1Mby1M Virtual Accelerator Investor Forum: With Max Brickman, Founder at Heartland Ventures (Part 2)

Sramana Mitra: Let’s do some examples of companies that you have invested in especially where you have brought them to your customers very early on.

Max Brickman: One would be Workstream. We are one of the early investors in their seed round. It targets the HR space – hiring hourly employees. We loved Desmond the founder. We wanted to introduce him to our network and see if other people agreed.

We flew him out to South Bend and we connected him to 13 of our investors who own manufacturing companies. He left that trip with 11 signed contracts. We invested. He raised his Series A from Founders Fund.

Sramana Mitra: If an investor comes with a customer introduction, I think that’s a very different value proposition.

How do you view this unicorn obsession of our industry?

Max Brickman: It’s a necessary evil because of the risk profile in venture. As a VC, you need those wins to offset the zeros.

Sramana Mitra: Not for a small fund.

Max Brickman: Yes and no. You don’t necessarily need billion-dollar exits, but you do need large exits where, if you make 10 investments and four of them go to zero, you still have a 10x that offsets those zeros.

Sramana Mitra: But these micro-VCs that are operating with $10 million up to $50 million funds don’t necessarily need unicorn exits to do 10x.

Max Brickman: It depends when they’re coming in.

Sramana Mitra: Micro-VCs come in very early. This discussion has gone on for many years. There is a distinct evolution that I have observed over time. The more money you raise, the higher the bar goes on exit. How many IPOs do happen? How many unicorn acquisitions happen? If you look at the number of VCs today, it’s humongous.

All these people who used to write angel checks have formed micro-VCs. A lot of them. The number has ballooned. Probably the number of Series A and beyond VCs has not ballooned. There is a good understanding now that the bulk of acquisitions happen in the sub-$50 million range.

How do you make a sub-$50 million exit work and how do you get a 5x to 10x from a $50 million exit? Your fund is $100 million. It’s more in the traditional VC scale. The $25 million and below fund size are thinking somewhat differently than the pure unicorn-chasing VCs.

Max Brickman: If you’re betting on the fact that you’re going to have a lot of $50 million exits, you need to get in early.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Max Brickman, Founder at Heartland Ventures
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