The Games Fund is a Moscow-based $50 million early stage fund that launched last weekRead more...
The fund is part of investment firm SDVentures
Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh, how times have changed!
While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.
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.
Bill Alena is a Managing Partner of Dating Group CVC.
Alena is a Digital Media and Dating specialist with over 20 years of experience. For 11 years he served as The Meet Groups CRO where he joined pre-revenue and helped grow the business to over $200 million annually.
He has also held executive roles at companies such Kiip Media and Scholastic. Alena began his Digital media career at DoubleClick in 1994 where he helped build one of the industry’s first Ad Tech platforms and networks.
VatorNews: What is your investment philosophy or methodology?
Bill Alena: First off, we're part of SDVentures, which is a larger company that really has two groups, and one is the SDVentures arm, which is kind of a little more complex. They’re really looking at social media and other placements. We're the corporate VC arm, which is focused solely on dating, so we're coming at this from a very different perspective. And my role now is the head of M&A and CVC for the Dating group. We have a specific fund dedicated solely for that and that's what's most interesting about what we're doing, why it's so different, and probably why people would be interested in what we're doing and why we're doing it.
Our founder, Dmitry Volkov, is the founder of SDVentures, as well as Dating Group. We own 15 different sites and apps in that dating ecosystem, so we know it well. He started this fund, of course, to help fund people, but, just as importantly, because he wanted to spur the industry. He wanted to give the industry more energy, start to add more competitors into the space and allow for some of these more early stage startups to get funding, to kick off. Dmitry’s vision is one that is focused on what we do really well, which is helping people, that's the heart of it. It's a $50 million fund to start and what we're doing is seed, Series As and and, potentially, Bs. We just launched in March, so we're just getting off the ground, but that's what separates us and that’s what we're really focused on doing. We have a large dating ecosystem of websites and apps, and we spend a lot of money on marketing, we run a lot of businesses, we have a 200 person team and a 50 person marketing team. As you can imagine, we do this really well.
My background is in the dating space as well. I was the Chief Revenue Officer for a large data company prior to joining this business. So, what we want to do is to find startups focused on the dating ecosystem, and do more than just give them money, do more than just stick somebody on a board. We want to support them by giving them access to our marketing department, access to our PR department, access to our engineers. We know everybody, we're tied to everything. We're spending tens of millions of dollars in marketing every year, we have a team, and we could just basically be your marketing group. So, we’re coming at this from a very different viewpoint than probably anybody else you're talking to, because we're so focused not just on one industry, which is digital dating, but social discovery as well. Because we're focused on that, and we're focused on the money as being just the first step in helping to support and grow these startups.
VatorNews: What’s the opportunity you see in the dating space right now? Why is it exciting?
BA: It's super interesting right now, specifically under the circumstances of COVID: we're leveraging video within the dating ecosystem. It's been coming, there's some things that have been done, and it’s been growing slowly but surely, in many different ways. But I think what's happened now is that everything that's been coming up slowly is going to be super hyper sped, and those are ones that, for me, are most interesting. And they range in what they're trying to do, whether it be recorded video profiles or one-to-many video dating or group chats or, and this is the most interesting to me, the one-to-one video dating platform, which is really meant as an icebreaker to kind of begin to actually go out and see somebody. So, all of that catfishing, as they use the term, of using fake photos, or not really representing yourself accurately, all of that would be gone in this example, because you have to literally get on a live video camera and talk. That allows for a lot more control over the situation. There are countless ways that this is being done, and what I find so interesting is, as I speak to each one of these founders, everybody's coming at this from a different angle. So, video is what's most interesting to me and the hottest piece of what's happening.
VN: With sheltering in place, and the fact that Zoom has become such a big part of our lives, are we more used to video now than we were a few months ago? Does that factor in?
BA: Yeah, I think so, for sure. I think that video was coming to dating. It was going to happen. This just, again, it's happening a lot faster. I think people are just more comfortable making that video, when they may not have been before.
VN: What's the big macro trend you're betting on?
BA: When we're looking at macrotrends, there are a couple of places, like video, where we're going to be placing some real bets. We also look at the success of some other apps, like Bumble, for instance. You may or may not know but it's a successful business and what we're trying to do is find apps to put more power, frankly, into the hands of the women, that allow them to have more control. What's going to make a woman feel more comfortable? How can we have more women on the platform feeling comfortable, willing to come and date? So, if you had asked me the two biggest things I'm focused on right now, its video and how do you allow more transparency? It’s not so much have more women as it is having more transparency that's going to make the women feel more comfortable.
