Sramana Mitra: I do want to finish by having you talk to us a little bit about what stage you invest in. You talked a lot about the segment and preference in B2B. Talk to us about stage as a concluding segment.
David Blumberg: We believe that there are many brilliant entrepreneurs all over the world. We are open. We are based in Silicon Valley but we have offices in New York and Tel Aviv. We’ve invested in companies all over the world. We’re open to you wherever you come from. We can help you with the networking and the ties in Silicon Valley. That’s our strength.
If you’re going for a global market, that’s important to you anyway. We invest in the early stage. Seed and Series A is our specialty. A few hundred thousand dollars up to $5 million is our first check. We like to follow on with our investments. We are very active investors. We jump in. We like to go on the Board of Directors.
We’re particularly good at business development and helping you find leads and especially at helping you raise the next round. We know a lot of the famous larger firms in the Valley. We bring them to you with white gloves. We like to say that instead of the entrepreneur as the puppet and the VC as the marionette master, our metaphor is you drive the Ferrari and we are your pit crew. We are here to change the tires, fill the gas, root for you, and we’ll give you some advice on how not to crash around the corner.
Sramana Mitra: When you are doing these B2B investments, especially seed investments, what kind of MRR or ARR are you looking for to see evidence that there is potential?
David Blumberg: The best explanation is an example. Our best two investments so far has been Nutanix, which may be going public this month. Three brilliant engineers came to us with zero product and zero customers. They just had a great idea. We backed them because they were brilliant. They had a huge problem to solve. They showed us a clear technological path to do so. They were perseverant and driven.
Second was as company called Hootsuite. I met the founder at a conference in New York. I saw that Twitter was a success. I thought that other infrastructure around that will probably do well. I particularly liked the B2B angle. He had 125,000 users, but they were not paying anything. We talked about the freemium model and moving people up into the right. That’s exactly what they’ve done. They’re a world leader in social media management. They have millions and millions of free users still. All revenue comes from SMB.
These are companies that had zero revenue. One had zero traction. One had significant traction but no revenue. Both of those equations are okay. I’ll give you the last example of EarnUp which had an MRR of about $35,000. We thought that was great. We’re not fixating as much on traction. It’s easier to sell if you have traction of course, but if you don’t, we want to see evidence that somebody is going to buy. It’s easier in the B2B area to prove that because we have a CIO council who will vet you with those people.
Sramana Mitra: We have done the Nutanix case story. It’s a great story. We have covered Hootsuite extensively but haven’t done an entrepreneur journey. The trend right now is that people are looking for about an $80,000 MRR or a million ARR before they would do a Series A. I’m very pleased to hear that you’re doing real venture capital.
David Blumberg: In cyber security, it’s impossible to have that when we first invest. Most of the companies would be too big if they already have that. We go in earlier. I think our Israeli office finds the most amazing cyber security companies because of the special link that intelligence units have there with the entrepreneurial community. Most of them have zero revenue when we invest. We’re not afraid of that at all.
Sramana Mitra: In cyber security, there are a lot of repeat entrepreneurs. This is a field ripe with serial entrepreneurs. Those have an easier time raising money on concept. First-time entrepreneurs have a harder time raising on concept.
David Blumberg: We still open our doors to them and we invest in a lot of first-time entrepreneurs.
Sramana Mitra: I’m thrilled to hear all the things that you have to say. Thank you for your time.