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The firm will do "classic Series A rounds" of $3 million to $4 million in cloud business apps
Cloud business software companies are currently in a strange position when it comes to venture capital. They require more capital and board support than the seed market can provide, while large venture firms look for strong market traction prior to investing.
A new firm, called Cloud Apps Capital Partners believes that is has the solution, combining the right experience and stage to help cloud business apps succeed.
The firm debuted on Tuesday, announcing an oversubscribed $53.7 million fund, raised from leading institutional investors, technology executives and investors.
"Cloud Apps Capital Partners is a new kind of venture firms, one that is focused specficially on cloud business apps," Matt Holleran, general partner of Cloud Apps Capital, told me in an interview, noting that that is the sweet spot for these companies, rather than seed rounds, which are too small, and later stage rounds, which they aren't ready for.
"Our strategy is to lead classic Series A investments, which is how the next generation of cloud business companies will be well served. Large firms want to make large investments, while for the seed market it is difficult for for headless syndicates to deliver true value for these companies on the back end."
What really separates the firm is the amount of experience it has in this space. A former executive at Salesforce, Holleran has 12 years of executive, sales, marketing and business development experience in the CRM, manufacturing and supply chain markets serving SMB to Fortune 50 customers globally. On top of that he also has nine years of venture capital and private equity experience.
Having been on both sides of the divide, as both an executive and a venture capitalist, Holleran said, gives him, and the firm, the right experience to be able to help cloud business companies with what they need to succedd.
"We come with 20 years of experience, so we know the best networks of high impact executives, that we can introduce them to, such as a VP of Sales or Marketing" he said. "We can do a substantial amount and we work hard to help our companies."
To date the firm has invested in seven companies, all examples of cloud business application companies and its investment strategy. Five of those have already been revealed.
The company invested in later rounds for social media management platfor Hootsuite and field service management software provider ServiceMax, as those are two companies that the Holleran had previously invested in, and they were companies that he pre-existing relationships with.
The other investments were in business freemium CRM compan Insightly, which helps hundreds of thousands of companies around the world manage their customers; Dasheroo, a business freemium company solving a global need for easy-to-use business dashboards; and GoFormz, a mobile enterprise platform that makes it easy for business users to modernize how they work.
Cloud Apps Capital Partners plans to invest in 10 to 15 total companies out of the current fund, so it is already halfway through.
It plans to invest $2 million to $4 million in initial funding, and it will reserve for follow-on financings. The fund also ince ncludes a co-investment structure to support portfolio companies’ growth throughout each company’s lifecycle with capital from leading institutional investors. The firm itself might invest $8 million into each company, but that number could jump to $20 million through its co-investors.
Ultimately, Holleran sees the firm as paving the way for a new type of venture capital firm.
"A market focused firm with relevant experience is what needed. There are going to be more firms that are market focused and we anticipate that we will see this in other significant tech markets. Cloud Apps Capital Partners is the leader in this new type of venure firm," he said.
Part of the reason for this is that wth seed firms it is hard for them to help companies craft their model, and the large venute firms, "want to see substantial traction, that you are building a significant product. You need to demonstarte the customers who are purchasing the product, andf you need to hire the right core executives."
"When you run the math, $3 million or $4 million, while less than what it used to be, is still a significant amount of money to do that," Holleran told me.
"This has do to with the evolution of the venture market, and the capital requirements necessary for success for the next generation."
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