Distributed Ventures funds startups in the fintech, healthtech, and insurtech industriesRead more...
MissionOG, which invests in B2B companies, recently closed its $167 million fourth fund
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.
Krautzel focuses on investment opportunities in software and data, as well as co-manages the day-to-day operations of the Firm. He is a driven entrepreneur and former executive who has a passion for building innovative business solutions to solve market challenges. Krautzel has led investments in portfolio companies including Apkudo, Brightfield, Cloudamize (acquired by Blackstone), DivvyCloud (acquired by Rapid7) and Venminder.
Prior to MissionOG, he co-founded and bootstrapped ITtoolbox, an online community for IT executives and professionals. A leader in best practice knowledge sharing, the company pioneered concepts for online community building and digital marketing, and was eventually acquired by CEB. Post-acquisition, George ran the company’s business unit and expanded its focus to include communities for financial and human resource professionals. Prior to ITtoolbox, he co-founded an IT services company and was a consultant for Accenture.
George graduated with a B.S. in Finance from Villanova University.
Newcomb focuses on investment opportunities in fintech, data and software, as well as co-manages the day-to-day operations of the Firm. He is a technology operator and investor with a history of start-up innovation, successful team leadership and financial achievement. Andy has led investments in portfolio companies including Bento (acquired by U.S. Bank), BridgeFT, d1g1t, iDonate, OneTwoSee (acquired by Comcast), Solovis (acquired by Nasdaq) and Syncapay.
Prior to MissionOG, Newcomb co-founded Relay Network, a mobile communications company; was Group Head of Sales and Corporate Development for Citi Prepaid Services; and was a founding team member of Ecount (acquired by Citi), a pioneer and leader in the prepaid card industry. Preceding Ecount, he spent eight years in investment management, most recently as a portfolio manager with Chartwell Investment Partners, where upon his departure his teams had achieved top decile and quartile rankings.
Newcomb holds a B.A. from Trinity College.
VatorNews: What is your investment philosophy or methodology?
George Krautzel: Our mission is to support innovation and the growth of high-potential businesses through the application of targeted capital, experience-based knowledge, best practices, and a dynamic network. We started with the idea that applying the learnings of experienced operators who founded, scaled, and successfully exited businesses would be a market differentiator and drive greater results for companies. To pay homage to our operator driven approach, the “OG” stands for “Operators Group.”
Andy Newcomb: From our days as operators and investors, we knew that by harnessing and leveraging the power of a network, we could better enable our team and portfolio companies to increase our chances of winning in whatever market we entered. As a result, MissionOG has focused on building and evolving a very purposeful, deep and experienced advisor group and robust professional network from the beginning.
VN: What are your categories of interest?
AN: We invest in high-growth B2B focused companies. We are thematic investors in key market segments where we have deep operational knowledge, including FinTech, data and software.
VN: What's the big macro trend you're betting on?
GK: For the last ten years, we have been investing in the digitization of the economy. While we have seen some exceptional companies address business needs for digitization during that time, we still think we are in the early innings for this opportunity.
AN: When speaking to product and corporate development teams, it is clear budgets to drive further digitization are strong and growing. We continue to find great teams with real traction that are building fast-growing, substantial businesses to address this need. When we invest, we think about how the company and its related market will evolve, versus what is noisy at a particular moment.
VN: What is the size of your current fund and how many investments do you typically make in a year?
AN: We just closed MissionOG Fund III with $167 million of commitments. We are high conviction investors. We typically make three to five new investments a year.
VN: What stage/series do you invest in and how much is that in dollar amount for you?
GK: We are targeting the acceleration stage of high-growth B2B companies. At this stage companies have established commercialization and are growing revenue at greater than 50% year-over-year, though annual growth for many of our companies is well over 100%. Our prospective investments are gaining significant traction with their customers, but are still a small portion of a defined, large addressable market. We seek to invest $8 million to $12 million with significant follow-on capital where necessary.
VN: What kind of traction does a startup need for you to invest? Do you have any specific numbers?
AN: We want to see high-growth companies that have completed a commercial cycle – they can effectively sell their solution, address customer needs, and validate their solution through renewals. In addition, our channel checks and discussions with customers confirm that the return on investment through usage of the product is real and significant.
Our criteria is that they are high-growth, with established commercialization and growing top line at greater than 50%; they have recurring annual revenue of $2 million to $10 million; are gaining significant traction but still within a small portion of defined, large, addressable market; have a proven core team; and they're capital efficient.
