Thinking About Thinking

Why Volition Capital Invested In Connatix

Posted in Founder-Owned Businesses, Growth Equity, Technology, Volition Capital by larrycheng on October 24, 2017


We are thrilled to announce our newest $15 million investment in Connatix, and I am very honored to join Connatix’s Board of Directors.  Connatix is performing exceptionally well, and we couldn’t be more excited to partner with them going forward.

So, what does Connatix do?

Quite simply, Connatix enables publishers to generate substantially more revenue from digital video through their industry-leading native video syndication and monetization platform (more on what that means in a bit).

Why does this matter?

It starts with the consumer.  You and I are changing how we consume digital content.  We are consuming more video every year.  Our desire for video content is accelerating and has been for years.  We are also consuming that video content predominantly on mobile.  In short, we want that video seamlessly, in any and every form factor, rendered perfectly, when we want it.  And, we only want quality, unobtrusive content.   Our tolerance for any content that looks untrusted is gone.  Simple enough, right?

Well, this creates a host of problems for digital publishers who now have to engage consumers with video content to stay relevant.  Problem #1: not all publishers have video content and nearly all publishers don’t have enough video content.  It’s hard to give consumers something you don’t have.  Problem #2:  video, especially on mobile, is technically difficult to deliver well.  Provisioning, editing, and delivering video content for a myriad of different platforms, file formats, and bandwidth levels is exceptionally hard.  Problem #3: many publishers don’t know how to efficiently monetize video.  Even if you have video, and even if you can deliver it, if you don’t monetize it well, you’re leaving money on the table.  Problem #4:  any video content on your site has to be consistent with the look and feel of your site (e.g. “native”) or it will degrade the consumer experience and you will lose engagement, not gain it.

So, how does Connatix solve those problems for publishers?

If a publisher doesn’t have video content – Connatix has a market-leading syndication network where a publisher can selectively publish the highest quality video content from other publishers onto their site.  If a publisher doesn’t know how to monetize video well – Connatix has a world-class monetization engine driving consistently superior video economics for their customers.  If a publisher doesn’t have video infrastructure technology – Connatix provides a full-stack solution that can be implemented easily and renders all content natively.  If a publisher has none of the above – no problem, Connatix’s end-to-end solution can take a publisher with literally no video content, no video monetization, and no video infrastructure and have them up and running in a day generating video revenue.  And, even if a publisher already has all of the above, they can still work with Connatix to syndicate their content out to other publishers in Connatix’s network (ranked #2 in scale by Comscore) to generate even more revenue from their existing video assets.  As customers like Time, Mashable, AOL, Tribune, CBS and many others have discovered, Connatix’s platform helps all publishers generate more revenue from the insatiable consumer demand for video content.

Why is Connatix such a great fit for Volition?

In all respects, Connatix represents exactly the type of company that we at Volition love.  The company is led by a pair of brilliant founders, David Kashak and Oren Stern, who have the ambition to build a game-changing company.  Connatix has a crystal clear value proposition for their publisher customers: more revenue.  They have a best-in-class product that can be implemented in hours making it a no brainer for publishers.  And as a result, the company has experienced significant triple digit top line growth while also having been bootstrapped and profitable since inception.  When I first met David and Oren and heard them share the Connatix story, my first thought was – this is a Volition company.  We are very excited that today that original thought is now a reality.  To all of our friends at Connatix, welcome to the Volition family.

Why Volition Capital Invested In Recycle Track Systems (RTS)

At Volition, we have often talked about how the Internet is changing the workflow for every company in every industry on the planet.  For that reason, we have always loved investing in the disruptive companies that are transforming the workflow or supply chain of large existing markets with low technology adoption.  That is why we invested in Chewy, which became the disruptive leader in the pet food retailing sector and was ultimately acquired for over $3 billion in what many have hailed as the largest e-commerce acquisition ever.  We also invested in Globaltranz, which has become one of the leading technology-enabled freight brokerages and is on its way to $1 billion in annual revenue.  Today, we are pleased to announce our newest investment which plays directly into this theme, Recycle Track Systems (RTS).

RTS, based in New York City, is a next-generation, technology-enabled commercial waste hauler – or as they like to say – a garbage company without trucks.  The problem that RTS addresses is simple. Let’s say you’re a business that has trash and recycling pick-up needs, so you contract with a waste hauler for that service.  Any variety of businesses have this need such as building owners, restaurants, hotels, grocery stores, universities, sports arenas, corporations, hospitals, etc.  RTS has great customers across many of these categories.  What we’ve come to appreciate is that many of these customers can experience service challenges because the level of technology adoption and data visibility in the waste management industry has lagged behind many other industries.

Practically, what problems arise for these businesses?  Pick-ups are missed, which leads to trash being left out, often in violation of city regulations.  There’s limited visibility into when trucks are coming for collection, which may require involvement from your facilities team.  Despite you separating recycling and composting from traditional waste, your hauler doesn’t actually take this specialized waste to the right facilities – so there’s a lack of accountability.  There’s no accurate tracking of recycling and composting to help you reach your stated sustainability goals.  It’s hard to order additional pick-up of excess waste, due to the absence of on-demand services.  The list goes on and on.

