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Quick Pitch: An Online Venture Fair Featuring Seven East Coast Venture Funds – Join Us

Osage Venture Partners, First Round Capital, Greycroft Partners, Grotech Ventures, Edison Partners, Safeguard Scientifics, and Ascent Venture Partners are excited to host Quick Pitch: An Online Venture Fair, during which entrepreneurs will have the opportunity to hold one-on-one chat sessions with VCs.  The overall concept is relatively simple and analogous to an in-person venture event.  Each VC fund will have an online "booth", and entrepreneurs can choose to wait in line in one or multiple booths.  Once connected in a chat, entrepreneurs have eight minutes to convince the VC of how exciting their startup is and to secure a follow-up phone call or meeting.  There are no plug-ins, downloads, or software requirements; all you need to participate is a computer, tablet, or smartphone with a reliable internet connection and the latest versions of Firefox, Safari, Internet Explorer, or Chrome.

If you are an entrepreneur of an early stage business-to-business software company on the East Coast, we encourage you to join us for what we expect to be a very popular and exciting event.  The key details are below

  • When: Friday, December 11 from 2PM – 4PM
  • Where: Your computer / tablet / phone wherever you might find yourself that afternoon
  • Who: 2-3 representatives from seven great funds: Osage Venture Partners, First Round Capital, Greycroft Partners, Grotech Ventures, Edison Ventures, Safeguard Scientific, and Ascent Venture Partners and 120+ entrepreneurs of B2B software companies on the East Coast
  • What: A chat-based event through the Brazen platform, which automatically pairs you with VCs for an eight minute, one-on-one discussion through which you can pitch your business and the VCs will have the opportunity to ask questions
    • Entrepreneurs submit a company description, LinkedIn profile, and business plan for review by the VCs, which is available during and after the chat sessions
  • What Does it Cost: Absolutely nothing.  OVP is sponsoring the event
  • How to Join: Register here ASAP - space is limited and we expect it to sell out quickly 

Earlier this year OVP invested in Brazen, an exciting company based in Arlington, VA led by a great team in Ed Barrientos and Ryan Healy.  Brazen offers a real-time messaging platform that helps organizations create better engagement with a range of stakeholders through chat-based online events, proving particularly effective in facilitating interactions between individuals who don't know each other but otherwise have an shared reason to interact.  We had tracked Brazen for a while from its origins in the recruiting space providing virtual career fairs, and became excited enough to lead the Series A round as the company broadened use cases to include alumni engagement events for universities, employee engagement events for large enterprises, and marketing and lead generation events for businesses.  We are excited about this partnership with Brazen to launch its latest, and what will undoubtedly prove its most lucrative, use case.   -.  


Pneuron Finds Itself at the Center of Containers and Microservices

In 2011, we invested in Pneuron, impressed by a strong and proven leadership team behind Simon Moss and Elizabeth Elkins and a technology that was a bit mind-numbing in terms of its capabilities.  While the team at Osage called it ”p”-Neuron for a while, we learned soon enough that the ”p” is silent and the company is simply pronounced Neuron (though Simon exacts his revenge by still pronouncing Osage incorrectly even four years later).  Once we got the name right, the rest of the diligence process came together pretty smoothly.

Pneuron had a core product called the “Pneural Cortex” that managed a distributed network of “pneurons” – mini-applications that performed very specific and narrowly defined functions.  By assembling pneurons into different logical sequences through a graphical design studio, Pneuron enabled enterprises to “wrap” an existing application or database or design entirely new products to perform functions ranging from focused actions such as selective data extraction in near-real time to complete application migration.  At the time of our investment, this was already a working, though early stage, product that had been tested at enterprise scale inside two financial services leaders.  If it hadn’t been enterprise tested, we probably would have thought what they were doing was more fiction than fact.

Pneuron was a new and early solution.  People tried to categorize it incorrectly – ETL, BI, and Big Data, among others – and more than once Simon was accused of black magic or simply lying while presenting to some big brand CTOs.  The company’s approach broke the paradigm of the last generation of data management and analysis because it did not require huge data warehouse solutions as a prerequisite for meaningful heterogeneous system analysis.  Slowly, companies with seemingly unsolvable problems came to find Pneuron, such as banks with a need for comprehensive anti-money laundering solutions that they needed NOW not in five years and financial institutions looking to create full 360⁰ views of their customers for regulatory and account management reasons.  It wasn’t clear what exactly the Pneuron technology should be called, but it worked to solve some of the biggest and most urgent challenges enterprise customers were facing.  Much marketing angst existed as the company sought to find definitions for what it was versus what it was not.