VN: What other signals do you look for? Team, product, macro market?
GK: Some of the signals we look for include: an “A” team; a solution that addresses undeniable market needs and is in pole position to receive budget from an identified buyer; demonstrated traction and positive feedback from customers; large total addressable market opportunity, yet with a clear focus and pathway to gain substantial traction; and an attractive perspective on how their market will evolve.
VN: What do you think about valuations these days? What's a typical Seed pre-money valuation and Series A?
GK: It is such a point-in-time question. We have seen public comps come down a lot for growth companies over the past couple of quarters. Good companies are still seeing healthy valuations and we expect that to continue. We are seeing more bifurcation as there are less all-boats-rise-with-the-tide valuations for companies that are more “me-too” in a category and less a shining star.
In regard to typical seed or Series A pre-money valuations, there are too many variables to state a specific number, including factors such traction, team, metrics and size of market. Currently, valuations are still very healthy from a historical standard within early-stage investing.
VN: There are many venture funds out there today, how do you differentiate yourself to limited partners?
AN: Building a successful company is about more than just building capital. Companies that we invest in have a myriad of options for financial capital, so it is the “more than money” aspect that we can provide that resonates with them. This is shown in our track record and experience as both operators and investors, our network, and our guidance to help them more efficiently build their company.
VN: Venture is a two-way street, where investors also have to pitch themselves. How do you differentiate your fund to entrepreneurs?
GK: Entrepreneurs value our experience because we have started, scaled, and successfully exited companies. Operators know operators. They appreciate the opportunity to get perspective and advice from knowledgeable investors that have walked in their shoes.
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?
UK-based GPS is a global payment technology platform whose technology and partnership approach have helped scale some of the most successful disruptive FinTechs around the world. With their dynamic team and unique footprint at the heart of the global payments ecosystem, we believe they are ideally positioned to power the next generation of financial services. FinTechs, banks, merchants all need the latest card and payment functionality for their customers and legacy processing platforms often can’t deliver with the capability, flexibility and efficiency that GPS delivers.
Plano, Texas-based iDonate’s fundraising software helps the top nonprofits in faith, education, human services, and healthcare achieve enduring growth and create a more generous world. iDonate serves a highly fragmented yet massive market with a demonstrated need for next generation digital giving requirements. Nonprofits should not have to settle for a 2010 ecommerce like experience for their donors when iDonate’s platform can provide the same type of transaction experience they are accustom to when they visit a leading ecommerce site. iDonate accomplishes all of this by providing an integrated back office that enables administrators to easily deploy multi-channel campaigns and create positive giving experiences that allow them to reach, convert, and retain more donors.
VN: What are some lessons you learned?
GK: The Fix-it Trap. Good operators are used to fixing things and then moving forward. It is what makes them resilient and successful. Investors who were once operators need to be very discerning about opportunities where there may be immediate fix-it needs and not underestimate the extent of the challenges. A seemingly great opportunity with one or two immediate fixes (i.e., personnel or model changes), may likely be the wrong opportunity, as it is first the leadership team in place that needs to make the correct changes. Enough fix-it requirements inevitably pop-up along the journey that seeing obvious ones from the outset is enough for us to move on to the next investment opportunity.
AN: Team advantage. Exceptional teams find a way. When confronted with an opportunity to leap forward, or on the flip side, avoid stalling or stumbling, a great leadership team more often than not chooses the right path forward. This ability to properly assess the landscape, determine options, and then be decisive on the steps to achieve a goal is so critical to maintaining momentum and winning. Team grading surpasses product-market fit; size of total addressable market and economic model every day (although of course, those are all important too).
VN: What excites you the most about your position as VC?
GK: It is a great profession. We are constantly learning and able to apply knowledge that we have gained previously. Every day brings with it an opportunity to go deep in a category and quickly get up to speed on what matters most to be successful. We have the opportunity to work directly with teams that run through walls and build big things. In addition to identifying and growing fantastic companies, we get to build our own high-performing team and enable them to help deliver results for our companies and investors.
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?
AN: With the explosion of capital raised and available in venture and private equity, there is certainly more funding available for companies than ever before. As a result, it’s highly competitive for firms such as ours looking to identify and partner with the best companies in our target segments. What has enabled MissionOG to continue to stand out, be selected by our companies and ultimately help them reach their goals, is a proven ability to know their markets extremely well, identify with their hopes and challenges from the get-go, and to be the type of overall partner they want to buckle up with every day.
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