RTS aims to use technology and a deep commitment to service to bring a fundamentally higher-quality offering to its customers in the commercial waste management market.  RTS’ model is to truly partner with independent waste haulers by providing them with a hardware/software solution for their trucks to enable better route management, tracking, scheduling and mobile app integration.  Haulers within the RTS network then get increased revenue opportunities by being paired with blue chip customers within their region for both recurring and on-demand waste collection needs.  RTS’ enterprise customers get greater service levels, transparency, visibility, reliability, accountability, and on-demand mobile capabilities for their waste management needs.  It’s a business model where everybody wins.

We couldn’t be more excited to lead an $11.7M Series A financing in RTS, and I am very pleased to join the Board of Directors.  We have gotten to know the founders, Greg Lettieri and Adam Pasquale, over the past year, and we have deep respect for their vision, passion, and commitment to service.  We are extremely impressed with the quality of customers they have been able to win as a young company in a mature industry.  We love the fact that the commercial waste management industry is huge, since any and every business you see has waste collection needs and could be RTS customers.  We are also intrigued by the fact that this market has had very low penetration of technology while being one of the most recurring and predictable markets in existence.  It is a market that is ripe for a new technology-oriented leader to emerge with a differentiated commitment to high service, and we are proud to partner with RTS to become that next-generation leader in commercial waste management.

Announcing Volition Capital’s Newest $250 Million Growth Equity Fund, Volition Capital Fund III

Posted in Growth Equity, Volition Capital by larrycheng on July 26, 2016

Today is a big day for Volition as we announce our latest fund, Volition Capital Fund III, with $250 million in capital commitments. This fund will have substantially the same strategy and focus as all of our prior funds – which we call small cap technology growth equity.  We invest in high growth, principally bootstrapped, technology companies that are poised for market leadership.  This is the same strategy that we have been executing on since Day 1.  This strategy has been born from our collective experience over decades of investing, in up cycles and down cycles, with lots of success and lots of scar tissue.  Our small cap technology growth equity strategy is not a marketing pitch – it’s our genuine, feel-it-in-our bones, part-of-our-DNA, belief about how to best steward the capital of our investors.

Nonetheless, we had to make an important decision with this fund.  It was clear before our fundraising process even began that there was substantial demand from investors for what we do.  If our primary goal was to be bigger, we probably could have raised a $500 million to $750 million fund – but it would have taken us away from our focus and who we are as a firm.  Instead, we decided that bigger wasn’t our goal – our goal, as it has always been, is to be excellent at what we do.  Our goal is to be the best small cap technology growth equity fund in the market – and ultimately, we decided that a $250 million fund would best suit that goal.  So, we opted for a focused fund with a quick fundraising process – less than six weeks from opening the data room to a single close at our hard cap of $250 million all the while having the privilege to be able to add some of the most reputable investors in the industry to our LP roster.

As we look forward to deploying this new fund, Volition will continue to be a study in contrasts.  Some folks at Volition refer to this as our yin and yang.

We will continue to be a conservative and aggressive firm.  We are conservative in that capital preservation is baked right into the heart of our investment strategy.  Quite plainly, we don’t like to lose money on any investment.  However, we are an aggressive firm in that we will not make any investment that we don’t think has tremendous upside potential.  If you’re with a Volition portfolio company today, it’s because we think your company can be an absolute home run.  We are not just a conservative firm, nor are we just an aggressive firm.  We strive to be both at the same time in equal proportion, and it’s that marriage which will help pave the way for unique success.

We will continue to be a creative and focused firm.  We endeavor to be creative because you don’t generate great returns through commodity thinking.  We have to think different to be better.  We have to have differentiated ideas to have differentiated returns.  We are committed to this belief.  However, we are equally and deeply committed to focus because focus is the key to excellence.  And our goal is to be excellent at small cap technology growth equity investing.  We have complete clarity on who we are and, equally so, who we are not.  Once again, we can’t just be abundantly creative without focus. And, we can’t just be abundantly focused without creativity. But, it’s the two together that is a foundational to our long-term excellence.

Finally, we will continue to be a firm that looks backwards and forwards at the same time.  We look backwards to remind ourselves of the patterns of our success and to remind ourselves of the mistakes we aim to not repeat.  We look backwards to remind ourselves every day of what got us here and to be consistent about who we are.  Importantly and simultaneously, though, we look forwards with absolute certainty that the world of technology will change – change is the constant.  We look forwards with the understanding that our pace of learning must exceed the accelerating pace of change that is endemic in technology markets.  We look forwards with complete conviction that we can’t stand still – we must constantly grow as a firm and as investors.  It’s this tension of looking backwards and forwards at the same time that we don’t just embrace as a firm, but is something we aim to thrive within.

This is who we have been and will continue to be as we take our next step forward with this fund.

