September 26, 2014
We’ve changed a lot of things at High Peaks over the past few years – new people, expanded resources, and a focused strategy for supporting our portfolio. But perhaps most importantly, we’ve gotten very focused and disciplined around the sorts of startups we invest in.
Sector-wise, I’ve long been a SaaS-focused investor, and have been religious about sticking to just that over the past 4 years. When Ben joined me in 2012, we added ecommerce and ecomm infrastructure to the mix, as that’s another NYC strength, and is what Ben knows best. So today, if it doesn’t fit into one of those two buckets, we won’t touch it. That focus has made us dramatically more efficient and effective, and we’re sticking to it.
Stage-wise, we are singularly focused on seed and ‘early A’ investment opportunities – generally $1-3MM rounds at <$10MM valuations. We like to engage early in a company’s life, at the point where the initial team has been put together, the strategy is clear, but usually before product-market fit has been established. Given the relatively small checks we write ($100K to $1MM initial investments), this stage also enables us to take more of a leadership role in financings and get meaningful ownership positions.
Additionally, our entire portfolio support strategy – in particular our talent program and Operating Partner Network – is built around working with companies at this stage. We frequently lead deals, and always actively engage with our companies, ensuring that our portfolio support resources can be fully brought to bear to help those companies grow.
So while we see lots of $4MM+ Series A opportunities with great teams in exciting markets, we’ve become religious about passing on them. We believe passionately in the value of living by our rules. We preach focus to our companies, and live up to the same standards. Seed deals in our target sectors are what we’re tooled up to do, so we stick to it.
But a wise man once said that rules were made to be broken. And we’ve just broken the rules in a big way…
The tech press has recently covered the formation of an exciting new ecommerce company, Jet, which raised an astonishing $55MM Series A from three of the biggest heavyweights in the business – NEA, Accel, and Bain Capital Ventures. A little further down the list of investors is High Peaks. (Last week, they also announced an additional $25MM of capital from WTI and Silicon Valley Bank.)
Jet was co-founded by what we firmly believe to be the best startup ecommerce team in the country right now: Quidsi co-founder Marc Lore and his Quidsi colleagues Nate Faust and Mike Hanrahan. These guys have done it before, building a $550MM winner that was acquired by Amazon in 2010, and the band is back together now with their sights set on even greater things.
So, why would we stray from our strategy and go after something like this, where we’ll have a tiny ownership position and limited engagement with the company?
In this case, it came down to two things – ROI and education.
- We think Jet has potential to be the single most important ecommerce company started during the life of our fund. This is as good a team as you’ll see, and they are taking a swing at an enormous opportunity. That led us to see huge ROI potential despite the aggressive initial deal structure. From an ROI standpoint, the chance to invest in Marc getting the band back together is an opportunity you simply have to pay attention to.
- We’re going to learn a ton from the experience. As investors in the company we’ll have an inside view as Jet grows and develops. Ben will be working with some of the most talented and innovative practitioners in the ecomm sector as they build a revolutionary business. The insights and perspective that we gain will be invaluable as we work with other companies.
So yeah, we’ve got rules. We care a lot about them and following them keeps us focused, disciplined and even smarter about our target sectors. But once in awhile – maybe a couple of times over the life of a fund – something comes along that is so compelling we’ll step outside those rules. That will almost always be about people, as it was in this case.
We’re looking forward to the Jet journey, and trust us when we say that as consumers you should be too. Stay tuned… 2015 is going to be an exciting year in the world of ecommerce!