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Holleran is a former Salesforce executive, who also held positions at Datasweep and Clarify
What everyone can agree on, though, is that there are definitely more seed and early stage funds now than ever before, and more people willing to give money to young companies looking to make it big.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Matt Holleran is General Partner of Cloud Apps Capital Partners.
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.
He has nine years of venture capital and private equity experience.
Holleran has a BA in engineering and economics from Dartmouth College and an MBA from Harvard Business School.
VatorNews: What do you like to invest in? What are your categories of interest?
Matt Holleran: Cloud Apps Capitals Partners is new kind of venture firm on focused specifically on cloud business apps.
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.
We have been working in the cloud business app market for over a decade. I was an executive at Saleforce, and I have 12 years of experience at go to market roles. The market opportunity is companies, now all over the world, in every country, small, medium and large can get great cloud business apps to run better at much lower cost. There is a better risk to reward profile than when this trend started a decade ago.
It is a very large and growing opportunity that remains early, but you need the perspective of 20 years inthe industry and a strong network to lead these investments.
VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?
MH: We have done seven investments to date, five of which have been made public. The cloud business app market has three distinct models:
Software as a service, like Salesforce or Netsuite
Business fremium, of which Hootsuite is an example of that kind of company at scale
Enterprise cloud, which is a model we coined and were the first to highlight. That means large businesses, like GE, moving mission critical apps to the cloud,
One of our investments in the enterprise cloud was in Servicemax, which I had championed a $2 million classic Series A at prior firm, and which is now the global market leader. So its something we have long term context in, and we understand SaaS as well.
Insightly, Dasheroo and GoFormz are good examples of the business freemium model.
All of the elements of these business models are different, including go to market stats, how you market, how you sell, how you build a product, how you service customers.
With Salesforce, a customer goes to inside sales representative, who sells to the client. With Insightly, which is a 50 person company that serves companies with up to 100 employees, a customer uses their app for free for an extended period of time, and if they decided to pay they can enter a credit card, or may choose to speak with sales representative. It's a fundamentally different go to market model and different in how customers choose to buy.
Servicemax, which has GE as one of its investors, allows the to move field service management to the cloud, so they service large
So these are the ways they are all different.
VN: What do you look for in companies that you put money in? What are the most important qualities?
MH: We ask, is this a business problem that should be solved? Should a business be built around it, or should it be a product or feature? Can we advise them on how the customer purchase process should work, and the pros and cons of how to build it? We have walked in their shoes, selling to enterprise clients.
We look to see how well do they match to models based on our the customer? We look to see how to architect that business and what we think is exciting to work on.
The most important thing is they have built and marketed and sold a product. Do they have product domain expertise, and go to market sales capability? We can help augment that through our network.
All of this informs us as a board member, and allows us to advise them on how to build great business.
VN: What kind of traction do you look for in your startups? And can you be specific? Are you looking for a number of customers or order volume?
MH: We often invest pre-visible traction. This requires a market-focused venture firm that has real operating and investing experience in the cloud business application market. Judy Loehr, a Venture Partner at the firm, and I each have over 12 years of go-to-market operating experience in the business application market. I have 10 years of venture capital and private equity experience.
Whether the problem a company is solving is a big problem that can support an independent market leader.
Whether the target customer's buying process is a good fit for cloud business application subscription business models.
Whether the team has the domain expertise in this problem area in product and go-to-market models.
How we can help them to build a great company.
VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?
MH: I went to Dartmouth, where I majored in engineering and economics. I went to work at Morgan Stanley at the early days of the buyout industry and I realized that there is nothing more exciting than the business app market. That is what we are passionate about as a firm, and I have been fortunate to work at three companies in this space: Salesforce; Clarify, which was a customer support market leader that was acquired by Nortel for $3 billion; and Datasweep, where I personally sold the first six enterprise customers.
I have been fortunate to work across multiple categories over a 12 year period, and I felt I knew enough to be useful as a venture capitalist.
VN: What do you like best about being a VC? What makes you excited?
MH: Having years of experience as an executive, and then as a VC, I think that are like apples and oranges.
What's more exciting about being a VC is finding a small team that is locked on to a really important problem, and advising them on how to a build company over a long period of time, and helping them to build great businesses that they are passionate about.
VN: What is the size of your current fund?
MH: We targeted out fund a $50, but we were oversubscribed and raised $53.7, which is rare for a first fund. 75% of our commitments came from long term partners, who will help build businesses over the long term.
We also announced a a co-investment structure, and, as a result, we will be able to invest more capital than that. We will be the largest investor if it is a market leading company.
VN: What is the investment range? How much do you put into each startup?
MH: When we lead a $3 million to $4 million round, we might do $2 million to $3 million initially. We will also work with seed venture and high angels to round out. With GoFormz, we have Mike Maples and Floodgate who helped us and rounded it out.
Lifetime we might invest $8 million or more, and when it is across both our investment and co-investments it might be $20 million or more.
VN: Is there a typical percent that you want of a round? For instance, do you need to get 20% or 30% of a round?
MH: When we do an investment in a company of two to 10 people, we want to own a substantial percentage. In addition, 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. We can do a substantial amount and we work hard to help our companies.
VN: Where is the firm currently in the investing cycle of its current fund?
MH: We just announced the firm for the first time. We have made seven investments, and we plan to do 10 to 15, so we are about halfway through.
VN: What percentage of your fund is set aside for follow-on capital?
MH: It depends on the company. If we are putting in $2 million to $3 million, we allocate $8 million for reserve.
VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?
MH: Our strategy is to lead classic Series A round. We are publicly sharing five of our seven investments, and of those five, there are two cases of classic Series A, GoFormz and Dasheroo.
We invested in Hootsuite and Servicemax, which I had championed when they originally raised their Series A. With Insightly, I had led the $3 million Series A at my prior firm, and Cloud Apps Capital led the $10 million Series B.
VN: In a typical year how many startups do you invest in?
MH: We are thrilled to have the opportunity to invest in one company per quarter. It lets us do a lot of diligence on the front end and on the back end. We need to deliver on our value proposition and help them to scale their business.
VN: Is there anything else you think I should know about you or the firm?
MH: For the next generation of cloud business apps, the strategic round is a classic Series A. Later stage firms want to write large check and make investments in companies where they can see substantial traction.
It's also hard for the seed market, for headless syndicates, to do due diligence and add value on the back end. A market focused firm with relevant experience is what needed. There are going to be more firms that are market focused and we anticipate other significant tech markets to have the same thing. Cloud Apps Capital Partners is the leader in this new type of venture firm.
The large venture firms want to see substantial traction, and when you are building a cloud business application company, when you are building a significant product you need to demonstrate that you have customers who are purchasing, and 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.
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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