When EVP or any venture fund invests in a startup for the first time, we never quite know the finer details of how the business operates and what it's going to be like to work with the founders. How will they manage the elation and stress of the inevitable ups and downs of a startup's growth journey? How will they maintain and enhance culture as the business grows headcount 3x in 12 months? How will they attract and maintain executives who may be more experienced and capable than them? Are they able to see around corners for strategic opportunities and threats while keeping a close eye on day-to-day operational execution?
While a thorough diligence process can give an accurate description of past business financial/operational performance, even years spent getting to know founders, extensive reference checks and all the psychometric testing in the world won't quite give you a comprehensive picture of the leaders with whom you're entrusting your investors' funds.
By way of example, take EVP's first investment in ClearCalcs in late 2021. At the point of investment, we had the benefit of getting to know founders Chris Borzillo and Steven Robinson for 2 years. References from our friends at Startmate from where the business had graduated were glowing. As were reports from Stile Education where Steven had previously run tech. Even customers spoke incredibly highly of the team. And yet, as we reflect on our original investment thesis, our original perception of "top-class founders with the right mix of industry insight, experience and passion for the problem space" was based on imperfect outside information.
Conversely, once we're "inside the tent" and working closely with founders, we can pretty quickly fill in the gaps and come to an informed view as to whether the founders are going to be able to take the business from its infancy into the large iconic SaaS success stories that we are hoping to see. Once we're on a business' share register, interests align and the board seats we fill give us insights into operational detail that is impossible to glean from the outside.
It is because of this information advantage that EVP along with many other venture funds preserves up to 50% of any given fund for follow-on investments into existing businesses where the conviction on the team and opportunity has grown. Yes, much of this increasing conviction might lie in an ARR line moving up and to the right. But just as important is a view on the individuals that will be responsible for keeping the ship chugging along with the increasing complexity that comes with exponential growth.
ClearCalcs Follow On Investment
Towards the back end of 2022 we were fortunate to have the opportunity to make such a follow-on investment into ClearCalcs. The discussion on business metrics took care of itself with revenue and customer growth on a tear. Equally, our view on the market opportunity characterised by fragmented, incomplete and clunky incumbent solutions stood largely unchanged. Instead, much of the conversation focused on the team and any new insights we had gained. Pleasingly, with the benefit of seeing the founders perform up close, we now have even greater conviction on the opportunity.
Be it negotiating and implementing partnerships with Government bodies, hiring experienced executive talent, fronting software issues with clients or maintaining high operational standards while growing a business from 10 to 20 staff, Steve and Chris have consistently reminded us that ClearCalcs is amongst the best-managed businesses in our portfolio featuring much later stage, larger and better funded companies.
Collectively we have greater belief in our original investment thesis from 2-years ago. As we highlighted in our investment notes on Hnry, EVP has a strong preference for investing in lines rather than dots. Now that we’ve had the benefit of many more dots, the line is looking particularly promising.
And that is why we invested in ClearCalcs (again).
And for those following along at home, Grandpa Lenny remains the business' number 1 ticketholder at the ripe age of 101.
When EVP or any venture fund invests in a startup for the first time, we never quite know the finer details of how the business operates and what it's going to be like to work with the founders. How will they manage the elation and stress of the inevitable ups and downs of a startup's growth journey? How will they maintain and enhance culture as the business grows headcount 3x in 12 months? How will they attract and maintain executives who may be more experienced and capable than them? Are they able to see around corners for strategic opportunities and threats while keeping a close eye on day-to-day operational execution?
While a thorough diligence process can give an accurate description of past business financial/operational performance, even years spent getting to know founders, extensive reference checks and all the psychometric testing in the world won't quite give you a comprehensive picture of the leaders with whom you're entrusting your investors' funds.
By way of example, take EVP's first investment in ClearCalcs in late 2021. At the point of investment, we had the benefit of getting to know founders Chris Borzillo and Steven Robinson for 2 years. References from our friends at Startmate from where the business had graduated were glowing. As were reports from Stile Education where Steven had previously run tech. Even customers spoke incredibly highly of the team. And yet, as we reflect on our original investment thesis, our original perception of "top-class founders with the right mix of industry insight, experience and passion for the problem space" was based on imperfect outside information.
Conversely, once we're "inside the tent" and working closely with founders, we can pretty quickly fill in the gaps and come to an informed view as to whether the founders are going to be able to take the business from its infancy into the large iconic SaaS success stories that we are hoping to see. Once we're on a business' share register, interests align and the board seats we fill give us insights into operational detail that is impossible to glean from the outside.
It is because of this information advantage that EVP along with many other venture funds preserves up to 50% of any given fund for follow-on investments into existing businesses where the conviction on the team and opportunity has grown. Yes, much of this increasing conviction might lie in an ARR line moving up and to the right. But just as important is a view on the individuals that will be responsible for keeping the ship chugging along with the increasing complexity that comes with exponential growth.
ClearCalcs Follow On Investment
Towards the back end of 2022 we were fortunate to have the opportunity to make such a follow-on investment into ClearCalcs. The discussion on business metrics took care of itself with revenue and customer growth on a tear. Equally, our view on the market opportunity characterised by fragmented, incomplete and clunky incumbent solutions stood largely unchanged. Instead, much of the conversation focused on the team and any new insights we had gained. Pleasingly, with the benefit of seeing the founders perform up close, we now have even greater conviction on the opportunity.
Be it negotiating and implementing partnerships with Government bodies, hiring experienced executive talent, fronting software issues with clients or maintaining high operational standards while growing a business from 10 to 20 staff, Steve and Chris have consistently reminded us that ClearCalcs is amongst the best-managed businesses in our portfolio featuring much later stage, larger and better funded companies.
Collectively we have greater belief in our original investment thesis from 2-years ago. As we highlighted in our investment notes on Hnry, EVP has a strong preference for investing in lines rather than dots. Now that we’ve had the benefit of many more dots, the line is looking particularly promising.
And that is why we invested in ClearCalcs (again).
And for those following along at home, Grandpa Lenny remains the business' number 1 ticketholder at the ripe age of 101.