Sramana Mitra: What is the typical round size?
Ron Heinz: We typically put in between $3 million and $6 million. Our ownership structures tend to be between 15% to 25%. Our average check size upfront is $5 million and the reserve would be double of that.
Sramana Mitra: When you do a Series A in that order, are you the only fund typically? These days, people don’t need as much money even though there has been a frenzy of raising too much capital. You actually do not need as much money. When we’re talking about a $5 million Series A, are we talking about a $10 million Series A because there’s another investor involved?
Ron Heinz: We’ve done it either way. We go it alone and with syndicate. Typically, we like to syndicate our deals because it brings more capital. It brings some broad-base thinking at the board level. When you’re a Series A investor, occasionally you are following a seed round by yourself and looking to make a syndicate expansion at the B level. I’d say it’s a mix.
At the A level, we have another firm at the table with us. The other half of that is we’ll start the Series A ourselves and look to grow the syndicate based on success of the business into the B round.
Sramana Mitra: Let’s talk a bit about what you’re seeing in the Rocky Mountain area startups. You mentioned that you have three different practices. Can you give us some examples of interesting businesses that you have seen or invested in that are representative of trends?
Ron Heinz: Let’s start on the enterprise. Last year, we invested in a company called Rackware that has a very large presence here. That’s a company that does disaster recovery, migration services, and private cloud offerings. That’s a real interesting piece of technology. We partnered with IBM with that company and are selling mostly into the enterprise. That’s an exciting company.
On the consumer side, we’ve been in a company called WildWorks, which is based in Salt Lake. This is a kid’s game that’s a lot of fun. We have about 40 million kids around the world. It has a mobile offering and a web-based presence.
Sramana Mitra: That’s a subscription model?
Ron Heinz: Yes, on the web. It also has in-app purchases on mobile devices. Another consumer company that we invested in last year is Chatbooks. For every 60 photos you take, you automatically get upgraded to a service that ships you a small scrapbook. Instead of having all of your photos tied up on your phone, this service allows you to get a little photo book each month. In very small business, we’ve got a very large company in Arizona called Infusionsoft that we’ve been with for a while now.
Sramana Mitra: We’ve covered Infusionsoft extensively. Infusionsoft is the same model that we discussed earlier – bootstrap first, raise money later model. They bootstrapped quite a way before they raised money.
Ron Heinz: Those are some examples of investments that we’ve made in the past. We continue to see really nice trends across the enterprise sector as well as very small business. Two years ago, we invested in a company called Eastwind Networks which is a cyber security company in Salt Lake. We’ve got a fair amount of depth in the cyber security market. That’s another example of the continuing trend in the cyber world. Albeit, that world has become much more crowded.
Sramana Mitra: Very crowded. What about exits? What are some of the prominent exits from the Rocky Mountain ecosystem? What has that done to the ecosystem?
Ron Heinz: We try to induce people to be repeat founders and like to see them stick around and maybe do one more with us. It’s been a pretty good couple of years for us on the exit standpoint. We just sold a company called C7. While we didn’t disclose that price, it was a very attractive exit for the entrepreneurs.
We sold another company called Luxul Wireless. It was a smaller exit but an exit where we had done really well. It was a business that sold WiFi access points for the home automation market. Those are a couple of examples of recent exits that have been attractive to us. A couple of years ago, we sold a company called Solera Networks which was in the cybersecurity sector. We sold that to Blue Coat which was ultimately acquired by Symantec.
There’s a fair amount of energy on the exit side. All of those entrepreneurs have recycled back into the community, either with us or with another firm. It’s pretty rare for you to see an entrepreneur in Salt Lake become exclusively an angel investor. Our exits, while compelling, may not be billion-dollar exits that you see in the Bay.
Our model tends to be a little bit different. We can invest at a lower entry point and sell a business for a couple hundred million dollars and everybody does very well. It’s somewhat germane to investing in these four or five states versus Bay Area investing.
Sramana Mitra: Do you have an estimate of how many technology startups are operating in the Rocky Mountain corridor?
Ron Heinz: I would say thousands. Between seed capital and Series A, there are thousands of companies here.
Sramana Mitra: Awesome. Thank you for enlightening us on your geography as well as what your activities have been.