Reflections on MongoDB’s IPO

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A month ago our portfolio company MongoDB went public. The stock priced at $24.00 per share and closed the first day of trading at $32.07 per share. While an IPO is merely a financing event in the trajectory of a successful company and, in the words of the company’s super talented CEO, Dev Ittycheria, “NOT an end but rather a new beginning for MongoDB”, it’s still an important milestone and one worth celebrating and reflecting upon.

My association with MongoDB has been an absolute pleasure, having served on the board since Flybridge led a $3.4M financing in the company at a $12M post-money valuation ($0.66 per share) in October of 2009. In that month, MongoDB had 2,563 downloads for its nascent product. Today, it has had over 30 million. When we announced the investment, I wrote about what led to our decision to support the company: a phenomenal team, a large market with trends in the company’s favor, and a great product that customers loved. What strikes me upon re-reading that post 8 years later, is how simple, but true, that analysis was.

Since the beginning, under the leadership of co-founders Eliot Horowitz and Dwight Merriman, MongoDB has had one of the most talented, creative and driven technical teams I have had the pleasure of working with. Further, throughout the company-building process, the company benefited tremendously from the advice and guidance of Kevin Ryan, the company’s third co-founder and Chairman. Our market thesis was that the database market was large, growing (at the time, $30B in annual revenue; in 2016, $44.6B) and trending towards more special purpose solutions rather than the legacy, one-size fits all relational database model. This market insight has played out broadly. In addition to MongoDB, alternative datastores like Hadoop and its derivatives in the analytics market have thrived in the market. Finally, on the product front, MongoDB has continued to be loved by developers for it’s simplicity, flexibility, scalability and the fact it can run in any environment from the company’s database as a service offering, Atlas, to the cloud, on-premise or in hybrid environments.

What we did not write about publicly, but discussed in our internal analysis, were three additional observations:

  • MongoDB is a classic disruption story. When we were conducting diligence on the company, many of our friends and experts with deep expertise in the relational database market were quick to point out all the product’s shortcomings and the features it lacked. These objections failed to recognize that user’s desires to (1) develop software in a more agile, iterative manner; (2) deploy databases in horizontally scalable cloud architectures; and (3) utilize a product that was easy to access and allowed for immediate productivity gains all created benefits that more than compensated for the product’s supposed shortcomings at the time. Today, this “nice toy” of a database, as one of these experts called it, sees 30% of it’s new paying customers come from applications migrating off of relational databases (the other 70% comes from net new applications).
  • Developers are the new King of IT. When we first invested, it becoming apparent that the proliferation of software applications across all enterprises coupled with the rise of of the cloud, and more distributed architectures, was making the developer the new “King of IT”. This allowed, and continues to allow, MongoDB to go-to-market with a very developer-centric approach and then leverage this grassroots adoption into paying customers over time. I have written much about this developer adoption strategy in general, and as it applied to subsequent investments we made in companies such as Firebase, Stackdriver and Crashlytics (all successful investments and interestingly, all now owned by Google), but the approach of building a passionate user base prior to selling into a large enterprise has proven to be a successful one.
  • Land and Expand is a powerful business model. The flip side of a grassroots adoption first model is that when you do land a paying customer, you often land them for relatively small dollars. But, with a recurring revenue model and a product that delivers on its promises, over time these small customers renew and expand and this can build a large and growing recurring revenue base as shown in the chart below. In the case of MongoDB, this led to annual revenues that grew from $40.8M in FY 2015 (Jan) to $101.4M in FY 2017; in almost 300 customers that now spend in excess of $100K per year, up from 110 in early 2015; net ARR expansion rate of over 120% for each of the last ten quarters; and, annual cohorts that show, in the case of 2013 for example, 4.1x expansion over 4 years (i.e $5.3 million in FY13 grew to $22.1 million in FY17).

