My Next Chapter in Venture Capital

After 15 fulfilling years at InterWest, I am excited to share the news that I have joined Shasta Ventures.    

When I joined InterWest, I was 26 years old, the year was 2000 and the bubble was bursting.  Most young people who joined the venture business at that time did not make it.  I am grateful to my partners at InterWest for mentoring me, providing me with a strong platform and having the patience to help me build a track record.

In Shasta, I have found everything I was looking for in the next chapter of my venture career.   While there are many models for success in venture, I subscribe to the belief that this is not a scale business.  I wanted to join a firm where all the partners can sit around a small table and make quick and efficient decisions.   And, I wanted a fund size where a single fantastic investment can return all or most of a fund.  Strategically, I sought to join a firm that is focused solely on Information Technology and that also has a strong software franchise.  Shasta has a fantastic enterprise software practice with investments like Anaplan, Apptio, Lithium, Steelbrick, Zenprise, Zuora and many others.  And, Shasta’s strategy to invest in Series A and in early Series B companies overlaps exactly with my experience.   Finally, and most importantly, I have found a firm with a strong cultural fit, shared values and a common philosophy that entrepreneurs are the core of our business.  Shasta has built a fantastic reputation among its entrepreneurs for being a valued and trusted partner.   

Today is also a day of mixed emotions.  After 10 years, yesterday was my last as a board member of Marketo.  I feel so fortunate to have been able to invest in Phil Fernandez, Jon Miller and Dave Morandi when they had an idea to revolutionize digital marketing.   I have learned so much about what it takes to build a category-leading public company from the founders and the entire team at Marketo.  Thank you to Phil, Jon, Dave, Fred, Bill, Steve, Jason, Sanjay, Nick, Margo, Joan and all of my fellow board members for allowing me to be a part of Marketo’s fantastic journey these past 10 years!  

I couldn't be more thrilled that the Shasta team chose me to join them as a partner.  I feel like I am starting the venture business again for the first time with all the same excitement and anticipation.  More than anything, I feel lucky to have the opportunity to be in this business.   Working with passionate and fearless entrepreneurs building ground-breaking companies is a true privilege.

IW's Journey with Flurry Analytics

Every investment is a journey and I thought I’d share a few perspectives from IW’s involvement with Flurry.  Fortunately, in this case, the journey was very successful with Yahoo acquiring Flurry.  There were many learnings from this investment, but here are three key takeaways:
  •  Private-to-private mergers can be a game-changer
  • Venture capital is a team sport
  • Startups can survive even the scariest near-death experiences

Private-to-private mergers can be a game-changer
One of the most commonly held beliefs in startups & venture capital is that private-to-private mergers are doomed to failure.  It is true that many are unsuccessful.  But, in the case of Flurry, their merger with Pinch Media in 2009 was a true game-changer.  Prior to the merger, IW was speaking with both Flurry and Pinch Media about a potential investment but were having trouble deciding which to invest in as they were both at a similar size.  Then, Flurry CEO Simon Khalaf called me to ask if I’d be interested in investing in the merger of Flurry and Pinch Media.  I was immediately intrigued and after a bit more diligence, IW led the merger financing of the two companies.  What the merger did was solidify Flurry’s position not just as the leader in mobile analytics, but really as the “standard”.  Instead of continuing to compete with each other, the combination of Flurry & Pinch Media instantly created THE default analytics provider for mobile developers on iOS and Android and, as a result, Flurry grew alongside the exponential rise of the mobile app ecosystem.  

Venture capital is a team sport
A misconception is that venture capital firms are a collection of individual partners operating largely on their own.  IW’s experience with Flurry demonstrates that nothing could be further from the truth.  Based on a relationship with CEO Simon Khalaf, my partner Khaled Nasr sourced the investment opportunity.   And, because of my focus on mobile, Khaled passed the potential investment to me and I conducted the due diligence, advocated the investment and initially sat on the board of directors of Flurry on behalf of IW.  However, when IW’s portfolio company Offerpal purchased Tapjoy and became competitive with Flurry, I had to make the very difficult decision to step off the board of Flurry and pass the seat to my partner Bruce Cleveland.  In 2011, IW brought on Keval Desai as a partner.  Keval had previously helped build Adwords at Google and we knew that he would be the perfect board member for Flurry.  Ultimately, Keval carried IW’s investment in Flurry to the finish line.  So, in the end, four different partners at InterWest played a role in our investment in Flurry and I think/hope that the Flurry management team would speak positively of their experience with IW despite the changes along the way.      

Startups can survive even the scariest near-death experiences
There was a moment during our Flurry journey where it appeared that the company might be shut down.  The short version: As part of its content marketing strategy, Flurry often released interesting data about the mobile ecosystem.  In a completely non-malicious post, Flurry wrote about some new devices (i.e. tablets) that were being tested in Cupertino (whoops!).   When Apple learned about that blog post, Steve Jobs wanted to shut Flurry down for this mistake.  Fortunately, the team at Flurry had built a fantastic mobile developer community which helped convince Apple to give Flurry another shot at life.   It was a reminder that no matter the situation, tenacious executives keep their heads down and plow ahead.  There is almost always a way through a bad situation and the Flurry team found it.  As a result, I can now watch the video below with a smile and some very fond memories:

Thanks to Simon Khalaf, Sean Byrnes and the entire team at Flurry for building such a special and important company and for including InterWest in the journey!  We wish them the best of luck at Yahoo in their quest to innovate in Search, Ads and Apps on mobile.   

