11.10.14 by Dov
Bill Gurley on the danger of using LTV in SaaS businesses…
As with most things in life, understanding how and why it works is important for proper application…
10.14.14 by Dov
I recently penned (keyed?) an article trying to address the question of how an entrepreneur should decide how much money to raise when. For those too impatient to click through, it basically came down to the idea that your valuation is inversely correlated with the level of risk remaining in your company. You want to raise just enough to eliminate the next set of major risks so that the subsequent financing can be at a higher price.
What risks any given investor is willing to take, as opposed to those that need to be addressed before they’ll come in, obviously varies by investor. But I thought it might be helpful to go through some of the categories of risk from Allos’ perspective. These are also directionally consistent with many/most of the other Series A investors in this part of the world.
The risks a young company faces come in a variety of forms, which not coincidentally are also the same primary topics investors tend to focus on during due diligence: product, team, market, sales, operational, legal, etc.
Today’s topic is the intersection of product and sales. That’s because Allos, like many venture firms, uses revenue as the primary metric by which we determine if something is a “stage fit” for us. We talk about our firm being an “early-stage venture firm” – but what does that really mean?
To us, it means that you have some critical mass of customers that demonstrate you have a repeatable sales process. Why do we set that as our criteria? Because it touches on at least 3 categories of risk:
So this one criteria allows us to set a bar that covers a wide variety of risks of the types that we really don’t like taking (#1 and #2 in particular), as well as providing some good data (#3) to give us more confidence in our financial modeling. All with the simple question – “How many customers do you have?”
In future posts (which I’ll try to make more frequent than I’ve been accomplishing lately), I’ll work through some of the other elements of risk and the milestones that folks like us are looking for. Stay tuned.
4.30.14 by Dov
Want to raise $10 million? It’s pretty easy…
3.29.14 by Dov
This morning, I was looking for a better way to manage the mass of photos we’ve accumulated (ideas in the comments, please). I came across Everpix, which I hadn’t heard of, but which was described as the best choice for the average user (beating out behemoths such as Flickr, Google+, DropBox, etc.). But alas, I discovered it was out of business.
My first reaction was disappointment – though mostly because it meant I had to keep looking for a solution to my photo problem. But then I discovered that they had left behind an entire autopsy of their business. Essentially every important piece of data (internal metrics, pitches to VCs, board packages, the terms of each of their rounds of investment, etc.) has been saved and archived at github.
There is a wonderful depth of information here, capturing the failure of a business. Every entrepreneur should go through the site and read the information. One piece that struck me as incredibly sobering was how little VC interest there was in a company in a hot space, which was demonstrating real traction. They had $40,000 of monthly recurring revenue for their final three months (though were still losing cash) and 50,000 users (7,000 of whom were paying $5/month each), and had hundreds of millions of photos uploaded.
RIP, Everpix. So long, but thanks for all the facts.
10.25.13 by Dov
Cincinnati has a rich history with Startup Weekend – dating back to our early attempts (led by Elizabeth Edwards and others) to roll our own way back in 2008 and 2009. We’re now all grown up and have official Startup Weekend events going on multiple times a year around the region.
For those who haven’t attended – it’s a pretty amazing thing. It’s like 6 months of starting a company compressed into two-and-a-half days. Bring your best idea(s), try to convince a team to join you, build a prototype (or enough screenshots to convince investors you have one), do some market research, and pitch for investment (well, prizes, anyway). I strongly encourage anyone with an idea for a new company (software companies are typical, but there’s no reason it couldn’t be just about anything) to sign up.
And if you don’t have any great ideas, that’s OK, too! Come to see if any of the ideas you hear pitched tickle your fancy and then lend your efforts to help get your favorite team across the goal line.
If you want to experience it for yourself, Cincinnati’s next one is coming up the weekend of November 15… It’s going to be in Covington – in UpTech’s new space, so it will also be a great opportunity to get a sneak peak at the new digs before the grand opening!
10.17.13 by Dov
You know how WiFi networks suck? I mean, they’re better than having to plug in, of course. Except when you can’t connect. Or your device says you’re connected, but you can’t actually do anything. Or you’re connected and then you get kicked off. It’s enough to make you want to bring your own network with you.
Well, help is on the way. We’re happy to announce our most recent investment – 7signal solutions – where we co-led a Series B financing with Mutual Capital Partners and participation from prior investors in the company, including the North Coast Angel Fund. They’ve developed an amazing platform to help enterprises better optimize and manage their WiFi networks to provide higher bandwidth, more reliable connections to users. Starting with colleges (those crazy kids always get the coolest stuff first) and hospitals (which you’ll appreciate when you’re in one and are hooked up to a bunch of devices all trying to use the WiFi network), 7signal is growing rapidly and expanding into retail, hotels, airports, business places, and more.
So, look for it near you! And next time you lose a connection on a WiFi network just as you were about to read that post about what your college roommate ate for breakfast, go ask why they aren’t using 7signal.
