If you have been bootstrapping and think you are ready for investors, you need to learn how investors think. First, please study our free Bootstrapping course and Investor Introductions page. Then start looking for entrepreneur – investor fit. Today I introduce you to Bruce Cleveland.
Bruce Cleveland, Founding Partner at Wildcat Venture Partners, is one of the early employees at Oracle, as well as a co-founder of Siebel Systems. His book, The Traction Gap, shares the framework that his firm uses in its venture capital practice. You can listen to a podcast of our conversation here and watch the roundtable video below:
Sramana Mitra: For those of you who may have been around in the early 2000’s, one of the most successful ventures in the history of enterprise software was Siebel Systems. Bruce was an integral part of Siebel Systems. Bruce, tell us about what you are doing with Wildcat Venture Partners. Given your background, you must have brought something unique to the perspective of Wildcat Ventures. Tell us what are the specifics of this venture.
Bruce Cleveland: Wildcat is a joining of two different groups – three people from a former firm and me from another firm. We elected a couple of years ago to build a brand new platform to do early stage software investing. I’ve known my partners for many years. One of the unique aspects of our particular firm is we all come from an operating background.
One of my partners built a company from scratch that was acquired by Oracle and generated about a billion dollars for his investors. I had the fortune of working in a number of interesting companies. I started in Silicon Valley at Oracle when it was still a small company with less than a hundred people. I was one of the first employees of a gentleman by the name of Tom Siebel. We all come from building companies.
We wanted to take those lessons that we learned to see if we could provide a set of operating principles and build a playbook to enable early stage seed or Series A companies. We’re a firm of four people. We’ve raised a transitionary fund. We’ve invested that across 23 companies.
We’re now in the middle of raising our second fund with the same principles – early-stage investing focused on software across B2B and B2C with the intent of using these operating principles to generate a better-than-average success rate. In this period of time, there’s almost a 90% failure rate. When we did some introspection of our investing track record, we’ve had about a 70% success rate. We’ve taken the principles and codified them into a framework.
Sramana Mitra: Let me ask you a few more questions about the fund so we know what kinds of entrepreneurs you would be interested in within our community. What sized investments do you make and what is the size of the fund?
Bruce Cleveland: Our first fund was a transitionary fund. We raised about $60 million. We come from very large firms. Many of our prior investors could not be investors in Wildcat because we wanted to create a smaller fund. We will never raise a fund bigger than $250 million.
The data shows that it’s very hard to generate venture returns off of larger funds. That’s one of our policies. We’ll invest in seed rounds – $100,000 up to a million. A normal full-sized investment would be somewhere around $6 million to $8 million and maybe $4 million initially. All in if you added reserves, a full investment over the course of the history of a company might be $10 million.