1Mby1M Virtual Accelerator Investor Forum: With Mark Achler of MATH Venture Partners (Part 3)

Mark Achler: Our preference and our sweet spot is, we like it when there’s velocity and when there’s momentum in the sales pipeline and when there is a scalable way to generate growth, which is also another proxy for saying size and scale of the opportunity. There are a lot of wonderful companies out there that’s not just appropriate for venture. We need to get an understanding of the potential of the company, the potential of the market, and the team’s ability to sell.

Let me give you a concrete example. In the last three years, we’ve met with 4,200 entrepreneurs at my fund. We get pitches four or five times a day. The vast majority of entrepreneurs when they come and pitch, they start with, “Our product does…”. I stop them halfway through. >>>

1Mby1M Virtual Accelerator Investor Forum: With Mark Achler of MATH Venture Partners (Part 2)

Sramana Mitra: Can you also double-click down into cyber security? Cyber security has urgency. As a result, it is also one of the most crowded markets of venture capital. It has always been that way. I’ve been in this industry for more than 20 years. There has always been huge amounts of cyber security investments and huge amounts of cyber security startups. How do you parse cyber security?

Mark Achler: I’ll give you an example of the two portfolio companies that we have. One is called NowSecure. They are the experts in mobile. If you look at utilization, more utilization and transactions are done through mobile than on the web. But if you look at resources, the vast majority of resources and infrastructure around cyber security are on the web. If you ask the CSO of a large company to show their head count, >>>

1Mby1M Virtual Accelerator Investor Forum: With Mark Achler of MATH Venture Partners (Part 1)

Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Mark Achler was recorded in October 2017. 

Mark Achler, Managing Director, MATH Venture Partners, discusses their investment strategy and the industry trends.

Sramana Mitra: Tell us about MATH Ventures. What is the focus of your firm? How big is the fund? What sized investments do you make?

Mark Achler: We’re based in Chicago. We’re a $28 million fund. We’re just launching our second fund as well which will be twice the size. In our first fund, we made investments of $500,000 to a million dollars. Typically, we’re early stage investors. We do some Series A and seed investing. >>>

1Mby1M Virtual Accelerator Investor Forum: With Nitin Pachisia of Unshackled Ventures (Part 6)

Sramana Mitra: One last question, which is another trend. I would say it’s less visible. We are in 2017. Lots of stuff have already been built. Especially if you’re B2B investors, there aren’t that many wide open opportunities out there nowadays. Building another Salesforce.com is not that easy.

There are many niche opportunities. Some of these businesses need to be built for very small amounts of capital – $1 million to $2 million and sold for $10 million to $15 million. In some case, built for $250,000 to $500,000 and sold for $5 million to $10 million.

I’m encountering a class of investors who are actually looking at these. These are smaller TAMs. They are not 

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1Mby1M Virtual Accelerator Investor Forum: With Nitin Pachisia of Unshackled Ventures (Part 5)

Sramana Mitra: VC firms are raising huge amounts of capital. The management fees are so big. They don’t really need to deliver any returns. They are just sitting and becoming fat with fat management fees.

Nitin Pachisia: To your earlier question about the trend in the VC industry, you have to decide as a VC whether you want to optimize for fees or optimize for carry. As a smaller fund, we’re optimizing for carry. If we do our jobs well, the carry is what’s going to generate the bigger returns for us.

As the funds that started off as miro-VCs and are now two $50 million funds, they’re optimized for fees. Whatever their thinking is, to generate carry, they have to return $250 million. If you don’t exit for $2.5 billion, my 10% is not going to be able to return the fund. >>>

1Mby1M Virtual Accelerator Investor Forum: With Nitin Pachisia of Unshackled Ventures (Part 4)

Sramana Mitra: If you have to make 500 micro-VC funds productive, there needs to be some of these segmentation and clear definition. Otherwise, nobody will find anybody. It’s going to be constantly hit or miss, or it’s going to be very inefficient. The information flow needs to get much more efficient.

To your point that there are exceptions, when people have really great teams – teams that have track record or teams that come out of specific scenarios with very compelling insights into problem areas – would be an exception. What is your read of unicorn mania? As a seed investor, you could get buried under later-stage liquidation preferences. How do you protect yourself? >>>

1Mby1M Virtual Accelerator Investor Forum: With Nitin Pachisia of Unshackled Ventures (Part 3)

Sramana Mitra: What about the vehicle? Are you doing equity investments or convertible notes?

Nitin Pachisia: It’s a mix. We like to do more equity and less convertibles but we work with the founders on whatever is the best solution for them is. Our preference is to do equity and we encourage founders, even for their subsequent rounds, to do price rounds versus layering up notes over notes.

Sramana Mitra: How do you process the current investment climate where capital is moving further and further upstream? How does a pre-seed or a seed investor mitigate the Series A gap? >>>

1Mby1M Virtual Accelerator Investor Forum: With Nitin Pachisia of Unshackled Ventures (Part 2)

Sramana Mitra: Talk about your portfolio. What have you invested in? What’s interesting? Take a few highlights of your portfolio and walk us through what they are, why you’ve invested in them, and what is the thought process.

Nitin Pachisia: We’ve made 18 investments in two and a half years, which is reflective of our pace of about 8 to 10 investments per year. I believe we’re seeing about 1,500 companies a year but we like to maintain that pace to be able to dedicate enough time to every company we invest in.

In terms of the some of the examples of portfolio companies, we have a company in the driverless trucking space called Starsky >>>