Sramana Mitra: When you made the decision to invest in this young founder, how did they find you or how did you find them?
Garrett Goldberg: That’s part of what we do here, we try to make sure we’re approachable by founders. This particular one came through another founder that we had a relationship with. We see a lot of good deal flows from later-stage VCs.
Sramana Mitra: This whole industry works in referrals. One of the reasons we started One Million by One Million is that it’s very difficult to break into this industry if you’re an outsider. For us, it has been great.
We work primarily with first-time founders. If the project is at a certain stage and we consider it fundable, I can provide 25 introductions in half an hour that are relevant to that company. We work with hundreds of investors.
That’s part of what bothered me very much. There are very interesting first-time entrepreneurs out there. All these big success stories are all first-time entrepreneurs.
Garrett Goldberg: We backed a lot of first-time founders along the way. We definitely noticed a difference between first- and second-time founders. All that does for us is, we know we need to focus on the first-time founders. It’s slightly different. It’s about the reception of the information too. We’ve adjusted our game.
Sramana Mitra: In the enterprise, there are a lot of very good repeat entrepreneurs. These are people who have already had exits. They have great domain knowledge. They come back in with a really strong proposition.
That category gets a tremendous amount of investment. They have the investor relationships also. Let’s do a couple more case studies of what you’ve invested in just to get a flavor of the types of companies you invest in.
Garrett Goldberg: One area that we really like are B2B or enterprise market networks, which is an evolution of the marketplace. Fast forward 10 years, it’s not enough to just open up a marketplace, because, most likely, you’re not the first one in your vertical. Simultaneously, it’s almost not enough to have a straight software product. The tools are out there. If they are, they may not be venture-scale returns. What’s interesting for us is where we got to a SaaS-enabled marketplace.
We have a couple of examples in the portfolio and I’m going to highlight two. The first one is BuildingConnected. We exited it last year. It’s a construction software company where the software was designed for general contractors to support their bidding process.
Coming out of real estate, I knew this problem well. We would send a project out for bidding. If something came back with an update from the city where we have to tweak a plan, we have to manually go send it out to whatever number of subcontractors that are bidding. BuildingConnected enabled that element of the process.
What made it exciting is the national network that it activated. You have these general contractors who are using it. The subcontractors would come on. Eventually we got to a point where that subcontractor would come on and then look at other posted jobs.
It didn’t start as a job posting board. That’s what it became. You had this network effect driving users to a particular place.