1Mby1M Virtual Accelerator Investor Forum: With Kyle Asman, Managing Director at Backswing Ventures (Part 2)

Sramana Mitra: That’s after they have come to you and decided that they want to work with you. These are two different, slightly off-center entities – a company that is already doing a million dollars in revenue that is profitability focused and is interested in a relatively early exit. Those are the characteristics of the business.

On the other hand, you have a venture fund that is looking for those kinds of businesses. What is the source of your deal flow?

Kyle Asman: I see a lot of deal flow from other venture funds who might not have the growth rates. I get a lot of people who reach out to me via email. I get 10 to 20 emails a day from different companies. I network with a lot of lawyers and accountants. I do a lot of networking with other fund groups and business groups in the area. It’s lot of networking. Once you put yourself out there, people start to find you.

Sramana Mitra: What is the geographical spread?

Kyle Asman: It’s global. The majority of our investments are based in the United States. We look close and hard at France and UK. We have one company in Israel.

Sramana Mitra: Double-click down on software investment. What do you like to invest in?

Kyle Asman: I like to invest in B2B. Consumers can be flaky. I like to go with business software. I’m very comfortable investing in that space and having a good eye for which companies are going to be successful. I have a couple of companies outside of B2B SaaS, but the bulk is in B2B.

Sramana Mitra: You said you already had a bunch of exits?

Kyle Asman: We’ve had two.

Sramana Mitra: Tell me more about what these companies did. In what state did they approach you? What did they have at that point? How long did it take for those companies to get to the exit? What was that journey?

I’ll tell you that overall framework under which I’m asking you these questions. It’s what we call bootstrapping to exit. We have a track for the kinds of companies that you are looking for where people want to go to exit straight away. They don’t want to swing for the fences. They want to build capital-efficient ventures and sell early.

Kyle Asman: You make a good point. If you can invest in a company that’s valued at $5 million and it goes to $50 million. That’s a phenomenal return. When you talk about $5 billion, you’re talking about major Fortune 100 public companies. To build a company to that level is extremely impressive, but it’s tough to do.

Look at the challenges that Apple and Amazon had getting started. Jeff Bezos started as an online book retailer. Now it’s, debatably, the most successful cloud software company in the world with AWS. The same thing with Apple. I don’t think anyone would debate that Steve Jobs is one of the top visionaries in the technology space.

It’s hard to get to that. I like to focus on companies that are a little lower in valuation. Most of them will sell for less than a hundred million and still get fantastic returns.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Kyle Asman, Managing Director at Backswing Ventures
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