By the way, they’re also hiring (sales, marketing, and finance roles).
9.23.13 by Dov
So, we’ve had a busy summer, what with one new investment and two more to be announced in the next couple weeks. So, I’m going to use that as an excuse for why it’s taken me this long to announce some amazing new additions to the Allos team.
Julie Whitehead and Chloe Morrical joined us early this summer, as our CFO and associate, respectively. The advantage of waiting three months to write this post is that I can now say with absolute certainly how awesome they both are (back in June, I would have just been guessing). They’re both awesome.
You can read their bios (you clicked on the links above, right?), but Julie comes to us with experience at big companies and small, including as a CFO of a venture-backed company, ultimately acquired by VISA. And Chloe joins us as an Orr Fellow, fresh out of Purdue. They’re already knee-deep (maybe even waist-deep) in increasing our bandwidth to guide prospective investments more efficiently through our process, as well as supporting our growing list of partner companies.
Shoot them an email to say hi!
9.12.13 by Dov
Well – we’ve done it again. We went and made another investment. Technically, we made it in June, but some additional investors came into the round later, so we’re just announcing it now.
In any case, we’re excited to announce that we’ve recently completed an investment in Pittsburgh-based Alung. Alung makes an amazing respiratory dialysis system (the Hemolung) initially targeting chronic obstructive pulmonary disease (COPD) patients, a large and growing market worldwide. The Hemolung is a minimally-invasive device that pumps blood at a low flow rate from the body, removes carbon dioxide, adds oxygen, and replaces the blood back into the body, thus lessening the load on the patient’s lungs. This offers patients and clinicians an attractive alternative to treatment with highly invasive intubation and mechanical ventilation (which sucks). And the CEO of ALung, Pete Decomo, was the CEO of successful Blue Chip IV and Gazelle portfolio company Renal Solutions. So we know him well and are thrilled to have the opportunity to back him again, as we believe he is the perfect leader for the company.
While we’re primarily focused on software and business service companies, we’ve always said we’d look at exceptional medical device companies and that we expected to make at least one such investment in our second fund. Now that we’ve found it, I must say that it feels pretty cool to back a company making such a difference in people’s lives – the regular updates we get on successful patients and notes from doctors, combined with the opportunity for a great financial return, have us all feeling a little giddy.
8.20.13 by Dov
While it may be less exciting than the race, the Inc 500 results are in, and Indianapolis-based (and Allos portfolio company) BidPal comes in a #75 overall, #1 in Indiana, and #8 in “business products and services”. Congratulations to the entire BidPal team!
5.9.13 by Dov
This year’s Innovation Showcase in Indy is coming up. Allos will be well represented (I can’t wait) – and you should be, too. Here’s a press release with the details…
The Innovation Showcase: Call for Company Pitches
Here’s what you need to know. The Innovation Showcase is July 11th, 2013. Applications are open now for companies who want to exhibit and pitch. The top presenting companies are competing for over 60K in cash and prizes. It’s free (but competitive) to exhibit and pitch. Companies sign up to exhibit and pitch here.
Now for more details.
This is a call to companies seeking to exhibit and pitch at the 2013 Innovation Showcase.
Entering its fifth year, The Innovation Showcase has grown into Indy’s premier event connecting fundable companies (of all stages) with top local and regional investors all while creating an undeniable energy fueled by Indy’s incredible entrepreneurial ecosystem.
This year’s event has grown even larger and will be held at the Dallara IndyCar Factory in the shadows of the famed Indianapolis Motor Speedway.
And this year we’re upping the stakes for our exhibiting startups. Each entrepreneur will have the opportunity to pitch to our investor panel for a chance to win more than $60,000 in cash and tangible services including:
5K in legal services from Barnes & Thornburg
5K in web development from Fox.io
5K in PR services from Blast Media
5K in Venture Coaching from DeveloperTown
5K in accounting services from Lehman’s Terms
5K in branding services from The Momentum Group
5K in video production from Neal Moore New Media
5K in web marketing services from DK New Media
5K in office space offered by Launch Fishers
5K in presentation skills training (for multiple companies) from Scientifically Speaking
5K+ in Formstack software (Max plans for three companies for a year)
5K in COLD HARD CASH!
Best of all, the top presenters from the pitch competition will gain access to the most well-known angel investors in the area. At least two presenters will go straight in that evening to make private pitches to HALO and Elevate Ventures. They (and maybe other presenters) will also gain access to guaranteed pitches to Stepstone Angels, Purdue’s P3 Alliance, IU’s Innovate Indiana Fund, Gravity Ventures, Allos Ventures and xCap Angels.
The deadline for company submissions is fast approaching. So if you think you have what it takes to mix it up with the region’s top entrepreneurial companies — we encourage you to apply now for one of the spots in the showcase. The process for companies to exhibit and pitch starts here: http://theinnovationshowcase.com/#exhibitors
Looking forward to seeing you there