1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 5)

Sramana Mitra: That was surprising to me when we started working on Fullcast. That tells me that there are many industry segments. Fullcast.io is selling to cutting-edge SaaS companies and finding white spaces. If you look at manufacturing and logistics and other industry segments that are not as advanced, there are a ton of workflow white spaces. Eventually, you introduce AI. There is just bread-and-butter workflow automation still wide open. 

Warren Weiss: It’s amazing. The more transparent the data on who’s doing what in your company and how customers buy, there’re more opportunities to understand both business processes to make things more efficient. 

1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 4)

Sramana Mitra: All these areas that we are talking about are talent war scenarios. They are highly-specialized areas. There’s not an abundance of people who have great expertise. That’s another driver for these acquisition scenarios. The larger companies are also trying to hire talent. One of the ways they hire talent is by acquiring smaller companies. That also creates a conducive environment for these smaller exits. 

Warren Weiss: The whole workforce has been massively disrupted by the pandemic. It’s brought to light new issues about how people want to work and where they can work from. The distributed nature in which you engage, hire, onboard, and train has become much more strategic. We have made a couple of investments in the HR-related space.

1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 3)

Sramana Mitra: We have very aggressively developed a whole track within our program. We have a big education effort. We are scaling that with some very interesting partnerships including with Udemy. The theme that we have developed around this topic is Bootstrapping to Exit.

By bootstrapping, I don’t only mean companies that are working without outside capital. They are also companies that are working in a capital-efficient way. It’s the same philosophy that you do things very capital-efficiently and get to certain milestones without making the exit price too high. You’ve answered one of the questions that I had in my original talking points around chasing unicorns. 

1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 2)

Sramana Mitra: You started off by saying that you’ve already had seven exits within three years. Talk to me a little bit more about the exit. What are the circumstances of these? That’s unusual for a small micro-VC to have seven exits within a three-year period.

Warren Weiss: One of the areas that we’re in is security. Larger enterprise security companies are hungry for growth. They’re looking for acquisitions that could be tuck-ins. That represents 30% IRR. We really focus on funding great engineering teams – people who know how to build world-class products.

1Mby1M Virtual Accelerator Investor Forum: With Warren Weiss, Managing Partner at WestWave Capital (Part 1)

Warren Weiss is Managing Partner at WestWave Capital. We had a terrific discussion on small exits as seen by a seasoned investor.

Sramana Mitra: Warren is very well-known in the industry as “Bunny Weiss”. That’s his nickname. I’ve known him for a very long time. He was a General Partner at Foundation Capital for many years. Our families go back a long time. My husband and Bunny worked together under Steve Jobs. More recently, Bunny has started his own fund. He has also recently invested in one of the 1Mby1M companies.

1Mby1M Virtual Accelerator Investor Forum: With Ben Narasin, Founder and General Partner at Tenacity Venture Capital (Part 5)

Ben Narasin: You build your business up to $5 million in revenue. It seems like a healthy lifestyle business to me. If you have a 40% gross margin, that means $2 million is flowing to you. If you can keep your operational expenses low, that can be a great living. Later, there are people who will buy you because they want to roll you up. They’re paying nice multiples. It’s rare for businesses that small to be paid revenue multiples, but it’s happening. There’s not just one buyer; there are multiple buyers that drives the price up. I didn’t have a billion-dollar outcome. I was the type of entrepreneur I would want to fund, but I didn’t have the scale that I wanted to fund. It’s funny.

1Mby1M Virtual Accelerator Investor Forum: With Ben Narasin, Founder and General Partner at Tenacity Venture Capital (Part 4)

Sramana Mitra: The most important thing is that big market opportunity. Hypergrowth is not a natural state of business. If every entrepreneur thinks that we have to achieve hypergrowth, that is not viable. Most businesses don’t have the characteristics of being able to meet that hypergrowth criteria.

Ben Narasin: Absolutely agree. Venture wasn’t built to fund really good businesses. It’s built to fund phenomenal outlier businesses. 

1Mby1M Virtual Accelerator Investor Forum: With Ben Narasin, Founder and General Partner at Tenacity Venture Capital (Part 3)

Sramana Mitra: What is your investment thesis? Tell me a bit more about what you like to invest in? What problems in the world do you have your eye on? What segment do you specifically like? Is e-commerce still an interest?

Ben Narasin: I make a very proactive effort to meet every VC in the top firms. An investor has just joined one of the best firms in the world and I took him out to lunch. He told me a story of what he had done. He has created a mobile advertising platform that sold for a little shy of a billion dollars. I said, “I have two really great mobile ad companies you should meet.” He said, “You got to have a lot of naivete to invest in mobile advertising.”