VN: How many investments do you plan to make in a year going forward?
BA: The fund launched in March, in the middle, or at the very early stages, of this pandemic. So, I'm almost reluctant to answer that because I don't even think we're sure right now. I think there was a plan prior, but I've only been on board for three months and, right now, frankly, we're playing it by ear. We're going to wait to see, and if we see the right investments, we'll make them. If we don't, we won't. So, I don't want to put any kind of numbers on it right now.
VN: What stage/series do you invest in and how much is that in dollar amount for you?
BA: The way we're describing the fund is we're looking at seeds, Series A, Series B, with a maximum of around $5 million that we put in, though it's likely most investments are going to be much less. Most of what we're going to be doing is probably going to be closer to the seed stage.
VN: What kind of traction does a startup need for you to invest? Do you have any specific numbers?
BA: We're going to need to see a product. I doubt that we're going to invest in anything that hasn't been built yet, meaning a site or an app, but I don't think there's going to need to be a whole lot more than that if we like the concept and, most importantly, and I'm sure you hear this from everybody, if we like to the founders. That's the most important thing because these businesses change and adapt and will move. The founders are the most important thing, particularly when we're looking at this dating ecosystem, which can evolve and move and transition so quickly. If you have strong founders that you trust, that you have faith in, I'm going to be more likely to want to invest in them than anybody else.
There's no specific metric line that we'll be requiring when looking at somebody. We like to see some traction. So, we'd like to see them in the market and seeing users engage with the platform and see how they engage with the platform. But there's not a line that says, ‘Okay, if you don't have one million monthly users we're not interested,’ or whatever that line is, no, we don't have one of those.
VN: You mentioned the team being the most important thing. What do you look for in a team you want to invest in?
BA: First, you love to see some past success. That's really helpful to be able to see. That's, of course, not a requirement but, if you look for something, that's one of the first things you're going to look at. Have they had any other business, have they had any exits? What did that look like? Frankly, if they failed, that's okay too, if you understand why and how. Oftentimes, that can be a good thing.
Personally, I look for folks that are sharp and smart, but, most importantly, I like to see that they have commitment to the business, that they really, really kind love what they're doing. They're intelligent enough to do it, and they have the drive to make it happen. Obviously, you have to check intellect and you want smart people, but I want people who care. That's super important to me when I’m making these decisions.
VN: You mentioned COVID, and the effect that’s happening on the space. How do you see that affecting valuations over the last few months? Or because the market is still up have they not been affected yet?
BA: Again, we're in a very unique situation because we're focusing on one industry. I'm happy to talk about my opinions overall about venture, but when I look at our business, I think, if anything, valuations potentially could be higher or inflated, simply because the dating businesses are doing better right now. People are stuck at home, people can't go on dates, so they are actually spending more time on dating platforms. What we're seeing is DAUs, daily active users, are actually up. So, for us, when we invest, we have to try and evaluate whether or not those numbers are artificially inflated due to COVID. It becomes a real question. Is this site, or is this app, growing this fast? Or, once we have a vaccine, and once everybody's going back to work, going back to school, are these numbers going to go back to the pre-COVID levels? Those are answers we don’t have, but, if anything, it’s inflating the value of the business.
VN: That’s so interesting that people would be using dating apps more when they can’t actually go on dates. I’m wondering what they are using it for if there’s no chance of actually meeting another person?
BA: This is where the video plays come in. A lot of the sites have added video. They just layered it on top, they went out and they paid, or partnered with somebody, to create a video tool in there. But, more importantly, it's just a pastime. If you can't go on dates, you could you could do chats or you could just send emails to people. You could be flirting with somebody if you can't get together. It's better than nothing.
VN: There are many venture funds out there today, how do you differentiate yourself to limited partners?
BA: This is easily defined by what we're doing and Dmitry, our founder, has decided to build our particular fund with the goal of really helping to grow and build this dating ecosystem. He wants to spur on the entire industry. Our message is that we are really, really good at dating. That's what this company does well. I'm coming from being the Chief Revenue Officer of a $250 million multiple dating app, we own 15 different sites and apps as part of SDVentures, we have this massive marketing team. We have people that know the business, so we're going to make better bets, first of all, because we know what it takes to be successful. And we have people that have actually successfully managed these businesses, so we'll be able to not only offer you resources, but people as well. Say you come to me and say, ‘Hey, I need to generate new revenue streams,’ based on the app type and site type I can give you some pretty good ideas on how to do that. We have an entire business that could help support that. So, when we're making that pitch to an LP, a lot of the story is we're good at this, and we can help them become good at it. It's almost like we're the team behind the team.