Of course getting the investment thesis right only matters if the company is able to execute. And the team at MongoDB has executed exceptionally well. Along the way, the founders were joined by Dev Ittycheria, who to no one’s surprise given his track record of success, has proven to be a remarkable, strategic, focused and results oriented, leader. He is also an exceptional recruiter and under his guidance the company has added well over 400 employees, including Michael Gordon, an extremely adept CFO (who after the IPO process is in need of a good night’s sleep), Carlos Delatorre, CRO who has built a world-class sales team, and Megan Eisenberg, CMO who has the unique talent in a marketing executive of being to drive both high level corporate marketing and a demand generation machine. Under Eliot’s leadership as CTO the company has also built a world-class, deeply technical, enterprise software team in New York City (which many thought was not possible, but it turns out to be a distinct advantage), including Cailin Nelson, SVP Cloud Engineering, Dan Passette, SVP Core Engineering, and Richard Kreuter, SVP Field Engineering. A hat tip to all of these executives, plus the 800+ other employees at MongoDB, on what they have built together.

Mongo celebration

It has been my distinct pleasure to work with such a talented team for the last 8 years. But, again, the IPO is just a financing. The company feels like it’s just getting started in its quest to disrupt this massive database market. I look forward to remaining on the company’s Board and continuing the journey for many years to come, building an important, anchor public technology company in New York City.

A Fortnight of Female Founders

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Last Wednesday marked the two-week point since the launch of XFactor Ventures.  We are grateful for, and a bit overwhelmed by, the support and feedback.  We thought there was an unmet market need for female founders investing in female founders, but you amazed us with the volume, quality, and breadth of opportunities that have come into XFactor.  

Over our first two weeks, we received 200 female-founded companies to review.  Obviously, there is a huge pool of talented and creative female founders!  Equally obviously, not all of these investment opportunities are going to fit with our expertise, passion or capacity, and we know that will mean we will end up missing out on some fabulous opportunities.  Given we can’t do it alone, we want to make sure amazing female founders have access to as many resources as possible.  As a result, we are developing an Allies list with whom we can make introductions.  If you’re an angel interested in backing seed stage founders or a fund that is committed to backing women and mixed gender teams, drop us a note to hello@xfactor.ventures letting us know what areas (however you define it) are most of interest to you!

In reviewing these opportunities we are struck by the fact that, apart from the high-quality level, there is no such thing as a normative female founded company.  While the stereotypical beauty/fashion company is a segment within our deal flow, it is nowhere near the most common. The companies we are seeing are diverse, broadly reflective of the venture industry, tech-driven and blow away the myth that female founders only start female-focused companies.  Specifically, 50% are deep tech companies (Software, AI, VR/AR, Networking, IoT, Robotics, Wearables, Other hardware), 20% are e-commerce (mostly B2C, some B2B, in the pet, clothing, beauty, food and home furnishings markets among others), 12% are Biotech (even though it’s not an area of focus or expertise for us at this time) and the remaining 18% are scattered across a variety of categories including fin-tech, ed-tech, marketplaces, content and tech-enabled services.

Nor do female founders always have a female co-founder.  Of the companies with co-founders, 68% have mixed gender founding teams.  This reinforces our belief that diverse founding teams will have a better perspective on market opportunities,  how to define and market products for the widest possible audience,  will make better decisions, and be more successful in attracting and retaining talent.  Interestingly, almost half of the companies have a solo-founder, and while this has always struck me as a harder path, some of the best female-founded companies (StitchFix, LearnVest and The Real Real are three examples that come immediately to mind) have followed this path, so it’s clearly not a determining factor one way or another.

On the XFactor front, since our launch we have closed 3 investments and committed to 2 others. We are extremely impressed with the quality of the first 5 female founders we are fortunate enough to support.  We will follow up with details in future posts, once these companies announce their financings and plans, but the companies are in the AI (2x), Data, Cloud Platforms and Content/Community fields and we look forward to working with these teams as they take on their respective billion dollar market opportunities.

Thank you all again for the support and introductions and for all the female founders we have met for your talent, perseverance, and grit.  As always, if you are interested in speaking with our team, please email us at hello@xfactor.ventures.

Announcing XFactor Ventures: Female Founders Investing in Female Founders

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Today, we are pleased to announce and launch XFactor Ventures, a pre-seed and seed stage venture fund that will invest in 30 new companies with female founders targeting billion dollar opportunities in the coming year or two.  

