Performancing Metrics

A Series of Small Things

Random Thoughts on Building Venture-Backed Companies in the Midwest

Happy Holidays from Allos Ventures

12.12.14 by Dov

For those of you not on our mailing list, I thought I’d pass along our holiday card that went out today… Here’s wishing you Happy Holidays and a fruitful new year!


 

Happy Holidays from Allos Ventures!

2014 was a busy year at Allos Ventures, and filled with joy: new investments in Tinderbox , enosiX, and WhenToManage; the launch of our Allos Alpha seed program; good progress by all fourteen of our portfolio companies; and the opportunity to meet with hundreds of talented entrepreneurs building innovative companies across the Midwest.  We wish you the best as 2014 comes to a close.

As has become our tradition at Allos, rather than spend money sending out shiny holiday cards that will soon end up in a landfill, we seek to make a difference by making donations to a variety of charitable organizations.  Each year we identify a few causes that are worthy of a year-end gift, but are also a bit different (recall that Allos is Greek for “different”).  And yes, these are all* legitimate charities – as far as we know (we are too busy making investments to diligence them properly).

* well, two out of three, anyway…


We at Allos (other than Chloe, who’s too young) long for the good old days when the TV airwaves were filled with episodes of Seinfeld.  Actually, we long for the days when TV was delivered over airwaves.  In any case, as we all know (other than these people, who’ve ranked it #3), the most iconic Seinfeld episode of all time introduced us to everyone’s favorite sitcom villain – the Soup Nazi.  Our first highlighted organization this year is nothing like that, though they do sell fantastic soup.  La Soupe is a local Cincinnati restaurant that donates a bowl of soup to the needy for every quart they sell.  You can’t actually donate to them, but we thought we’d highlight this great local business anyway (we’re all about thinking outside the box here).  And what better way to warm someone’s heart (and your own) than to support this charitable local business?

Moving along to our charitable selections, we thought we’d stay in the food space.  Our most recent investment is in an amazing software platform for restaurants called WhenToManage.  Seriously – if you own a restaurant, you need to call them now (1-888-316-8861).communityplates  In any case, one of the first apps on their platform allows their partner organization, Community Plates, to engage volunteer food runners to pick up leftover restaurant food at the end of the day and divert it from the dumpster to food pantries and other organizations for distribution.  And every dollar you donate can rescue 8.5 additional meals.  They rescued millions of meals in just four cities last year and are hoping to expand rapidly this year.

Some brand names make us feel bad about ourselves.  Others tell us to aspire to mediocrity.  And others just confuse us.  But every once in a while we come across a brand name so direct and honest that it makes us (and hopefully you) want to give them money.  This year’s Allos Truth in Advertising Award goes to Cancer Sucks, an organization that raises money for cancer research and, importantly, provides a forum to connect those who have lost loved ones to this disease.  And, in keeping with their transparent brand, they even show all the research organizations they’ve supported over the years right on their website.


Remember – give early, give often.  And however you choose to make a difference this year, we wish you and your family a happy, healthy, and prosperous New Year!

Don, John, Dov, and the rest of the Allos team

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What he said

12.3.14 by Dov

Mark Kwamme tells the story of why we at Allos love the Midwest.

 

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An oldie but a goodie

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

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Risk in the Midwest: Part I – Sales

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:

  1. It means that you have a product that works.  While products – software in particular – are never truly done, if you have paying customers you must have something “done enough” for them to be using it.
  2. It means that the product has value.  Paying customers presumably see some ROI (hard or soft) in your product.  Until you get someone to write a check, that’s still a question (i.e. a risk).
  3. It means that you have addressed some early pieces of operational risk – specifically, that you have some early signs of the cost to acquire a customer.

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.

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Yeah, that’s basically how it works

4.30.14 by Dov

Want to raise $10 million?  It’s pretty easy…

Will Indest forwarded this overview to me this morning.  Beautiful.

 

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The failure of a great idea

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.

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It’s better than raking leaves

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!

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It’s about time someone solved this problem

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.

Satellite in a backpack

More reliable than Starbucks’ network.


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).

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We’re growing!

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!

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We’re breathing easier at Allos

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.

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