VN: Venture is a two-way street, where investors also have to pitch themselves. How do you differentiate your fund to entrepreneurs?
BA: We have a board of directors of C-level and former senior level executives that were focused on this particular ecosystem. So, there's access to people that we're going to bring to you.
With our fund being relatively small, $50 million, and with our fund being very new, in that it's three months old, there's not a lot we could put on the table to say, 'come to us because we're different' other than the idea that we're so focused on this and there's so much more we can give you beyond the money. Again, that ranges from marketing support to helping you find more investments to recruiting. Every dating company in the space, I know people there, so we can you help find the right people. Our home office is based in Moscow, we can get access to very inexpensive engineers, ones that you can trust, that you know understand the space. So, if you need a particular feature built, we know somebody that can build that feature. I don't mean to continue to repeat myself, and I apologize for doing so, but I think I think that's really the crux of it.
VN: What are some of the investments you’ve made that you're super excited about? Why did you want to invest in those companies?
BA: I would be happy to talk about one of our early stage investments, a company called S’More. It’s a dating app that's focused on giving more control back. One of the things I like about it is that it has these blurry pictures and images and you have to get to know somebody by asking questions about them, or talking to them, or engaging with them, to some degree before you can see their photos. And it gets clearer and clearer as you go through. ‘Something more’ is what it stands for, and you have to get to know the person before you could actually meet that person, to get to see them. They just lay it over video and it's really interesting.
The founder is great, he’s been in dating for 10 years and he's really, really high energy. He's been out, he's gotten press all over the place, because he's really making an effort to make sure he's out there talking about it. He’s seen great growth, so we're really excited about this one. But the reason we invested very much had to do with the concept, which aligned with our vision, and the founder was also really important.
VN: So that app sort of turns dating into kind of a game? How do users respond to that?
BA: The app wants people to feel more comfortable, but, yes, they want to try and make it fun too. So, it's interesting, it's engaging, you're going to come back, you have to answer questions. It's a really cool concept and they're seeing exponential growth right now, month over month, but they're only launched in five big cities and only on iOS right now. Basically the pre-seed round is really where we were and now they're raising a second, or a full, seed round right now.
VN: What are some lessons you learned as a VC?
BA: First off, I was part of senior management teams that raised a lot of venture capital through seeds, As, Bs, and a lot of M&A from, so I've experienced it from the other side at length, but from this side it is relatively new to me.
Some of the things that surprised me are some of the founders I've spoken to are not nearly as prepared as I thought they would be, or could be. I know anytime we went to raise money, I went to raise money, we were as buttoned up as you could possibly be. We had everything and anything planned, prepared, were prepared to kind of answer any question. And I find some of these guys just aren't all that serious, it seems. And that's not the majority, but let's say I've spoken to 50 people, 50 companies, maybe five or six of them were kind of woefully unprepared, which was a little surprising to me. Maybe just because everybody thinks they can create a dating site, so they have an idea and they reach out and I'm taking all the calls because I want to hear everybody and anybody and see what they have to say, so it could be the nature of the type of business we're in.
The second thing is that, for me, it has become more about the dating world than even the VC world, and our commitment is to continue to add to making this dating ecosystem stronger, more diverse, continuing to fund it and not let one or two companies just take full control of it. Dmitry really had that vision to take this fund and really help the industry. And so that's what I'd like to kind of leave you with as far as who we are and what we're about.
VN: What excites you the most about your position as VC?
BA: I love to see young entrepreneurs with a lot of energy. I love to hear what they’re doing, hear what they want to do and know with certainty how much I can help them. I know what they don't know yet because they haven't done it yet, they haven't made the mistakes that we've made, most people here have made, and I know what they're building and I know what they want to build and I know if we invest there's a lot of ways in which we can help. What excites me the most is saying, ‘This guy's great, this gal’s great, they're smart, they're sharp and now we can really help take them to that next level.’ That does get me excited. When I get off a call with somebody that I really liked, I'm super excited because I know that we can really help them.
VN: Is there anything else that you think I should know about you or the firm or your thoughts about the venture industry in general?
BA: I'd love to be able to have a conversation like this again after we've been up and going for a year and say, ‘How did we change the dating space?’ Because that is the plan. That's the goal, that's the founders' vision and we're trying to get behind that and really take that concept and make it real.
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