Totango: The Leading Customer Success Solution

InterWest is very excited to announce our latest SaaS investment in Totango.  Similar to our thesis when we invested in SaaS leaders such as Marketo, Spredfast, Optimizely and Newscred, we believe Totango's team has built the best product in an explosive emerging category.

Over the past 10 years, much of the investment in front-office software has gone into applications that enable enterprises to achieve revenue growth by optimizing the marketing and sales functions.  More recently, there are a number of market developments that have created the need and opportunity to increase revenue (and reduce churn) from existing customers.  Must read: David Skok's excellent blog on the subject of customer success & churn.

NewsCred: InterWest’s Investment in the Future of Content Marketing

I’m excited to announce that InterWest has invested in NewsCred, a provider of end-to-end content marketing software that includes the world’s largest marketplace of licensed content. 

InterWest has conducted extensive due diligence on the content marketing space for over two years, meeting with 25+ innovative companies before selecting NewsCred.  Our selection was based on the same fundamental investment thesis that led us to invest early in other category-leading SaaS companies like Marketo, Optimizely, and Spredfast.  Namely, a massive market that satisfies our “Why Now?” questions, the best product in the space and a visionary and product-oriented team committed to building a company for the long-term. 

NewsCred is the clear leader in the space today and we believe they have all the characteristics of a category-leading company.  We look forward to supporting their team and co-investors in building a successful and long-lasting company.

Here are four reasons why we chose to invest in NewsCred, and why I am excited to join their Board of Directors:

Interview in San Jose Mercury News

Thank you to Peter Delevett from the San Jose Mercury News for posting this interview.

Doug Pepper joined the venture capital business straight out of business school — in 2000, as the dot-com bubble was bursting. Not what they call auspicious timing.

But by focusing on consumer Internet, mobile and (more recently) Software-as-a-Service deals, the Stanford grad has earned a seat at hot companies like Marketo (whose IPO last spring raised $85 million) and Lombardi (acquired by IBM for an estimated $180 million) — as well as onetime high-flyers like Groupon competitor Bloomspot, which JP Morgan Chase bought for less than what its investors are believed to have put into it. Can’t win ‘em all, as many a VC will tell you. 
Still, Pepper, who plies his trade at Sand Hill Road’s InterWest Partners, has found that investing in serial entrepreneurs can boost that batting average. In this week’s Elevator Pitch, Pepper talks about that strategy and what else he’s seeing in the tech world. 

The Epicenter of Venture Capital is not Sand Hill Road

What is the Epicenter of Venture Capital?   Obvious answer: Sand Hill Road...right?  Wrong: it is actually Burlingame, CA.  

Of  course, I'm biased because I live in Burlingame.   But, I believe this is the best location on earth for a venture capitalist. The reason is because the true epicenter of Venture Capital should be in the offices of startups and the garages of entrepreneurs.  Certainly not in the often too-quiet and stale offices on Sand Hill Road.  I am surrounded by startups.  The central location of Burlingame on the Bay Area Peninsula allows me to connect more easily with entrepreneurs in the markets that I invest. For those who don’t know, Burlingame sits directly between downtown San Francisco and the heart of Silicon Valley. And, it is also about 5 minutes from SFO.

I try to spend most of my time out of the office.   If I am sitting in my office in front of my computer, I am failing as a VC.  Where do I really want to be?  I'd rather be in SF meeting with the next hot mobile or consumer internet startup.   Or, in San Mateo meeting with the next category-leading SaaS company.   Or, meeting with one of my 3 investments in SF or my 3 investments in Burlingame/San Mateo.  I take as many meetings at The Creamery in SF or Le Boulanger in San Mateo as I do in my office on Sand Hill Road.  But, mostly I like visiting entrepreneurs where they work.   That is the best way to learn - by listening, seeing and feeling what is going on at a startup.  Inside the walls of a VC office is not the best place to truly understand entrepreneurs or startups.  

So, for me, living in Burlingame means that I sit right in the epicenter of my business.  Don’t get me wrong, I have plenty of meetings at InterWest's offices on Sand Hill including many important meetings with my Partners.   And, I’m willing to get on a plane to find great teams and companies. In fact, I have investments in Austin, New York and Seattle.

This post is not meant to be a public service announcement for Burlingame. But, hopefully it gives entrepreneurs a better sense that I can get to them very easily and I would rather meet at your offices than my own, if at all possible.

Why Now? The Key Question for Startups

There are many important questions that entrepreneurs ask themselves when starting a business or that VCs ask when making an investment decision.   Common questions include: How strong is the team?  What is the competition?  How good is the product?  What is the financial plan?  But, there is an important question that is too often missing:

Why Now?     

In other words: What are the fundamental drivers that are creating a huge market opportunity?   What is causing the tide to rise and float all boats in a market?   What ingredients exist to allow a market that didn’t work 5-10 years ago to flourish today?

I believe every VC pitch deck should have a Why Now? slide.  If there aren't fundamental market forces that are creating a massive new market opportunity, you could certainly still build a great business but not likely one with explosive growth.   

Why Now? Examples

Mobile Device Management – Corporate employees are also consumers.  And millions of employees are bringing their own devices to work (BYOD) - iPads, iPhones, Androids, etc.  For a while, enterprise IT organizations fought this trend.   But, CIOs now realize they have no choice and they require new systems to monitor, manage and secure these devices.  This is happening at nearly every enterprise in the country today.  As a result, the Mobile Device Management market, with leaders like MobileIron, is exploding.

Social MarketingWith the rise of Facebook, Twitter, Linkedin and Google+, the CEO of