A Series of Small Things
Random Thoughts on Building Venture-Backed Companies in the Midwest
Does size matter?
1.15.13 by Dov
According to a recent National Venture Capital Association report, the venture industry is continuing to bifurcate into smaller, focused funds (either by industry, geography, or something else) and massive funds that invest across a wide spectrum of deal types.
On one hand, the reduction in the number of overall venture firms nationally is probably a reflection of the poor returns the industry has had over the past decade plus. If a relatively small portion of venture firms are actually good at their job, then of course investors should want to give their capital to those firms, driving them to be larger. Newer firms then enter the industry with small funds (because that’s all they can raise), but grow over time if their performance enables them to raise larger funds in the future.
As for Allos, we remain unconvinced that bigger is better. Those massive funds must out of necessity invest across a whole swath of industries, geographies, and deal stages in order to put so much capital to work. It seems to me that there are two basic ways they can do that. Become complete generalists or effectively act internally as a collection of smaller firms. In either case, I wonder if their performance can possibly continue to keep pace with the returns that presumably drove investors to give them so much capital in the first place. If they have become generalists, they lose the expertise they presumably had in their earlier models. If the become siloed, then it’s as if their investors were diversifying across a number of small funds. Perhaps their internal teams really can be the best in each of those areas. But it seems more likely that some of those silos will probably not be “up to par” and thus the firm overall would be better off dropping them from the strategy.
Would we like to have a $1 billion fund? Of course. Am I just a bit jealous of those management fees? Sure – maybe more than just a bit. But we also remain convinced that those smaller, $30-100 million funds will continue to outperform (oh, and here’s more).
We’ve been discovered
11.28.12 by Dov
So CNN/Money has released a new list (just what the world needs, right?) of 6 non-coastal “cities where startups are thriving”, with our own Cincinnati listed second. While it’s unclear exactly what the selection process was, we certainly wouldn’t overlook the other great startup cities in the region – from Indianapolis to Pittsburgh to Ann Arbor to Cleveland to Columbus to Detroit to … At the same time, we’re proud to call Cincinnati home to half of Allos, and can’t help but agree that it’s a startup scene on the move.
Long live B2B
9.14.12 by Dov
Sequoia Capital’s Jim Goetz was recently quoted expressing dismay at how few entrepreneurs are building B2B software companies (vs. consumer-focused startups).
Jim: Come visit the Midwest. While folks like the Brandery have been building our consumer sector, the region’s already overflowing with great B2B companies here (focused on both the enterprise and SMB). For example – there’s BidPal, Blue Pillar, Scale Computing, and Weblink. And that’s just in the Allos portfolio.
I’m going underground
6.5.12 by Dov
If I read one more article about how exposed all of our national infrastructure is to cyber-attack, I’m going to be forced to build an underground bunker filled with Twinkies. I’m not sure how else to prepare for the day when the entire country is shut down by a) a rogue government, or b) a curious teenager (“I wonder what would happen if I…”)
Could somebody do something about this already?
Oh, wait. For those of you with standby/backup generator capacity, Allos portfolio company Blue Pillar already has. You’d be amazed how many universities, hospitals, etc. have their backup generators’ controls exposed to the world. But, that no longer needs to be true, thanks to Blue Pillar. And solving that national security nightmare is just a happy side effect to all of the other time- and money-saving benefits of a Blue Pillar microgrid.
Every time they sign up a new customer, I feel so much more secure that I immediately reduce my Twinkie cache by one (yummy!)
Allos strikes again
5.1.12 by Dov
I’m happy to announce our latest investment – a Series B financing of Indianapolis-based Blue Pillar, with co-investors Claremont Creek Ventures, Arsenal Venture Partners, and OnPoint Technologies. Blue Pillar is helping accelerate the “smart grid” by enabling institutions which already have backup generation capacity (ex. hospitals, data centers, universities, large industrial companies, etc.) to manage that capacity more effectively, and even use it to reduce their load on the grid when it makes economic sense (which non coincidentally also happens to be the time the grid needs more power).
Congratulations to CEO Kevin Kushman and his team – we’re looking forward to working with you!
Announcing Allos II
4.20.12 by Dov
Busy day today on the blog front, but couldn’t let this nugget slip by undetected.
I’m happy to announce that Allos II has had a closing – giving us the capital to continue our search for the perfect investment. The fund continues the strategy and builds on the success of our first fund, which invested in AssureRx Health, BidPal Networks, Scale Computing, and Weblink International.
Not only that, but we and our portfolio companies will continue to benefit from an advisory board and limited partner group that includes successful technology company founders and executives such as David Becker (First Internet Bank of Indiana), Scott Dorsey (Exact Target), Bill Godfrey (Aprimo), Mark Hill (Baker Hill), Scott Jones (Boston Technology, Gracenote, Cha Cha), Bill Oesterle (Angie’s List), Carl Sparks (Travelocity), and Tim Schigel (ShareThis), among others.
So to all you entrepreneurs – let me just say that we feel your fundraising pain. And isn’t that what you really want from your VC – some empathy?
Have a promising company? Tell us about it.
This is not how we value companies at Allos
4.20.12 by Dov
For the most part.
Mark Zuckerberg Will Never Make It As A Banking Analyst
Intern Update
4.20.12 by Dov
Jon Schneider started as our AAI today (Awesome Allos Intern for the uninitiated). He is, as his title implies, awesome. He joins us from the University of Dayton, where he has managed their student angel fund, and in his free time enjoys working as an M&A analyst at Brady Ware Capital and probably building cold fusion reactors in his basement. Plus he’s an Eagle Scout – what’s not to love?
3 out of 100′s not bad
12.2.11 by Dov
Forbes released its most recent list of America’s Most Promising Companies and we’re a bit overwhelmed here at Allos.
While we believe that all four of our portfolio companies deserve a spot on the list, we’re honored that of the 100 companies named, three have ties to Allos. Scale Computing, at number 13, is an Allos portfolio company. And ChaCha (number 53) and ShareThis (number 84) were each founded by a member of the Allos advisory board (Scott Jones and Tim Schigel, respectively).
Congratulations to all of these great companies!
Don’t Launch A Company, Launch A Fund (Or The Series A Will Die)
11.7.11 by Dov
Nice call to action from Adeo Ressi. We totally agree (and we are).
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