Are you a female founder with the XFactor looking for funding?  If so – we want to talk to you!  Please find us online at XFactor.ventures, follow us on Twitter or reach out via email to hello@xfactor.ventures

XFactor is led by a fantastic investment team of female founders –

  • Bay Area: Danielle Morrill of Mattermark, Erica Brescia of Bitnami, Jessica Mah of inDinero, and Ooshma Garg of Gobble
  • New York: Aubrie Pagano of Bow & Drape, Kathryn Minshew of The Muse, and Liz Whitman of Manicube
  • Boston: Anna Palmer of WonderMile, who while also working on launching her second start-up, was instrumental in co-founding XFactor with me and my amazing partner at Flybridge, Kate Castle.

This team has delivered hundreds of investor pitches, raised well over $100M in venture capital across multiple rounds, hired thousands of employees and generated significant value as they have built and grown the almost dozen companies they have founded.  

XFactor’s goal is threefold:

  1. Supporting and enabling the next generation of female-led businesses.  We invest in companies with at least one female founder – the “X Factor” – who have the insight and drive to build the next billion dollar company. Our investment team are all talented and successful female founder operators that have ridden the company-building roller coaster themselves and will provide connections and “in the trenches” advice and mentorship to our portfolio companies.  Regardless of gender, a team of successful founder and leaders investing in the next-generation of founders is unique and their collective insights will be valuable to the companies in which we invest.
  2. Providing our investment team a platform and mentorship to become successful investors. We hope that, over time, this effort will increase the ranks of female investors in the venture and angel investing community.
  3. Finally, and most importantly, XFactor is focused on generating attractive investment returns by identifying massive market opportunities and backing the most talented ambitious founders (who happen to be female) based on our conviction that diverse teams will outperform in the market.  Said another way, XFactoris not an affirmative action fund with all the negative connotations that implies.  There are few things worse for a female founder than being referred to a female-focused fund with the insinuation that you are not ready for the big leagues of male dominated funds. That’s not us. We are big league entrepreneurs and investors that will hold founders to high standards and support them in building game-changing companies.

I have been a venture capitalist for almost my entire professional career, first as a General Partner at Greylock and more recently as a co-founder of Flybridge.  On a personal level, I have always been surrounded by strong women and recognize the unique value women can bring to the table.  Over the years, when I realized that my male-dominated deal flow and investment activity did not reflect those values, I told myself that it simply reflected the demographics of the B2B tech space in which I invest.  Further, when I heard stories about VCs who would ask female founders what they would do if they got pregnant, or comment inappropriately on their appearance, or get their wife on the phone to help assess an idea that was being pitched to them or, as has become so apparent in the last weeks, inappropriately turn pitch meetings into a dating opportunity, or even more deplorable, an opportunity to leverage their power to sexually harass female founders, I comforted myself by saying that was not me or my partners. Those jerks are the minority of venture investors and not the ones I work with.

But last Fall, it became apparent that being a bystander was no longer acceptable.  I was appalled that the public discourse in the country suddenly turned openly misogynistic.  And when I received a specific comment from my oldest daughter, a tech-focused junior in college, I realized I had to do something to change the venture industry. “Dad,” she groaned, “I am so tired of looking at websites of startups and seeing only men on the management team” Thus, teaming with Kate, the inspirational XFactor investment team, and all of my partners at Flybridge, we set about forming XFactor Ventures.

The venture industry needs to dramatically change.  80% of the companies that receive venture funding have male only founding teams, and only 7% of partners in leading venture firms are women.  The two are related.  Female partners are more likely to back female founders and yet venture firms pull new venture partners from the ranks of successful founders, so the cycle perpetuates.  While the funding statistics are objectively not right, they are, equally importantly, not smart.  Diverse founding teams will have a better perspective on market opportunities, how to define and market products for the widest possible audience. They will make better decisions and be more successful in attracting and retaining talent.  All of which will lead to superior investment returns.

Finally, as no post from me would be complete without a chart, I have been astounded by the change in the gender composition of my “sourcing meetings” since I started working on XFactor, and this is in the last six months while we were quietly working on this initiative.  As shown below, it turns out to find female founders; you just need to look for them.