We couldn’t possibly conclude an announcement of a new fund without a substantial word of thanks.  To the founders and executives who provide the leadership, vision, and heart for our companies – we are here because of you.  On behalf of all of us at Volition, we love what we do because we have the privilege to work with people like you.  Thank you for your perseverance, fearlessness, and unbridled commitment.   We appreciate that your companies are not just companies – they are part of who you are as people.  And we are incredibly grateful for the very personal invitation to partner with you on your journey.

To our LPs and investors – we hope that many years from now, you will be able to make one primary statement about Volition: that we did exactly what we said we would do.  That we executed on the strategy we said we would execute on.  That we generated the returns that we said we would generate in the way that we said we would generate them. That we were the type of people we said we would be from the very beginning.  Thank you for your substantial vote of confidence by entrusting your reputation and capital to us.

Finally, to all the Volition team members – thank you for all of the efforts that you make every day to help make Volition’s success a reality.  Thank you for going above and beyond when no one is watching.  Thank you for not just doing your job but also caring deeply about and taking immense pride in what you do.  Job well done.  It’s a joy to be on the same team.  Onwards and upwards…

Why Volition Invested In Pramata

Posted in Founder-Owned Businesses, Growth Equity, Venture Capital, Volition Capital by larrycheng on December 17, 2015

This week, we announced a $10M growth equity investment in Pramata.  I am very honored to be joining the Board and am excited to work with the team going forward.  So, what do they do and why did we invest?

What does Pramata do?  

It’s very simple.  Pramata extracts key information out of enterprise customer contracts and puts the data into CRM systems so that enterprise sales reps, sales ops, and account managers can have a clean and accurate view about an existing customer relationship.  What’s so hard about that?  Well, it might not be hard if you are an enterprise with 5 sales reps, selling one product, to 30 customers, on a standard contract.  But, what if you have hundreds or thousands of reps, all across the country or world, selling dozens or hundreds of products, to thousands or tens of thousands of customers, with several distinct buyers within the same customer, mostly on negotiated non-standard contracts, with SLAs, addendums, etc.?  Well, then it gets very complicated, very quickly.  But, that is just direct sales.

What if you throw in channel partners who also sell your products with their own contract structures?  It’s even more complicated.  And, what if your company is acquisitive, so you are regularly layering in companies with overlapping customers on different contract structures?  Then the complexity is nearly impossible to manage.  The net of it is for a large enterprise that has negotiated enterprise customer contracts – a single customer relationship can be buried in hundreds, if not thousands, of complex and ever-evolving contractual documents.

When that’s the situation, it becomes incredibly challenging to answer seemingly very simple questions that sales reps and account managers want to know such as:

  • What products or services has this customer bought?
  • How much does this customer spend and on what?
  • What are key dates, milestones, expiration periods, etc. on their contract?
  • How much are they paying and what discounts are in effect?
  • Are there any non-standard terms or overlapping agreements?

It becomes even harder for sales ops to have visibility across their customer base to answer important questions like:

  • Which customers are expiring in the next 6 months?
  • Which customers bought x product, so we can focus on upselling y product?
  • Which customers have non-standard pricing?

Having a clear view into a customer relationship has very practical implications.  Account managers know when to approach customers about renewals or products to upsell.  New reps can get up to speed quickly on existing customer relationships.  Bills can actually be right (which is a bigger problem than meets the eye).  Pricing and utilization can be optimized across a customer when you have a holistic view into the relationship.  Net net, having a clear view of customers can have direct and profound revenue and productivity implications for enterprise sales teams.

Why Did We Invest In Pramata? 

There were lots of really important reasons why we invested in Pramata, and then one indispensable reason.

Among the really important reasons:

  • Great Product-Market Fit.  We really believe the problem Pramata has identified and the way they solve it can provide tremendous value across a broad cross-section of enterprises.  It’s a big pervasive problem that they have cracked the code on solving.
  • Blue Chip, Highly Recurring Customers.  It’s not often we see a company start at the high-end of the market – winning the biggest and best brands first.  Industry leaders like Cisco, Medtronic, Centurylink, FICO, Comcast among many other customers provide great validation for the value of the product.
  • Nirvana Customer Feedback.  The before Pramata/after Pramata feedback from existing customers was not just good – it was described as a game-changer.  A number of customers talked about how Pramata is the single-most important vendor that the sales team works with.
  • Proven Delivery Model.  They can deliver the goods.  They give customers a great customer experience.  They live up to their promises.  They do what they say they’re going to do.  Their delivery model has been refined and hardened taking on some of the largest companies in the world.
  • Strong growth.  Of course, this is indispensable for us as a growth equity investor – but the company is experiencing strong growth as the market becomes more aware that the solution exists.  We certainly expect that our investment will drive even stronger growth ahead.

But, the most important reason we invested was apparent the very first time I met with Praful Saklani, CEO, well over a year ago – philosophical alignment and shared values with the management team.  From the very first time I met Praful, and met other members of the Pramata team, it was very clear to me that we think alike and share common points of view on how to build a business.  We share an old-fashioned sensibility that businesses should be built off of delivering real value to happy customers, egos should be checked at the door, and we should do right by the people around us.  My reaction the first time and every subsequent time I’ve met with the Pramata team is this is a Volition management team.  And, I’m thrilled to make that a reality today.