Fast forward to today.  There are now terms for what Pneuron does.  The “Pneural Cortex” is a “Container” and a pretty advanced version of one at that.  The ”Pneurons” are “Microservices”, which are combined together in different forms to rapidly build customer solutions at the point of implementation.  Both “containers” and ‘”microservices” are terms best known to forward thinking analysts, bleeding edge CTOs, and of course to VCs.  The poster boy for containers is Docker.  The poster girl for microservices has yet to be found.  Advanced technology teams are using both in places like Facebook and Netflix, but to date no one has demonstrated the ability to commercialize these technologies into products that are justifying enterprise investment.  No one, that is, except for Pneuron, which has quietly been doing this for years and which is likely the best example of what is possible in this new product category.  Pneuron has an e-book that discusses its perspectives on Microservices and Containers which is quite well done.   

Simon and Elizabeth have been joined by an exceptional leadership team including Tom Fountain and Ken Lawrence, and will add another exciting executive in the next week.  I am excited for Simon, Elizabeth, Tom, Ken and the Pneuron team, for they finally have the ability to define themselves by what they are versus what they are not.  From thought leaders to category creators, to market leaders – what’s next? 


PHELAN – Entrepreneurship Runs in the Family

Mike Phelan was CEO of SevOne from 2006 until 2012.  After he stepped down as CEO, we at Osage Venture Partners were lucky enough to have him join us as a venture partner.  Mike has proven so valuable for us in assessing infrastructure investments and in connecting with entrepreneurs, though that comes as no surprise – he is one of the best.

Last week, my wife Suzanne and I had the opportunity to go to New York and to experience what one of the next generation of Phelans is doing.  We were privileged to be invited as Mike’s daughter Amanda Phelan launched her new fashion line in what Vogue described as a bang.

“Get ready to hear a lot more about Phelan: The new label by former Alexander Wang knitwear designer Amanda Phelan launched this afternoon with a bang. The show, seated theater style, was led off by an extraordinary four-woman performance choreographed by Vim Vigor Dance Company founder Shannon Gillen, and it concluded with the assembly, onstage, of models clad in some of the most innovative looks to come from a young New York designer in quite some time. The rapturous applause was earned.”

Mike is the behind the scenes advisor and is leveraging some former SevOne finance talent to support the enterprise, but the leadership, vision, and drive is all Amanda.  Seeing her come out on stage after the show, seeing her working the crowd of critics and buyers, and, even to this untrained eye, seeing what she produced and the way the show was confidently staged, I was reminded of what it was like back in the board room at SevOne when Mike hold the reins, loosely but in control. 

I remain ever in awe of talented entrepreneurs and Amanda is going to be a great one.  While we at OVP don’t invest in fashion and only in b2b software, after the Phelan show, I wished it wasn’t the case.  I guess someone in the Lentz family is just going to have to invest in the product versus the business.  Clearly an opportunity missed.


Dreamforce15 Reflections

Well, 170,000 people can’t be wrong – can they?  Either way, San Francisco in September is a great time – even when it rains.  DreamForce is a professional event and a branding statement like no other.  There will be thousands of posts, blogs, tweets, and articles about the main show, the speakers, and the glitz, so I will leave that for others.  Salesforce put on a great show and is clearly the center of a huge ecosystem.  Here is the take on Dreamforce15 from one East coast tech investor.