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The entire team at Flybridge is thrilled to support XFactor and, on a personal level, I am looking forward to working with our phenomenal and unique investment team as we back and support 30 companies started by fantastic female founders with the XFactor!  

Are you a female founder with the XFactor?  Find us online at XFactor.ventures, follow us on Twitter or reach out via email to hello@xfactor.ventures.  

From DIY to DIFM — Getting the Help You Need, When You Need It

I’ll be the first to admit, there’s nothing better than taking on a do-it-yourself (DIY) project.  I love a challenge and figuring out how to build or fix something can be exhilarating.  The reality of DIY, however, is that at some point you get stuck and the project switches from fun to frustrating.  Stuck and frustrated, I often find myself desperately looking for the “phone a friend” lifeline.  Sound familiar?

Over the past 15+ years, we’ve seen a boom in the number of companies focused on providing DIY technology platforms.  Constant Contact led the movement and has been followed by hundreds of companies that allow people to quickly, easily and cost-effectively deploy web-based products, services and marketing programs without having to spend thousands of dollars and months of development time. And while platforms like WordPress, Squarespace and HubSpot have enabled millions of small and medium sized companies to start and grow their businesses, the reality is that expertise cannot be 100% automated away and even the easiest to use DIY web platforms often leave end users stuck and looking for a DIFM (do-it-for-me) lifeline.

This is why I am so excited to be working with the Lorem team.  I first met Sam and Charlie during Mentor Madness week at the beginning of the most recent TechStars Boston program.  They were two young, smart, scrappy entrepreneurs who had identified and were tackling a problem where there were surprisingly few solutions.  In today’s “on-demand’ world you can get food, car rides, groceries, dog walking and most anything else instantaneously, getting true real-time help when your web platform fails is not really an option.

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I left that initial meeting excited, instinctively feeling that Sam and Charlie were onto something and so, along with the rest of the Flybridge team, we dug in.  

First, we used the product and became a customer.  It was not supposed to happen this way, but one day all the content on a WordPress website we run to provide students with funding to attend industry events (www.stayinma.com) disappeared.  Kate, our exceptional Marketing Partner, spent an entire day banging her head against a wall trying to fix the site herself.  Not her area of expertise and time far better spent working with our portfolio companies or generating visibility for the firm.  This coincided with the visit from the Lorem team, so off we went.  One plugin download and a click of a button and she was connected to a Lorem expert.  The expert took a look at the problem, found multiple issues on the site caused by using out of date versions of WordPress and various plug ins, quoted $40 to fix it and within an hour, we were back up and running.  Kate became the first convert on the Flybridge team, calling Lorem her new “secret weapon” for website fixes.

Second, we scoped and sized the market.  The trend towards DIY platforms was not the question (WordPress alone powers 75 million sites), but competing alternative solutions were.  Simply, we saw two options for customers:

  1. Keep doing it yourself: This has the lowest perceived cost, but that is deceptive as trying and failing, hitting up Google searches and accessing the online support provided by the platforms is wildly time intensive.  This is what Kate first tried and it takes a business owner’s time away from running their business, it is frustrating and leads to a high-rate of dissatisfaction with the DIY platforms (read churn!) and it increases the cost of customer support for the DIY platforms.
  2. Find someone to do it for you.  The logical alternative and there are obviously lots of design and development firms and freelancers with the right expertise.  But none of them are easily accessible for small projects as on existing freelance marketplaces it can take days or weeks to define and execute a project and often with less trusted resources and design and development firms are expensive, charging rates of up to $300 an hour, and not geared up to handle small projects.

None of these options provide instant help when a company needs it and we agreed with the Lorem team that there is an opportunity to provide businesses with trusted, on-demand, in context, quick solutions at an affordable price.  

And then I did the math.  Who wouldn’t pay between $10 to $100 for real-time quick fixes on their website or other DIY tools? With nearly 30 million small businesses in the U.S. alone and Lorem quickly seeing these companies use the platform for multiple jobs and spending $400 a year on average, the market suddenly got much bigger than you would think.