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The 10 Slide Company Pitch Deck

Posted in Growth Equity, Technology, Venture Capital, Volition Capital by larrycheng on April 29, 2014

I love meeting with new companies.  To me, it’s the oxygen of this business and the most energizing aspect of the job.  That being said, the one thing that can take the energy right out of an introductory meeting is the obligatory 20-40 slide company pitch deck that drags on and on.  Personally, I prefer a more conversational meeting in which slides are used to launch conversations, rather than claim the entire conversation, about various important topics relevant to the business.  Therefore, I thought I’d provide a general framework for a succinct 10-slide pitch deck that should be more than sufficient for an introductory investor meeting.  Keep in mind that given Volition is a technology growth equity investor, this is more geared towards companies with some revenue and customers rather than a pure start-up.  But, I do think there are principles that are portable across different stages.

The 10 Slide Pitch Deck (in no particular order):

1.  The Problem Statement. This is the problem the company solves.  What is the problem, why is it such a high priority for whoever has it?  Why does this problem have to get solved?

2.  How You Solve The Problem.  This gets to what the company does.  Why do you have unique knowledge of the problem, how do you solve the problem, and why is that a differentiated / defensible approach?

3.  The Customer.  This gets to who the target customer is specifically.  The more detailed and segmented this is, the more credible I find it to be.  I’d rather hear, “The chief compliance officer at hedge funds with $100M+ in assets” than “financial services companies”, as an example.  Then provide examples of actual customers.  How many of those target customers out there actually have the problem you articulated?

4.  The Value to the Customer.  This gets to the return on investment.  How much does the customer have to pay (what is the pricing model), and why is it clearly worth it to them to pay it.

5.  Actual Use Cases.  Now that you’ve established the problem, solution and value in concept – let’s talk about it in reality.  If there’s only one primary use case, given an example of a real customer with a prototypical use case.  If there are 2 or 3 common use cases, let’s hear example of all of those.

6.  The Product.  This can go anywhere in the presentation, but if it’s at this point, I’m probably more than eager to see the product in action.  A live demo is always best.

7.  Competitive Position.  Who else out there is also trying to solve this problem, and why are you better positioned to succeed?  Why are you going to win your segment?  This is a great chance to talk about win-rates against competition, etc.

8.  Financial Overview.  A simple slide with historical and projected (to the degree you have them) income statement, balance sheet, and cash flows.  A couple of bullets on financing history and ownership breakdown are helpful.

9.  Other Key Metrics.  This is your opportunity to brag with the actual data that you consider leading indicators for your business.  Maybe it’s retention rate, lifetime value/CAC, upsell dynamics, customer or transactional growth, etc.

10.  Management Team.  Who are the people behind this company?  Don’t just put logos of past companies, but titles/roles, companies, and key achievements for each exec at their prior companies.  Also worth noting if there are any key hires you want to make.

Every company is different, but hopefully this provides a helpful framework to organize a simple pitch deck.  Don’t feel the need to address every sub-question with actual content on the slide.  You can always talk to the details during the presentation.  Often times, less is more when it comes to slide content.

My suggestion in terms of order is to start with the strongest aspect of the company.  If the management team is the strength, lead with it.  If the financial performance is the strength, by all means, lead with that.  If you’ve got a breakthrough product, start with a demo.  But, creating momentum in the meeting right out of the gate is always a good idea.

I’m probably missing something important, but hopefully this is helpful in getting readers pointed in the right direction.


Why Volition Capital Invested In Ensighten

Posted in Founder-Owned Businesses, Growth Equity, Technology, Volition Capital by larrycheng on September 20, 2012

Following up on my prior post, “What Is Tag Management”, this second post will be specifically about why Volition Capital invested in enterprise tag management leader, Ensighten.  Often when we announce a new investment, like we did with Ensighten last week, people ask me why we invested.  Hopefully this post will serve to help answer that question.  Let me emphasize that for any investment, the management team and the people behind the company is the most important factor.  That being said, I will start with some other key factors on why we invested and end with the most important one, the team.

#1: Clear Competitive Separation and Market Leadership

When a new market emerges that we think will be a high growth and strategic market, like tag management, we want to invest in the market leader.  While the term “market leader” is easily thrown around in marketing collateral, we use it sparingly when it comes to our investment decisions.  Our analysis on whether Ensighten is the market leader in tag management rests on a number of objective measures.

The first sets of measures are financially oriented.  Is Ensighten the largest and fastest growing tag management vendor?  Yes and yes.  We are very confident that Ensighten is the largest independent tag management vendor in the market based on revenue.  The revenue difference between Ensighten and the next largest player in the market is quite substantial.  We also believe that Ensighten is the fastest growing company in the market in terms of revenue growth.  These size and growth characteristics combined suggests that Ensighten is scaling aggressively and expanding its lead over the competition.

