2017 isn’t even over yet, and it’s already provided more than enough evidence that the tech world still needs to diversify–from the uproar over the so-called “Google memo” to the shakeup at Uber over the ride-sharing platform’s allegedly discriminatory work culture. And that’s not to mention the stuff that doesn’t always make headlines, like the fact that black women founders still get less than 1% of venture funding, or that tech employees overwhelmingly believe their employers are more diverse than they actually are.
Meet the Managing Directors of Laconia Capital Group
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?
Swimming through the Buzzwords: Our VC Summer Internship
If you ever want to make a college student cringe, usually all you have to do is ask, “Have you found a summer internship yet?” Luckily, after developing mild carpal tunnel syndrome from scrolling through our respective college career sites for countless hours, we were both given the opportunity to enter the venture capital world as summer interns at Laconia Capital Group. Just completing our sophomore years at Penn and NYU, we began our internships at Laconia unsure of what our summers had in store for us. On each of our first days, we walked into the office uncertain but excited to gain experience in an industry that would give us exposure to a variety of businesses and accomplished people. However, ten weeks later, we now find ourselves participating in office discussions with confidence and an eagerness to absorb all of the information thrown our way. As our internships come to an end, we reflect on our experiences and the invaluable lessons we have learned this summer. We’ve outlined the top five takeaways from this summer that are relevant to those working in the VC industry, as well as those thinking about their own business.
Keep Your Friends Close:
One of the key lessons we both gained from our internship this summer is the importance of cultivating relationships. After attending multiple networking events, it is evident that one of the ingredients crucial to becoming successful in the VC world is to maintain strong connections with entrepreneurs as well as other VC firms and personal networks. Establishing strong ties with other venture capitalists has the potential to increase exposure to high quality deals, while also nourishing relationships with possible co-investors for future investments. Even if a VC firm decides to pass on an entrepreneur for the time being, forming valuable connections with founders allows investors to keep communication ongoing and open new doors for business.
Keep Your Eyes on the Prize:
“Your capital strategy is just as important as your operating strategy.”
This is a message we have had drilled into our heads almost daily over the past ten weeks. Far too many times, entrepreneurs overlook the importance of a well organized cap table or capital structure. It is rare that a CEO would say that they love fundraising; however, having a detailed plan going into your capital raise is crucial to the success of your business. Ensuring that your company will always have enough money in the bank to meet your KPIs allows founders to go into negotiations in a position of strength rather than weakness. Companies run into trouble when leaders fail to raise the appropriate amount of money needed to reach their milestones. Additionally, building strong relationships with VCs prior to needing to raise capital can be advantageous to the entrepreneur down the road.
Perfect Your Pitch
After going through dozens of pitch decks and sitting in on presentations, we can now properly identify the good, the bad, and the ugly. What makes a pitch stand out to us is the founder’s ability to develop an easy-to-follow storyline that the audience can relate to. Oftentimes, founders get too tied up in jargon and struggle to simplify complex concepts. Even though you may know each and every detail of your business, remember that outsiders need to be walked through each step to fully understand the problem you’re trying to solve. Keep in mind that although you might be the smartest person in the room, you still need to illustrate your business as if you were speaking to a five year old (with an MBA).
Be Ready for Anything:
One lesson learned as an intern is to come prepared. You are not expected to know how to write an investment memo on day one. However, it is helpful to familiarize yourself with the language used on a daily basis. One book that expedited the learning process for us in our first few weeks was Venture Deals by Brad Feld and Jason Mendelson. We highly recommend this read to anyone interested in venture capital or starting their own business, as it will help you understand not only the financial aspects of a venture deal but also the legal and technical sides.
On the entrepreneur side, VCs appreciate those who come prepared to meetings and have materials ready to go once the due diligence process begins. These documents oftentimes include financial statements, customer referrals, a well-thought out pitch deck, and team bios. Each VC firm varies on their level of due diligence; however, it is helpful to have these resources on hand for whatever might be thrown your way.
Back to the Future:
It’s hard to imagine what the world will look like in 5-10 years; however, as an entrepreneur or investor it’s important to evaluate a marketspace and try to imagine how it will evolve over time. VCs are interested in understanding the vision of your company and how you would adapt to a change in the competitive landscape. We have learned at Laconia that it is not about finding the “unicorns” of the industry but rather seeking out scalable, reliable businesses that will be able to stand the test of time.
We’d like to finish this post by telling you about the best parts of the job. For starters, what normal twenty-year-old gets to sit in on meetings with the founders of some of the most innovative companies in the world? In VC, this is the norm, and we were lucky enough to get to sit in on at least two each week. In addition, interning at a micro-VC firm allowed us to work side-by-side with Laconia’s two partners, exposing us to the minds of investors and the way in which they think about potential investment opportunities. Finally, we were able to gain access to accelerators, incubators, and pitch events, introducing us to the larger VC community. We hope these tips come in handy as you attempt to enter the daunting world of VC or take on a new business venture.
Inside the Mind of a New York VC: Laconia Capital Group
Welcome back to Inside the Mind of an NYC VC, a new series at AlleyWatch in which we speak with New York City-based Venture Capitalists. In the hot seat this time are not one but two prominent VCs in New York, David Arcara and Jeffrey Silverman, Partners at Laconia Capital Group, a late seed stage B2B venture focused on investments in the Northeast. Jeffrey and David were kind enough to provide an entertaining view of their partnership dynamic, building a firm that captures the best elements of both angel and venture investing, how the Laconia thesis leverages its LP base for entrepreneurs, and much more.
So, You Bet Your SaaS on IoT
Various estimates peg the number of Internet of Things (IoT) devices deployed in the market to be between 6 to 7 billion, and that number is expected to grow over 8 times in the next 3 years. To illustrate an example of an IoT device, imagine a parking spot with sensors installed. These sensors send data on the availability of that parking spot to a local internet-enabled gateway that ultimately communicates the information to the car drivers (through their navigation systems) in that vicinity – in this case, and in any similar scenario in which sensors enable communication between physical objects and Internet-enabled systems, we are talking about IoT devices.
The market opportunity for SaaS companies within IoT becomes huge once these devices become more pervasive. Today, the primary market opportunity for SaaS companies is centered around enterprise, web, and mobile sectors, with industries more skewed toward modern non-traditional (non brick-and-mortar) sectors. That market is less than $20 billion. With IoT devices, many traditional industries such as energy, utilities in general, construction, transportation, and the environment will be ushered in the 21st century of connectivity. That means stakes are much higher, as these multi-billion dollar industries are much bigger than the modern enterprises. There is a reason GE calls IoT the Industrial Internet of Things (IIoT).
Not only that, we anticipate that IoT will bring brand new challenges – which subsequently pave the way for opportunities – for current and next generation SaaS companies to build services and products. For example, current generation solutions might not work as they are to get similar intelligence, data, and analytics for IoT devices such as sensors and actuators.
Similarly, applications for Quality of Service (QoS), Security, Billing, Maintenance and so on all have to be reimagined (or retrofitted) in the world of IoT. As far as data is concerned, what we call “Big Data” today will look like rounding error in 3 years with the amount of data generated by 50 billion IoT devices.