The fund is part of investment firm SDVenturesRead more...
MIT-alumni investor boasts a diverse portfolio with over $60 million in tech innovation
As entrepreneurship has become a global meme, with the title of "Founder" worn like a badge of accomplishment, there's no shortage of emerging investors on hand to fund these wide-eyed optimists.
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.
Meet Chris Sklarin, Managing Partner at Castor Ventures.
Castor Ventures, although is not affiliated with MIT, is a private, for-profit venture company that backs MIT alumni.
Sklarin came to Castor Ventures in 2017 from Edison Partners, an investor in growth stage software businesses, where he was Vice President.
An MIT alumni himself, Sklarin has over 20 years of experience investing in tech innovation and product development and has a diverse portfolio of investments over $60 million. His background is in software product development and sales engineering, and he is an inventor on two patents in software engineering.
Here, he tells VatorNews about his portfolio and the fast investment strategy.
VatorNews: What is your investment philosophy or methodology?
Chris Sklarin: Castor Ventures is a part of the healthy ecosystem of MIT alumni. We look for a strong lead investor and management team. We are stage agnostic and invest in a diverse range of scalable companies in sectors from healthcare to enterprise software and from geographies all over the United States and abroad.
There are some very unique characteristics and benefits to our model. Alumni have an easy way to acquire ownership of a diversified venture portfolio—most individuals don't have access to these kinds of investment opportunities.
Castor also allows investors to “pay it forward.” Investors become part of something larger, helping support MIT's entrepreneurial ecosystem and the next generation of MIT entrepreneurs. The power of our model is the huge community we’re building to source deals, refer investors and entrepreneurs, and socialize the fund.
VN: What do you like to invest in? What are your categories of interest?
CS: Castor is strategically diverse across sectors to mirror the overall venture industry for our investors. We like to invest in strong companies and lead investors, which allows us to build diversity and minimize risk. As is true with most professional investors, we like to back companies in line with major shifts that can affect large markets. Industries represented in our portfolio range from software to security, healthcare IT, e-Commerce, FinTech, mobility, to Internet of Things (IoT), and many others.
VN: What would you say are the top investments that you have been a part of? What stood out about those investments in particular?
CS: There are two great companies from earlier in my career that stand out due to their exits and strategic acquisitions.
First was CoverMyMeds, a company I advised just as they were raising their seed capital. The company was both angel- and founder-backed, then went on to raise a small seed round from JumpStart. The team built CoverMyMeds up to a healthcare powerhouse and eventually sold to McKesson for over $1 billion. What was unique was the combination of the leadership: they had a unique blend of software, business, and healthcare expertise. They also really listened to their users and made sure to solve a problem that the end customer would pay for.
A second company from earlier in my career was HealthMedia, a SaaS digital coaching company that provided wellness, disease management, and behavioral health products to employers, health plans, and other partners to improve the health of individuals. The prime example was to coach people on the best use of a “stop smoking” patch. HealthMedia grew from a small SaaS, web-based coaching company into a $175-million acquisition by Johnson & Johnson, becoming a cornerstone of J&J’s online health coaching offering. HealthMedia’s success was driven by its team, which had a never-say-die attitude and a management team that listened to the market and learned to sell into large, self-insured employers and other payers.
Now at Castor, we have invested in many great companies. Included are Humatics (robots and industrial precision tech), Kinsa Health (a smart thermometer), Dataxu (digital marketing analytics), and Trocafone (an online mobile phone marketplace). We are excited to back all our portfolio companies and to see their future growth and exits.
VN: What are the most important qualities in companies that you put money in?
CS: Customer sales, or revenue, is the number one indicator of success in business. I also want to see pain points solved for a large and growing target market. Speaking with diverse users and hearing stories of their buying journey are the most compelling pieces of diligence.
VN: What kind of traction do you look for in your startups?
CS: Specific metrics depend on the sector and stage of development. We would like to see multiple paying customers with compelling use cases and progress over time. Of course, this varies by industry and use case. The more customers, the better, plus a growth rate that is accelerating.
VN: How long is the process of meeting a startup and making an investment, and how do you conduct your due diligence?
CS: Our model depends on co-investing, meaning we only invest when there’s a strong lead. So negotiations, terms, and a round are already coming together by the time we get involved. This helps streamline our process. We do conduct our own due diligence, and we benefit from our large alumni network to help in our assessments.
As for our own evaluation, it’s a fairly transparent and streamlined process, so the transaction takes place quickly — in weeks, rather than months. We make decisions very fast.
VN: These days a seed round is yesterday's Series A, meaning today a company raises a $3-million seed and no one blinks. How has that changed where a company needs to be to get their Series A round?
CS: I spent years as a growth equity software investor, so this creep from smaller to larger rounds surprises me a bit. In fact, as technology has evolved, entrepreneurs have been able to do so much more with fewer and fewer resources. I’ve always believed that in order to get that first institutional round, a company should demonstrate solid customer traction to its potential investors. Perhaps the level of revenue has changed, but solid engagement and sales remain important factors.
VN: What is the size of your current fund?
CS: Castor Ventures 1 is fully invested and we are now investing Fund 2, which is a $10-million fund.
VN: What is your typical investment range?
CS: Castor Ventures typically invests $200,000-$750,000. If our sibling funds from Alumni Venture Group AVG join us, then the range can increase. For instance, we did a late stage deal last year that was a combined AVG total of $2 million into a much larger round.
VN: Is there a typical percent that you want of a round?
CS: At Castor Ventures we aim to help fill out a current round alongside a lead investor. From that point of view, we are typically 10 percent or less of the total capital raised in a round. We do not negotiate price or take board seats. That said, we certainly look at the valuation of a company that has been negotiated and the state of its progress. It’s all about funding great companies and investing in them at a compelling price.
VN: Where is the firm in the investing cycle of its current fund?
CS: We are about two thirds complete toward our target of approximately 25 total companies. We invest much more quickly than traditional VCs, so by the time you are reading this, we could be close to finished and perhaps investing the next fund.
VN: What percentage of your fund is set aside for follow-on capital?
CS: We typically set aside about 10-15 percent of the fund for follow-on investments. We have a “reserves light” model because we are not the lead investor in our deals. Also, we have the added benefit that follow-on participation can be part of subsequent Castor funds.
VN: In a typical year, how many ventures do you invest in?
CS: We invest in about 25 deals per fund.
VN: Tell us about your background. What led you to the venture capital world?
CS: I am an engineer by training. I graduated Electrical Engineering and Computer Sciences from MIT in 1988. I then worked in software development for years and saw two companies go public while I was with them. I switched over to sales engineering and worked while going to business school at UC Berkeley’s Haas School of Business.
Once I left business school, I joined a seed stage fund and started my investing journey, further exploring venture and growth investing before joining Castor Ventures last year. I was drawn to investing by the promise of a team changing the world. I really enjoy getting to know the teams and sharing in making those dreams a reality.
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