A second key measure of leadership is competitive win-rate.  When Ensighten goes up against its competitors in a sale process, they win 90%+ of the time.  This is an astonishingly high win-rate.  After talking to dozens of blue-chip, brand name customers who tested Ensighten against its competitors in proof-of-concepts (POC), we think Ensighten is winning because of superior technology.  I will expand on the technology later, but a 90%+ win rate is a clear indicator of competitive separation.

A third important measure of market leadership is customer retention.  Ensighten has a near 100% customer retention rate.  This means that once Ensighten wins a customer, they almost always keep the customer.  This level of retention indicates that the value the customer receives is extremely high.  When you combine these attributes: largest company, fastest growing, 90%+ win rate, and near 100% customer retention – we think Ensighten has both established and is extending its leadership position in the tag management market.  That’s a great dynamic to invest behind.

#2:  High Customer Value – Must-Have Product

We talked to dozens of Ensighten’s blue-chip enterprise customers including Microsoft, Sony, Seagate, Symantec, United, Dell, and many others.  Typically, Ensighten’s buyer comes from the marketing organization of these companies.  The customers communicated to us, both with their words and their tone, that in no uncertain terms, the value they are receiving from Ensighten is exceptionally high.  We think of value as the differential between how much pain the customer experiences from a problem and the delight of the customer when that problem is remediated.  On both measures, Ensighten’s customers measured exceptionally high.

In their own words, the key problem marketing organizations have before deploying Ensighten is a fundamental inability to do their job.  As I discussed in greater detail in my prior post, “What is Tag Management”, if adding, changing, fixing, or deleting a tag requires dependencies on IT release cycles that can run in intervals of many months – marketing is completely hamstrung.  They can’t modify website analytics with ease.  They can’t test different ad networks or tailor their website with ease.  They can’t deploy and customize important customer centric apps like chat, voice of the customer, and recommendation engines without substantial dependencies on IT.  They just can’t do their job.  When marketers describe this pain point – it’s very clear in their tone that the problem is debilitating.

On the flipside, when customers describe what life is like after deploying Ensighten’s tag management system (TMS), the joy in their tone is obvious.  It was clear to me that the dozens of customers we spoke with were smiling ear-to-ear on the other end of the phone when they talked about Ensighten’s value.  That’s rare in customer references.  Often times customers will say nice things to be polite to their vendors, but their tone will be more muted.  In Ensighten’s case, the customers were raving fans.  The reason is that Ensighten’s TMS gave these marketers unprecedented agility and control not to just do their job, but importantly, to do their job well.

#3: World-Class Technology

We spent an extraordinary amount of time evaluating Ensighten’s technology because the tag management space is noisy.  Our conclusion is that tag management is one market where the distinction between complexity in servicing basic tag management needs and enterprise-scale tag management needs is dramatic.  This market will evolve to be the tale of two worlds.  We believe that low-end tag management is a relatively easy technical proposition and will be commoditized quickly.  Conversely, we also believe that supporting the complexity and scale of large enterprise tag management deployments is one of the hardest engineering problems we have seen.

From inception, Ensighten has had four philosophical pillars underpinning all technology development.  1.  All Ensighten products must be able to be delivered through a single line of code.  2.  The platform must support all tag-based applications.  3.  The platform must support any device (e.g. PC, smartphone, tablet, kiosk, ATM, etc.).  4.  Everything must enhance page performance.  First of all, this is an outlandish vision in many respects.  Many would have said at the outset that it couldn’t be done. To those who would try, there would have been hundreds, if not thousands, of engineering decisions along the way where it would have been simpler to relax these constraints to get to market more easily and quickly.  But, Ensighten pulled together a team with both the technical genius and discipline to architect the solution that stayed true to these principles.

Adherence to these principles is why Ensighten now stands in the position of having the only tag management solution that can truly meet the needs of any and every enterprise-scale customer.  This is why Ensighten wins over 90%+ of the time against its competitors.  Ensighten’s entire platform was designed from the ground up with rigid adherence to principles that would ultimately prove to be critical to servicing enterprise-scale deployments.  After the conclusion of an exhaustive technical diligence process, we sat back and just said, “Wow.”  It became clear that Ensighten has a brilliant technical team that cares deeply about their engineering – and the biggest beneficiary of that is their customers.

#4: Large Strategic Market Whose Time Is Now

A year ago, not many people knew much about tag management.  We believe that a year from now, tag management will be known as one of the most strategic and important enabling technologies in digital marketing.  While Ensighten aims to be the enterprise leader in this market, we believe that thousands of companies large and small will be deploying some form of tag management in the years to come.  Large enterprises in particular will have to deploy an enterprise scale tag management system (TMS) like Ensighten just to be competitive.  Not having a TMS will soon be an unacceptable position for any enterprise whose web and digital properties are mission critical.

Tag management will become a critical part of web infrastructure as it sits between a company’s digital properties and potentially every third party application that interacts with those properties.  This position will be very strategic as the TMS will have potentially unparalleled visibility into the activity and data of a company’s digital properties.   Therefore, we expect the tag management market to evolve as quickly and as pervasively as the web analytics market.  We anticipate consolidation early in the lifecycle of the market, but also believe there is room for one or two significant independent companies – a position we expect Ensighten to occupy.

