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MicroVentures invests $100,000 to $250,000 in 60 to 70 companies a year
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.
Clark has more than a decade of top level management experience in the credit risk management and financial services industry.
As Risk Manager at an online payment processing company, Clark's responsibilities included managing risk on the merchant side of the business. His comprehensive approach to the company stems from key experience previously helping manage a billion dollar portfolio of small business accounts as Credit Risk Manager in the Small Business Risk Management Division of a captive financial institution.
He holds a BS in finance from Michigan State University as well as Series 7, 24, 63 and 79 licenses.
VatorNews: What is your investment philosophy or methodology?
Bill Clark: We invest in innovative companies that are building technology-enabled solutions to demonstrable consumer and enterprise pain points. We prefer to invest in companies that have a working product and a critical mass of users or customers and have already discovered product-market fit. The early stage companies we evaluate are typically looking for funds to implement a go-to-market strategy and scale their business to prepare for a Series A financing round.
VN: What do you like to invest in? What are your categories of interest and what opportunities do you see there?
BC: We like to invest in all subsectors of the technology space. We believe opportunities arise out of inefficiency, so we look for companies that are addressing a key issue in any given market whether that be health care, big data, business intelligence, financial services, or consumer products.
Given the model we use to fund our investments, we avoid overtly complex technologies, so bitcoin and the blockchain, biopharma, and quantum computing are examples of what is not a good fit for us.
VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?
BC: We have executed investments in a number of successful later stage pre-IPO companies through secondary transactions. These portfolio companies include Spotify, Dropbox, and Palantir, among others. Exits include Twitter and Facebook.
Top early stage investments include Space Monkey and Biomeme.
Most investments come down to the team and their ability to execute on their plan and make quick adjustments when things are not working as planned.
VN: What do you look for in companies that you put money in? What are the most important qualities?
BC: The most important attributes for us include a working product and a demonstration of product-market fit. Product-market fit can be demonstrated through a successful beta program, a critical mass of customers or users, or early revenue generation.
We look for strong, sustainable month-over-month growth in a number of key performance indicators. Another critical quality is founders who have domain experience, which can help the company weather times of industry or company volatility.
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?
BC: Each company or product is different in how we measure or evaluate traction. There is no hard and fast rule as to whether a company meets our traction criteria to indicate an investment decision. That said, a few key things we look at are traction growth and the underlying performance of that growth.
For example, a company may show a graph of a consistently growing monthly active user base month-over-month, but if that company is churning 35% of its users every month, it has to spend that much more and work that much harder to attract new users. This pattern indicates a lack of product stickiness and means the product may be nice to have but is not critical to solving an overbearing issue in the market.
VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?
BC: I graduated from Michigan State University with a degree in finance. I was in credit risk management for 10 years at Dell Financial Services and Paypal. This experience gave me the ability to work with startups and small and midsized businesses and see their capital needs on a daily basis. Those insights led me to think about how to help these startups get funding from an alternative funding source.
VN: What do you like best about being a VC? What makes you excited?
BC: I like working with founders who are passionate about their company and the problem they are solving, then providing guidance when necessary and seeing the companies grow and gain traction/market share.
VN: What is the size of your current fund?
BC: We have raised ~$82 million for our companies so far and expect to deploy another $40 million over the next 12 months.
VN: What is the investment range? How much do you put into each startup?
BC: Given our funding model, investment sizes vary significantly. However, for early stage companies our typical investment size is $100,000 to $250,000 with outliers on both sides.
For late stage investment opportunities, we raise between $1 million and $5 million.
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?
BC: We do not have a predefined participation level in any given round. As part of our due diligence process, we evaluate the current funding round and determine where we might fit within that round. We like to invest alongside institutional VCs and fill out the balance of a financing round. On average we end up being about 25% of a round.
VN: Where is the firm currently in the investing cycle of its current fund?
BC: We fund deals on a deal-by-deal basis, so we are continually investing fresh capital.
VN: What percentage of your fund is set aside for follow-on capital? What is the size of the fund?
BC: For follow-on funding rounds, we re-evaluate a company and determine whether the opportunity merits a follow-on investment. If it does, we fund it using the same process as an initial investment.
VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?
BC: We typically invest in seed, bridge/post seed, and Series A rounds.
VN: In a typical year how many startups do you invest in?
BC: We will invest in 60 to 70 companies in the next 12 months, and that will grow over time as we deploy more capital.
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MicroVentures gives start-ups and existing small businesses access to early-stage capital investment, creating peer-to-peer investing in the venture capital space for a unique synergistic equity structure. Based in Austin, TX, the firm provides exclusive opportunities for investors, facilitating access to well-vetted entrepreneurs (and their concepts) who are in need of capital funding. This matchmaking process is facilitated online through MicroVenture’s website, connecting investors with businesses looking for capital.
MicroVentures evaluates prospective early stage companies based on defined criteria of suitable risk, likelihood of profitability, and other key due diligence factors, and then matches them with investors for a unique venture capital hybrid based on peer-to-peer lending. This innovative, one-of-a-kind model connects entrepreneurial concepts with individual investors, allowing participation in the funding of startup opportunities typically not readily available outside the traditional venture capital model. Investments initially total $50,000 to $250,000 per deal; individual investors can invest from $250 to $5,000.
Microventures funds a wide range of industries, including technology, consumer products and services, healthcare, media and entertainment, and telecommunications.
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What is Twitter?
Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests.
Where did the idea for Twitter come from?
Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.
How is Twitter built?
Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes.
We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.
How do you make money from Twitter?
There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.
In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet.
At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.
Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.
What's next for Twitter?
We continue to focus on building a product that provides value for users.
We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.