The more I thought about the opportunity and met with Sam and Charlie, the more I fell in love.  As TechStars demo day approached, we knew we wanted to be a lead investor with the company.  At 6:00 a.m. on the morning of demo day, I emailed the team what was their first of several term sheets and we ultimately led a $1.1M seed round in the company along with our friends at Founder Collective (David Frankel) and a few angels including Randy Parker (Founder of Constant Contact) and Fred Townes (author of one of the most popular WordPress plugins called W3 Total Cache).

I could not be more thrilled to be in business with this talented team and look forward to being part of their success.  

Fired Up By a Flybridge Family Reunion

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Last week there was an interesting piece of news in the tech world when Firebase/Google acquired the Fabric product line and team from Twitter. Over 20+ years in the venture industry and hundreds of companies, this was a first for me: two companies we had invested in merged post their respective acquisitions by larger players. While it was unusual, nothing could make me happier than to see Crashlytics, which was acquired by Twitter in 2013, and Firebase, which was acquired by Google in 2014, join forces and continue the missions they held from their founding, and our original seed investments, of improving the lives and effectiveness of mobile developers. Huge congrats to Andrew, James, Jeff and Wayne and many thanks to both Twitter and Google for their support of both companies and allowing them to deliver on their common goals.

Rewind the clock to 2011. At the time my core investment focus was on developer-driven cloud platforms and an insight that companies that went to market with products that delighted developers could achieve significant adoption and break down many of the barriers seen by companies that focused on more traditional enterprise sales models. Within this broader theme (that also led to our investments in companies such as MongoDB, Stormpath and Apiary), it was clear at that time that the mobile developer was the new rock-star and thought leader and that most new application development spend was for mobile apps. But while mobile developers were leading the way, it was still too hard and technically challenging to quickly and easily get high quality apps into the market. Over the next year, this thesis led us to make seed investments behind two phenomenal teams. Both companies started out focused on very different markets – Crashlytics on crash reporting and Firebase on a platform to allow developers to easily build serverless back-end platforms. But both had a common goal of creating innovative technologies to help developers create amazing apps.

It’s always interesting to look back on your investment successes to see what if any common traits they shared. For Firebase and Crashlytics, there were many:

  • Founded by young, passionate entrepreneurs[i] who had strong technology backgrounds, startup experience and an innate understanding of their target customer who were
  • Creating platforms that addressed large and expanding markets with a
  • Special “developer first” approach to working with the developer community that led to rapid adoption of their platforms which led them to
  • Blow away their seed round metrics within less than a year and in turn raise Series A Rounds led by their initial investors and ultimately to being
  • Acquired by leading technology companies less than a year after Series A rounds and these
  • Acquirers provided significant incremental resources, let the teams run independently and continue to innovate under their own brands post the acquisitions

I could not be more proud of both of these teams. With millions of apps and hundreds of thousands of developers now using their technologies, what each has built is exceptional and I am 100% sure, will only get better as they join forces.

[i] It should also be noted in this time of anti-immigrant sentiment that in each company one of founders was born outside the US

Post Election Advice

img_0404Flybridge held our CEO UnSummit earlier today for all the leaders of our portfolio companies.  It was a fabulous day and full of energy, and we will be posting more on some of the many insights these phenomenal leaders had about their companies and best practices.

But today is about a more timely issue, namely the election.  It was obviously the elephant in the room at the CEO UnSummit and I spoke to that directly in my introductory remarks. I have pasted in below what I said in the event it is of interest more broadly.

My intro remarks certainly took a different turn early Wednesday morning around 3am, so before we talk further about today I thought I would take a few moments to talk about the elephant in the room, especially as many of you have asked for thoughts on what the election means for all of us.

While I am no means a political expert, I have lived through many cycles in my 22 years as a venture capitalist and have a few thoughts on managing a company through uncertain times. The first and most important observation is not to panic. If you were excited about your market opportunity and the strategy you and your team are executing on Monday, you should be excited about it today. The big technology and macro market shifts that drive the markets we are all participating in tend to meaningfully outweigh any increases or decreases in GDP, fluctuations in currency markets or what party controls what branch of government. Remember, this is a long game we are all playing and that short or even medium term periods of uncertainty generally don’t have a lot of impact on the likelihood of success or failure. That said, periods of uncertainty do have an impact on short term results, as customers who may be ready to invest with you may find it equally easy to put that decision off for a quarter or two until the dust settles. Thus, I would encourage you to, on the margin, be cautious and conservative with your incremental spending decisions. Further, short term fear and uncertainty can have a real impact on the capital markets, and while we did not see the large drop in the S&P it looked like we might see late Tuesday night, I would guess that the fund raising markets for each of your companies will be more challenging than not in the coming 6-12 months, so if you have an opportunity to raise money now, take it but don’t spend it, and if you need to raise money in that window, think about ways to defer, or at least minimize, that need.