#5:  Talented and Trustworthy Management Team

Let me finish this post with where my interest in Ensighten all started, the management team.  Specifically, I connected with Josh Manion, founder and CEO, the first time in August 2011.  He was kind enough to return the cold call of an associate who was in his first month on the job (related post: What Happens After The Associate Cold Call).  I met with Josh five times before we seriously engaged in discussions on an investment.  Josh is unique – home schooled through high school, chess champion, MIT grad, and grew up in a small town in Wisconsin.  The first thing I came to appreciate about Josh is an alignment of values.  He’s a nice guy.  He’s trustworthy.  He’s a grounded and decent person.  He’s got old-school values which I respect.  The second thing I came to appreciate about Josh is he’s just inordinately smart.   The third thing I liked about Josh is he’s deeply competitive and wants to win.  Don’t be fooled by him being a nice guy – he wants to dominate.

As I got to know the rest of the management team, I could see Josh’s characteristics throughout the team – off-the-charts intelligence, good people, and fiercely competitive.  They also happen to be real domain experts in the field of tag management and passionate about the problem they are solving.  At the end of the day, it was our confidence in the team that was the deciding factor on our investment.

So, there you have it – that’s why Volition Capital invested in Ensighten.  Needless to say, we’re excited to be involved and honored to be part of the team.

What Is Tag Management?

Posted in Founder-Owned Businesses, Growth Equity, Technology, Volition Capital by larrycheng on September 14, 2012

This week we announced Volition’s newest investment in enterprise tag management leader, Ensighten.  I couldn’t be more excited to be involved with the company and to join their Board of Directors.  I was sitting down to write a post about why we invested in Ensighten, but after some thought, I realized it would probably be best to first write this post to explain what tag management is for those who don’t live it every day.   My next post, therefore, will be about why we invested in Ensighten.

So, what is tag management?  Let’s set the stage for the problem.

For many companies, their website is a mission critical part of their business.  Hence, to get the most functionality and intelligence from their websites –  the webpages themselves interface with many different best-of-breed third party applications.   You may not realize it, but when you visit a reasonably sophisticated webpage today, it’s probable that many different third-party applications are loading on that page because of your visit.  Some of these applications are visible to you as the end user.  Examples of these are ad networks, recommendation engines, video platforms, chat applications, social network plug-ins, re-targeting platforms and feedback engines.  Some of these applications are not as visible to you as an end user.  Examples of these are web analytics applications, a/b testing platforms, content optimization engines, audience measurement applications, affiliate networks and marketing automation systems.

The way these applications interface with a company’s webpage is typically through a tag.  Think of a tag as a little program that is inserted into the html code of that webpage.  When the webpage loads, the tag fires, and the application runs.  That tag contains the instructions for how that third-party application will operate on that particular webpage for that particular user.  For a web analytics platform, it could define what specific parts of the webpage to measure.  For an ad network, it could contain instructions on what type of ad unit to run.  For a feedback engine, it could set the parameters for what type of feedback module to render.  For an a/b testing platform, it could set the algorithms for how different tests will run.  Simple enough.

Here’s where it starts to get complicated.

First of all, the tag for a single application can take many different forms.  For example, if you want a different ad unit on one webpage versus another, it could necessitate a different tag even if the ad is delivered from the same ad network.  If you want the web analytics platform to pull different data from different webpages, which is often the case, that could require different tags.  In short, tailoring any application creates many different variants of tags from any single vendor.  So, the first complication is there are many different tags, within a single application vendor.

The second complication is that sophisticated websites have lots of different tag-based applications running.  In our conversations with Ensighten’s enterprise customers, they may have 10-50 different tag-based applications on any single webpage.  The volume of tags is driven by two things.  First, companies want best of breed functionality on their websites across all application categories.  Secondly, they may be testing different application vendors within each application category.  So, that adds even more complexity to the equation.

The third complication is volume.  A single website can have hundreds of thousands, if not millions, of webpages.  If a tag for a single application needs to be placed on every page, that can be hundreds of thousands of tags on hundreds of thousands of webpages for a single application.  Not only can companies have websites with lots of webpages, they may in fact have lots of different websites.  Many large enterprises have different web properties with distinct domains often in many different geographies.   Some enterprises have hundreds, if not thousands, of distinct web properties.  That obviously multiplies the volume problem.  Then throw on top of all those websites and all of those webpages –  tons of web traffic.

Therein lies the complexity: (lots of tags) x (lots of tag-based applications) x (lots of websites) x (lots of webpages) x (lots of traffic) = millions of tags firing every day to users like you and me from a single company’s web properties.  And, I won’t even start talking about other platforms like mobile and flash at this point.

That sets the context, now what’s the problem?

