to the rule as there are a lot of great opportunities in the West Coast from LA to Seattle. We anticipate 60% to 70% of our deals will be in Silicon Valley. The rest will be opportunistic and have to have very strong teams to get us interested.

Sramana Mitra: Talk about your current portfolio. What are some of the highlights? What have you invested in? Walk us through the stage at which they came to you. What did you see? What was the mental process of you deciding to invest in these companies?

Curtis Feeny: We have a company called AugmentHQ. This team came to us through my partner Jim [McClane]’s relationship with the founders. They have come up with some artificial intelligence augmentation for real-time enterprise chat support and, soon-to-be, voice support. If you think of a call center taking calls from customers, you are typically responding to either technical questions, sales-related questions, or other questions.

You need to quickly respond to them through chat or voice. There is a real significant difference between the best tech support people and the average. It’s a 90/10 split. What this software did was use machine learning and artificial intelligence to take the top 10% performers and augment their responses with the best-of-breed solutions. It then measured and monitored that as they continued to build and improve in this typically machine learning cycle.

Many of the calls coming in are going to be the same calls or very similar. We push those results from the top 10%, which is an augmented AI solution, down to the 90%. You get a huge lift in performance.

Sramana Mitra: Where are they penetrating the market?

Curtis Feeny: They’re primarily in the tech support space. They will provide this same solution to a large range of technology companies.

Sramana Mitra: What stage did they come to you? What did they have?

Curtis Feeny: They were just getting the idea to alpha product when we invested. That was one of the $2 million to $4 million range with 10% to 20% ownership investment. We came in early, enough.

Sramana Mitra: Any other examples?

Curtis Feeny: There’s another company that has a similar story called Ansara. Ansara brings machine learning to analyzing the performance of, what we call, high-volume low-cost label tools. If you think about retailers, distributors, or manufacturers where they have entry-level employees with a very high-turnover, what is happening is the large companies never learned how to optimize the quality of the employees and put machine learning on determining the quality of the applicants.

Over time, you can have a huge improvement in the quality of employees you’re hiring, the retention rate of employees, and the performance. Bringing machine learning to that is providing a significant uplift to the cost of having a high turnover. We came in about the same stage as AugmentHQ.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Curtis Feeny of Silicon Valley Data Capital
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