Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Luis Gutierrez Roy was recorded in July 2019.
Luis Gutierrez Roy, Managing General Partner of Telegraph Hill Capital, discusses his firms’ investment thesis. The fund provides Spanish limited partners access to investment opportunities in the US and Europe.
Sramana Mitra: Tell us about yourself as well as about Telegraph Hill. Let’s get you introduced to our audience.
Luis Gutierrez Roy: I started my career in M&A. I lived in San Francisco in the mid to late-90’s. I worked for Houlihan, an investment boutique bank. Then I moved to PwC in their corporate finance practice.
I then decided to move back to Barcelona where I’m from originally. I joined PwC M&A practice out of Barcelona. I got involved in transactions globally from Spain. Eventually, I moved from PwC to EY to build their M&A team as well.
I did that for about eight years before I launched Telegraph Hill Capital with a set of people I had known over the years. We started this as a small fund for us to invest in really early stages. We soon came to the conclusion that it was best for us to bring LP money on board.
We raised our first $10 million fund and started investing off of that. Around 2012 to 2013, we built a portfolio of about 25 companies primarily in the US, a little bit in Canada, and a little bit in Europe.
Then we eventually raised a second fund, which is 20 million euros. That’s investing primarily in the US, mostly in California, Northeast US, as well as Montreal. We do investments in Europe and places where we have some type of presence like Barcelona.
Sramana Mitra: You are based in Barcelona though?
Luis Gutierrez Roy: Yes, I’m based in Barcelona. I end up spending a fair amount of time in the Bay Area and LA.
Sramana Mitra: Talk about sectors and what kinds of companies do you like to invest in. What is the investment thesis?
Luis Gutierrez Roy: We invest in early stage. I don’t want to call it pre-seed or seed but I just say rounds that are less than $2 million in companies that have raised less than a million dollars before us. We lead, co-lead, or followers in rounds. We do equity and price rounds as well.
We typically invest in companies in the single-digit pre-money valuations. We do have a particular preference for B2B companies. Many of those follow SaaS business models. However, we have invested in B2C companies when we’ve seen there’s a strong subscription angle.
A good example for that would be companies like Clutter or The Buoqs. These are B2C. However, a big part of the business is around subscription from users to get, in the The Buoqs case, flowers delivered to their home or subscriptions for physical storage in the case of Clutter. 80% to 90% of our deals are in the B2B space.
Sramana Mitra: Within B2B SaaS, do you have any further specifications or anything that you are looking for, or any trend that you are particularly aligned with?
Luis Gutierrez Roy: We are pretty agnostic when it comes to verticals. There are some areas or verticals that we like better than others. Productivity tools for enterprises is an area we really like where we see how companies benefit from tools that help them run businesses more efficiently and save costs.
We’ve done deals in the logistics space, fintech, areas in the digital health space, cybersecurity. We’re pretty agnostic. What we do need to see is some initial traction or some level of monetization. Companies have to be able to get to $20,000 MRR by the time we come in.
These are companies that have been around for a year or two, have bootstrapped or raised a little money from angels or some acceleration programs. They’re trying to get to get to product-market fit. If not quite there yet, they must have some paying customers, healthy growth, and low churn.
Again, we look for capital efficient companies. We try to get to companies that would not require a lot of money to build a decent-sized business.