The problem occurs when you want to change, delete, add, fix or reconfigure a tag.  Think of a typical marketing analytics or optimization organization at a large enterprise.  They’re sitting on top of this sea of potentially millions of tags firing every day as users interact with their web properties.  Let’s say they need to change a single tag.  Maybe they want to run a different ad unit or capture slightly different analytics data.  Because that tag sits in the html code of the webpage, marketing must convince IT that the single change should be in the cue of the next release cycle for the website.  If they are successful in that, which is an if, then they must wait until the next IT release cycle for the website which could potentially be many months away.  Think about that, it could take months to make a single and simple change to one solitary tag.

In reality, large enterprises need to change tags all of the time.  Tags can be programmed improperly, so they need to be fixed.  The website itself could change which could necessitate a change to a tag.  Maybe they were testing an application on part of the website, and now want to roll it out to other parts of the site.  Maybe they want to take down an application or deploy a new one.  There are reasons why enterprises need to engage with their tags and their tag-based applications in a dynamic way.  But the current model of being beholden to the IT release cycle brings marketing agility to a halt.

That’s where Ensighten comes in.

Ensighten turns the entire methodology for managing tags upside down through its Tag Management System (TMS).  They start by placing a single line of code in the header of the website:

<script type=”text/javascript” src=”//”> </script>

That’s it, one single line of code.  That code interfaces with Ensighten’s cloud-based TMS every time a user views a webpage.  The magic of Ensighten’s TMS is it enables marketing organizations to manage all of their tags without ever touching the code of the website.  That means they can now fix, change, add, delete, and reconfigure any and all tags in Ensighten’s TMS right there in the cloud without ever engaging with IT – and those changes will render on the webpage as if the tag was hard-coded onto the page itself.  It bears repeating, Ensighten enables this flexibility for any tag-based application.  Enterprises now have ultimate flexibility to try different applications, configure existing ones differently, and remove underperforming applications with complete ease.  What could take months, if not years to do, can now be done in a days with Ensighten’s TMS.  We talked with many of Ensighten’s blue-chip clients like Microsoft, Sony, Symantec, United, Dell, Seagate and several others – and the feedback was very consistent with this sentiment:

“For me to get a new tag added to the site or change an existing one, it would take 4-5 months.  In order to get that tag changed, I would have to go through IT, log a defect, get in a release cycle, fight and claw.  I was at the mercy of our bureaucratic IT processes.  This is one of the best things we’ve ever done.  I can go in and change tags within a day.  If I need to add something new, I can add it within a day.  It has made my life much easier.  I am in control of my own destiny.” – Fortune 500 Ensighten customer.

Hopefully that gives you a window into what tag management is and what Ensighten does.  I could go into how Ensighten does it, but that would be a longer post.  But, let me just say that what sounds simple required some really brilliant technical minds to come together to create.  We think the problem of tag management will be a pervasive problem.  We think the tag management market will quickly accelerate to be one of the most prominent sectors of the web because the problem is unavoidable.  And, we know that Ensighten has a significant lead in the market.  But, I shouldn’t get ahead of myself.  Now that you know what tag management is, my next post will be about why we invested in Ensighten.

What Happens After The VC Associate Cold Call?

Posted in Venture Capital, Volition Capital by larrycheng on February 18, 2012

An entrepreneur I really admire asked me for advice on how to handle associate cold calls from VC firms.  I thought the best way to answer that question is to share what happens after the cold call so entrepreneurs can deduce for themselves how to handle it.  I’ll describe what happens at Volition Capital, but having been in the industry for 14 years at a few different firms, we’re a broad proxy of what happens at other firms.  Where we might be distinct is as a smaller firm, the partnership probably gets involved earlier and more broadly than at other firms.  Given that, let’s see what happens after the cold call:

[click]  The conversation with the associate is over.  The associate will then enter the notes of the call into Salesforce.  If the company is deemed by the associate to fit our specs both in terms of what the company does and our investment focus (more on this later), the notes of the conversation will be emailed to the entire investment team.   Elevating the visibility of the company through this means happens irrespective of whether the company is interested in raising capital.  Every investment partner at the firm will read the notes of that call within 24 hours.  Typically some email dialogue on the company occurs at this time.  In addition, those notes will be included in a packet for discussion at our Monday team meeting.   We discuss every company that has been elevated in this way every Monday.  It is at this meeting that we decide next steps, if any, with the company.

So, the net of it is very clearly this:  If you want partner visibility for your company – talk to the associate.  

Associates are assets to you in two ways: (1) They know what kind of opportunity the firm gets excited about, and (2) They know which partner would probably like the opportunity the most.  As one of the managing partners in my firm, I absolutely pay attention when an associate is excited and has conviction around a company.  I trust the judgment of the associates at our firm.  So, my advice to companies is if you want to have the conversation with the associate – treat the associate like you’re talking to a partner because the salient points of what you communicate will not just get to one partner, but all of the partners of our firm.

