Patience Pays Dividends: Four Recent Success Stories

Neither venture investing nor startup is for the faint of heart. A lot of people think that’s because of the spectacular rises and falls we read about in the headlines (electric scooters! ICOs!), and there is a certain roller-coaster aspect to the squiggly line that is entrepreneurship.

But the real test we’ve discovered is about patience. Phenomenal patience for the plain and simple work that needs to be done every day when you’re building a foundational company.

It’s our privilege to support the brilliant, hardworking makers who lead Bee portfolio companies through their daily paces and stay out of the sensational and distracting headlines. They make incredible progress building success in their verticals and moving toward truly changing the world (no, really).

Their hard work and progress also augur significant return for the LPs who have joined us in supporting them.

In the past, we’ve shared successes with you from Skycatch, TubeMogulBuildingConnected, and Tradesy. Here are four more examples of recent progress in the portfolio, each company on the cusp of accelerated growth at scale.

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Real-time analytics to transform battery data

Six months ago. Two words: Promising and brainy. The company had promising engagements with large enterprises and a brainy emphasis toward lab thinking.

Today. Big-name clients increasing in volume and number, expanding Voltaiq’s global presence. New product innovations to future-proof the offering.

The world after Voltaiq. Consumers will have a stronger perception of battery safety and reliability. Commercial and industrial systems will experience lower friction and lowered cost through predictability.

Influencer marketing platform for brands

Six months ago. One-product pony with financing risk and customer concentration. Encouraging progress but in a highly competitive market.

Today. Three of the top 10 brands in the world use Sideqik, with more to come.

The world after Sideqik. Right now, 32 percent of internet users have ad-blocking software. Great for the browsing experience but an absolute sinkhole for billions of ad dollars. In the world after Sideqik, big brands’ messages will be carried via the trusted emissary of the influencer directly to the end user.

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Building LinkedIn for the local economy

Six months ago. Small employers and Bay Area job seekers loved it, but its scale was limited.

Today. Available nationwide, with large employers adopting the product.

The world after Localwise. For employers, their selection of talent improves through better data and filtering. For employees, “job-hopping” gets radically reinterpreted as a linear narrative of related experiences pointed toward success.

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Managing data and facilitating access to accelerate the clinical trials process     

Six months ago. Users numbered ~1,000 across cancer hospitals and researchers. Not bad, but a lack of network density and sponsor usage threatened company growth.

Today. 3,000 research teams, one out of every five cancer researchers, and 600 studies are on the platform. That’s right: one out of five cancer researchers.

The world after Florence. In a future when all cancer trials use Florence, a 30 percent increase in clinical trial studies will be possible. There’s no telling how many thousands of patient lives could be saved by the data efficiency.

We’re excited to imagine the world Bee portfolio companies are hard at work making. It’s a world less reliant on fossil fuels. One where companies redirect ad dollars to better use, where job hunters find great jobs faster and through their community, and where clinical trials are accelerated. And that’s just four examples out of more than 50 portfolio companies.

Do you have connections in large OEMs that rely on batteries, brands worth $1B+, employers desperate for talent, and/or pharmaceutical companies engaging in clinical trials? Get in touch and we will connect you to our hardworking Founders. Hit reply, email me at michael@beepartners.vc, or call me at (415) 519-4707.

Optionality for Founders: Becoming Profitable Can Do a Funny Thing

A few weeks ago, Bhavin Parikh, cofounder and CEO of Magooshpenned a great note that cautioned Founders about what they should know before they raise money from a VC.   Bhavin is in a unique position to opine on the subject, as his company raised a small Seed round and hasn’t since raised another dime from outside investors.  In a nutshell, he warned founders to be sure of alignment of interests with their capital sources.  I thought it would be interesting to share our perspective on the subject as well.

In 2011, Bee Partners co-led the Seed Round in Magoosh, and at the time, we had an expectation that the Company would require additional capital. Later, they did ‘top up’ their financing a bit, but it turned out that they started generating cash-flow! Becoming profitable can do a funny thing…. It can create ‘optionality’ for founders, which is exactly what Bhavin has achieved.  If he wanted to, he could easily raise more outside money, but at the same time, he can just as well grow using cash flow from operations.  This optionality is something we talk frequently about with founders inside the offices of Bee Partners, and we’re extremely supportive of this potential path for founders. Here’s why we are so supportive, from the context of the multiple hats we wear inside of the firm:

As a VC, we will generate a meaningful return
1/ Unlike most VC firms, our fund size is small, and intentionally so, which is a topic worthy of a separate blog post. Because of our appropriate size, were Bhavin to generate the 10x return that he’s aiming for, it would meaningfully contribute to our returns! In baseball parlance, it’d be a stand-up triple and we’re more than happy to hit those as well as doubles all day long (with a home run every now and again too :-).

