Nnamdi Okike: We look at the round after that. What we are looking for are companies that typically have built an early product and have some early traction. If it’s software selling to small businesses, maybe they have 10 early customers.
These are companies that don’t have a lot of revenue. Usually when we come upon them, they may have a couple of hundred thousand of ARR. They’re looking to scale up. Typically, they have a big market opportunity and founders who have a high-level of dedication.
What we do is, we invest to help companies scale to Series A. We’re investing, on average, $750,000 to a million. The rounds that we lead, may be $2 million to $3 million. That’s sufficient capital to enable the company to really scale to a Series A round.
What we look for are companies that we believe can get to a very competitive Series A round. If you look at our portfolio historically, we had firms like Charles River Ventures, Index Ventures. What we look for are companies that can get to that stage.
Our goal is to work with those companies to help them get to that next level and to put the pieces in place to do that. That’s helping to build the sales team, helping to build the engineering team, and helping them think through the story and the brand of the company.
Sramana Mitra: What about geography? Is this happening around the country, around the world, or just in New York? What is your preference?
Nnamdi Okike: One of our core beliefs is that in today’s entrepreneurial environment, you can start a great company from anywhere. Oftentimes, if you’re a software entrepreneur, it is advantageous to start a company in a smaller city where you can get access to the best talent and where there aren’t as many companies competing for the best engineers and sales people.
The way we run our model is, we call it outbound sourcing. What you’ve seen historically is that outbound sourcing has been applied very effectively at the growth stage at firms like Insight. Outbound sourcing wouldn’t apply very well to early stage, because historically, there wasn’t a lot of data on startups. Startups took more money to get to the next stage.
It was very hard to run a sourcing model. We believe that’s now changed. We use our own internal data and analytics software. We have a sourcing team who proactively call on companies.
Just to give you one case study, the most recent deal we did is investing in a company called Aadya which is a very high-potential internet security software company. This was founded by the former CIO of a company called Duo Security, which is a $2 billion plus acquisition by Cisco. This company is in Detroit.
Duo, as you may know, was also in Michigan. There’s a lot of great alumni and folks who have built their careers at Duo who are looking to join a new startup. The way we found this company was through our own internal analytics. We were able to identify this founder as a very high-potential founder. We reached out to him proactively. His name is Raffaele Mautone. We were able to lead his first venture round.
That’s reflective of our model. It’s an outbound sourcing model. If you look at our portfolio, we have investments in New York, Texas, Bay Area, DC. We look for the best companies wherever we can find them.
Our belief is that today’s entrepreneurial environment is producing great companies in a much broader set of locations than has happened historically.