What about the conventional wisdom that some entrepreneurs adopt which is to tell the associate you won’t talk to anyone besides a partner?  I presume entrepreneurs ask this question to assess how interested the VC firm really is in their company so as to not waste their own time.  The logic being that if the VC firm is really interested, they’ll get a partner on the phone.  I don’t believe this approach actually accomplishes that.  What this approach forces is for the associate to make a deduction about whether your company is worth partner time, without knowing much about your company.  So, the associate essentially has to guess.  Whether this approach leads to a call with a partner is based less on the merits of your company, and moreso on whether the associate is a good guesser.  It’s more or less left up to chance.

The better approach in my mind is to ask the associate what specifications he or she is looking for and decide whether you should do the call based on how closely your company fits those specifications.  For example, if you asked a Volition associate what our investment focus is, they would say this:

  • Sectors: Internet, software/SAAS, tech-enabled services, information services
  • Revenue: Typically $5M-$30M+ revenue
  • Revenue growth: 25%+ minimum, typically 50%-100%
  • Financing history: limited or no prior capital raised
  • Profitability: Near break-even or profitable
  • Most importantly: Aspirations for Greatness.

Companies that get elevated to the entire firm typically fit most, if not all, of these criteria.  Other VC and growth equity firms likely have very different criteria, so this is clearly Volition-specific.  If the associate can’t give you specific criteria of what they’re looking for, then he or she is probably just fishing and their firm probably has more of a referral-based orientation.  In this case, it may make sense to ask for a partner.

Given this backdrop, if you think your company does or will eventually fit the spec of the calling firm, and you either want to build relationships with investors for down the road or raise capital in the not-too-distant future, then I’d say have the call.  If your company doesn’t fit the spec and likely won’t, then it’s completely fair game to let the associate know that and politely decline the call.  If you’re not sure, it never hurts to know what firms are looking for and just keep your own database for future reference.

I hope this is helpful.  If you have other questions to demystify the VC process, please feel free to comment.  If your company fits the criteria I stated above, feel free to call me or any of our associates – it’s all the same :).

Why Volition Capital Invested In Globaltranz

Posted in Founder-Owned Businesses, Growth Equity, Technology, Volition Capital by larrycheng on January 13, 2011

Volition Capital announced a $10M investment in Globaltranz this week.  We couldn’t be more excited about the investment so I thought I’d share a little bit about why.  Globaltranz enables small businesses to go online to comparison shop and procure freight capacity – most notably trucking and other modes of transport.  It is somewhat analogous to how consumers use Expedia or Orbitz for airline travel, but in Globaltranz’s case, the end customers are businesses that are procuring freight.  Next time you’re driving on the road, look around at the trucks on the road – Globaltranz probably had a hand in putting cargo on that truck. 

The value proposition is very simple.  Globaltranz offers more selection and better rates to small businesses that ship goods.  In tougher economic times, the ability to save money on non-core functions like shipping is really valuable to small businesses.  On the flip-side, Globaltranz offers freight carriers (e.g. trucking companies) a low cost way to reach the small business customer.  It’s too expensive for carriers to sell small businesses direct, yet they certainly value additional volume given the fixed-cost nature of their business.  The value is very clear to all parties which is probably why the company is growing so aggressively. 

Globaltranz represents exactly the kind of company that Volition loves to invest in.  They are high growth: ~100% year-over-year growth for a number of years in a row.  They have a sizable and diversified revenue base.  They are bootstrapped: having never raised any institutional capital throughout the company’s history.  They are led by an experienced and dedicated management team.  And they have aspirations for greatness: their stated goal is $1 billion in revenue which given the size of this market is attainable.  They have accomplished a lot without any investment, and it is our hope that through our partnership and capital, the company will achieve even greater heights going forward. 

Needless to say, we are very pleased to be the first institutional investor in Globaltranz. 

Which is your favorite video? Happy Holidays from Volition Capital

Posted in Volition Capital by larrycheng on December 23, 2010
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Happy Holidays from Volition Capital
Volition Capital would like to wish you a wonderful holiday season. To spread the holiday cheer, we wanted to share with you our favorite YouTube videos.Enjoy and Happy Holidays!The Volition Team
Charlie Bit Me
Charlie Bit Me
Geraldine’s Favorite
Phil Davison Speech
Phil Davison Speech
Sean’s Favorite
Evolution of Dance
Evolution of Dance
Larry’s Favorite
Apple: Keyboardless Computer
Apple Introduces New Laptop with No Keyboard
Marie’s Favorite
Get Smart “Cone of Silence”
Get Smart
Andy’s Favorite
Whip Your Hair
Whip Your Hair
Dave’s Favorite
The Jets Fireman Ed
The Jets Fireman Ed
Roger’s Favorite
Caddyshack “Dalai Lama”
Caddyshack, Bill Murray Dalahi Lama
Rob’s Favorite
People Are Awesome
Amazing People
Angie’s Favorite
Old Woman vs. Mercedes
Woman vs. Mercedes
Jill’s Favorite
Watermelon Launch
Watermelon Launch
Will’s Favorite
Calming the Baby Beast
Calming the Baby Beast
Aimee’s Favorite
Marcel the Shell
Marcel the Shell
Whitney’s Favorite
Extreme Caterpillar
Extreme Caterpillar Breakdance
Mike’s Favorite