But… if we had a $75 million fund, Magoosh exiting for a 10x return wouldn’t do enough for Fund returns for us to crack open a celebratory PBR. We’d certainly be happy, particularly for Bhavin (see below) and his team, but on a purely financial basis, with a $75 million fund, it would be a ‘meh’ outcome.

As an Individual, I’ll see a check myself
2/ Bhavin is right to suggest that VCs invest OPM, or other people’s money; but for us, we’re also ‘all in’ at Bee Partners. As a result, we care…. a lot! … about companies generating return. So for us, a Magoosh 10xer would send a check home as well. Were we larger, the proceeds generated from a Magoosh exit like this would instead get recycled or ‘held back’ to get reinvested into more companies. The VC partner may not even get paid a bonus/carry in this case. And so… they’d be disappointed from the optionality whereas we’re thrilled.

As a long-time Partner & Friend, we’ll be proud of their achievement
3/ Such an exit would likely be a life-changing event for Bhavin and his team and we clearly want to support that. I’ve had the great opportunity to witness these events on a few occasions, and expect more in the future. It’s wonderful to see your friends succeed and have the optionality to do as they wish. Some party, some share, some buy and some invest, most do a little of it all – it doesn’t matter. I wonder whether Bhavin would head to culinary school….

So what, you may ask?   Well, if you’re thinking that this ‘optionality’ sounds appealing, how then should you solve for fit when finding your pre-Seed and Seed capital partner? Well first:

  • If you want to build an indie business and specifically don’t want to pursue a $billion+ outcome, then seek alternative capital sources outside of Seed and institutional VC. Doing so will save you a ton of time & headache. For every one investor that may take you on because they think that your indie business could become a unicorn, there are 100 who will decline simply because you’re not aiming high enough. Instead, consider capital that takes the form of consulting revenue, angels, friends & family, crowdfunding, etc. Regardless of your approach, always remember to be clear in your intentions with your capital partners.

  • If you aim to become a unicorn, when pitching to VCs and Seed investors, don’t pitch to the optionality! By all means, pitch the big hairy audacious goal (BHAG), and include your financial partners into your thought process about the optionality route, but don’t lead with optionality.   Then, as you reach indie status and rethink your approach due to the market not unfolding as you expected, or due to your personal desire to pursue an organic growth model instead, just be forthright with your investors. Honesty is so important here.

Second, as you choose your investors, I’d ask them a series of questions:

  • If we become an indie, how does your involvement in my company change?

  • Please share examples of when you’ve advised your founders to not pursue VC funding.

  • Would a 10x return drive meaningful returns to your firm?

  • How much of your fund do you own?

Responses to these questions will offer you a great deal of information about your potential capital partner, so that when that difficult decision is made to pursue an alternate route, that you know they still have your best intentions in mind. It’s true that we’re searching for ‘unicorn’-potential founders. But if that’s just not how things work out, and instead we see a $25 – 100mm exit, I’ll still buy you a steak dinner and sing your praises as a successful Founder.

You’re an Entrepreneur if…

Today, Tom Post at Forbes wrote a post titled: Are You an Entrepreneur?  In the post, they reposted a survey written by Alana Muller, president, Kauffman FastTrac®.  My quick response after reading this was something like:

If you have to take a survey, you’re not an Entrepreneur.

Look, I know at bit of entrepreneuritis is going around – seems like it’s in the water these days.  But after meeting with 1,000+ founders, I’ve found those that are true entrepreneurs have known it for years, that it’s been in their blood and DNA seemingly forever, and that it can never be cured.

Steve Blank suggests that Entrepreneurship can be taught, but I think what he means is that the act of venture creation can be taught.  However, the innate characteristics of an entrepreneur come from within, through life experiences, and can never be created within a structured educational process.

So stop taking surveys and create some life experiences — you’ll know, and when you do, come tell me about it!