  • San Francisco needs to finish that subway and open up its roads.  Between the construction of the subway, new building development, and trade-show madness, much of the business district was rendered pretty unbearable.  Not as bad as Philly will be with the Pope, but no one expects to conduct an honest day of work when the pontiff is eating cheesesteaks.
  • If I had to guess whose stock was rising and falling inside the Salesforce universe based on presence and buzz, I would say the following:
    • Consulting firms are making a bundle on Salesforce and thus are willing to buy huge booths and staff them fully.  Makes me wonder how seamless all of these disparate Salesforce parts are and whether the “no software” player has become one of the large messy platforms that it set out to unseat
    • Smart players like InsideSales and Mulesoft didn’t have huge booths or big splashes, but they still managed to be in a lot of places and to touch many people.  As an investor, I much prefer dollars being spent that way
    • LinkedIn was practically silent and it was clear that the combination of the fact that they have shut off so many attendees’ APIs and that Salesforce is quickly distancing itself from and is soon to be competing with them was lost on no one
    • I was surprised not to see Veeva, but I may just have missed them; maybe Dreamforce is too horizontal for their focused vertical strategy
    • I saw many companies with booths or kiosks that were very early, some even close to pre-revenue early.  I know because I have seen them in our offices and spoken to them on the phone.  Maybe there is so much buzz about the conference that these companies feel a need to be here, which results in a very expensive case of FOMO that they likely can’t afford.  For me, their stock dropped because they are demonstrating a poor spending discipline that will carry forward to post Series A actions
  • I learned that I better get smart about “quote to cash” because Apttus and Steelbricks both were spending a king’s ransom on letting every one of the 170,000 attendees know that it was important.  Maybe the fact that Salesforce Ventures invested a bundle in each of these competing businesses makes me scratch my head, but round tripping revenue from the corporate venture group back to titanium sponsorships seems a little dotcom like.  To me, a solution that combines “configure-price-quote”, contract management, and revenue management and only requires six months of LiquidHub or Accenture to implement doesn’t seem like an innovation.  Valuable for sure, but haven’t people been doing this for years?
  • Not to pick on Apttus, but they really made themselves a target.  Having raised $41M in February, 2015 followed by $108M just three weeks ago, they were intent on poking everyone at Dreamforce with their unicorn horn.  They had a huge booth and a bunch of smaller booths, multiple store-fronts in and around the Moscone Center taken over for the duration for private events, and were giving away a Tesla.   Hold on Unicorn, money may be your food, but it doesn’t grow on trees.
  • I sat at the end of an aisle of eight-foot booths calculating that at $75k per booth times about 30 booths per aisle, that was $2.25 million of dollars before travel, hotels, food, other sponsorships, and give-aways.  The led me to think that maybe giving away a Tesla is not such a bad idea.  Imagine this – instead of one of our portfolio companies paying for a booth, it rents a suite at the W, which is right across the street.  Then, several months before Dreamforce, the company reaches out to its highest priority targets and offers those prospective customers the right to one of only 50 raffle tickets to win a Tesla if they come and spend an hour with the start-up’s leadership in the suite.  Fifty one-hour sessions with the key people from prospects would be much more productive than scanning the masses on the trade-show floor, while the costs would be similar.  Or if the lottery sounds a little extreme, offer to pay each of their entry fees to Dreamforce if they spent an hour in the suite.
  • is relevant to so many enterprises and to so many other software players who need to operate within the salesforce ecosystem.  It is the 4th largest software company – after Microsoft, Oracle, and SAP – and yet it feels so much more relevant, maybe because it is moving at such a higher speed than the three larger legacy businesses.  It’s hard to know if this is the apex for Salesforce or just a check-in point on the up escalator, but if I had to guess, I would say that there is more room to rise, and increasingly our b2b software investments will need to understand where they fit in the broadening Salesforce ecosystem.  Hopefully they can do this without spending a huge percentage of their annual marketing budget.

Term Debt and Venture Backed Businesses – No Thanks!

Maybe it is because I started out my career as a loan officer at what is now J.P. Morgan Chase, but I really have a hard time with debt.  To be fair, not all debt, and not for all companies – I have a hard time with term debt to small, volatile, cash flow negative companies.  This aversion likely comes from an early lesson in the year-long credit training course I was put through, during which they taught us that term debt was debt that was outstanding typically for longer periods of time and was to be repaid with the cash flow generated by the business.

So why would a lender make loans to small cash-flow negative start-ups?  Well, for starters, it is because they can charge high fees and get equity, and these loans can be really profitable if they get paid back.  Second, they look to the investors (who would sit behind the lender on the balance sheet) to repay the loan should there not be an exit, another funding event, or, in rare circumstances, the company’s ability to generate positive cash flow prior to the repayment of the loan.

Why would an entrepreneur take term debt?  It can sound very attractive because debt is less dilutive than equity, and thus it can be used to bridge to an exit or to lengthen the period before a next round of fund raising, allowing value in the business to grow. 

Why would the investors support term debt?  Frankly, I don’t know.  On the boards I am on, I rarely do.  Many of our companies have AR lines of credit where loans are available against a percentage of eligible receivables.  These work well and are designed to support working capital expansion.  They tend to be inexpensive and are not repaid through operating profits but through receivable collection.  Often, the lenders suggest a second line of credit not supported by accounts receivable and the question I ask is always – what is the source of repayment of these loans?  When a board I am on approves one of these lines of credit, I always push for the caveat that they cannot be used without board approval at the time of drawdown.

Here are some further thoughts on term debt:

  • As a number of well-known economists have pointed out, excessive debt and loose lending practices have been the driver of many economic maladies over the years
  • As positive economic cycles lengthen, banks get used to making money and keep pushing to make more, thus many banks continually loosen their lending practices often until loan losses mount, then they retrench, often to the detriment of those to whom they have lent
  • Banks have proven an inability to self-regulate, and often put short term profit ahead of long term risk management (mortgage crisis, savings and loan crisis, junk bond LBO crisis, Latin America debt crisis – to name a few).  Entrepreneurs and their boards need to be the regulators because the banks can’t and won’t self-regulate, and thus these term debt term sheets show up in many board rooms
  • Investors, especially new investors, hate the use of proceeds in a financing to be debt repayment.  Investors want to fund future growth in the business, not repay the costs of past growth

If you are an entrepreneur, look at the repayment schedule on the debt and ask yourself – if you could not raise additional capital then could you ever make these payments?  And remember one of the first lessons from credit training:  a company without debt cannot go bankrupt.  

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