More difficult, and I am treading on more tenuous and potentially emotionally charged ground now – but I will do so as there are certain values we hold strongly as a firm – is what this election says about our society and what we can collectively do as both company leaders and leaders in our community on a go forward basis. A few thoughts come to mind on this front. First, is to remember we live in a fabulous country and our political system has been remarkably resilient over 200+ years and we should respect the democratic process even if we may disagree with the outcome of this particular election. Second, is to take the high road and focus on what we can all do moving forward. If the divisive rhetoric of the campaign, with its anti-immigrant, misogynistic and racist overtones made you sick to your stomach, let’s address that in ways we can control and actively seek to model a culture of inclusivity in our companies and create opportunities for people who were born outside this country, people of color, women, different sexual orientation and generally embrace diversity in all of its forms. It will not only set an example for others in our communities, it will make for stronger companies. Finally, it became clear with the surprising nature of this election that those of us in the tech community living in our coastal bubbles, have potentially lost touch with the impact that the rapid pace of change has had on the American workforce, so I would encourage all of you to think about ways we can improve our communities and our country, not only by building great companies, as entrepreneurs are indeed the engine of economic growth in this country, but also by thinking creatively about whether there are ways to hire team members outside our mainstream cities, or to get involved in educational opportunities for those less fortunate, or to think how our innovative approaches to business can be channeled to address issues with a social objective in addition to a profit objective. And with that, I will get off my soapbox.

Flybridge Seed Graduation Rate

Earlier this week, Mattermark (a Flybridge portfolio company) posted an interesting analysis of the Seed matriculation rate from the over 2000 US-based software companies that received funding in the period from 2009 to 2012. What they found, to save you from reading the post, was that 32% of the companies that received seed funding went on to raise a Series A, 17% a Series B and 7% a Series C.

This inspired me to take a look at the software companies Flybridge seed funded during the same period. As the graph below shows, our data is quite different, with over 90% of the companies raising a Series A, just over 65% a Series B and about 50% a Series C.

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As to why our experience is so different than industry-wide data, especially at the Seed to A fall off, I am not sure. I suspect it is a combination of factors. First, on the margin we have favored slightly larger seed financings (in the $1-2M range) and those companies have had, as a result, more runway to accomplish their goals.   Second, we have favored strong, involved syndicate partners and it is often through us, and our co-investors, that the Series A investors learn about the company (virtually all the A rounds brought in a new investor). Third, we are active seed investors, but relatively selective, so we hope there is some level of quality at play. This also means our pool of companies is not huge, so I am sure serendipity is involved as well!

In their post, Mattermark noted that there are likely three reasons for the fall off: companies failing, companies being acquired, or companies becoming self-sustaining, but that they did not necessarily have all the data to determine the relative weight. We obviously do for our own companies, so here is our experience:

  •  Of the 10% of companies that did not go from Seed to Series A, the cause was generally a failure to find product market fit, resulting in an acquihire of some kind.
  •  Of the companies that did not move from Series A to Series B, three quarters were acquired, either in a highly positive way like Crashlytics (Twitter) or Firebase (Google), or less positively in one other case. The other companies that have not raised a Series B are still running on their Series A capital.
  •  Of the 25-30% of the companies that raised a Seed, an A and a B, but not a Series C, the vast majority (80%) are still executing on their Series B capital with the remainder having been acquired.

While it is hard to generalize from one firm’s experience, as a seed stage founder the most important lesson from this analysis is to make sure you raise enough capital to achieve critical milestones, including demonstrating product market fit, and that you align yourself with investors that have the network, relationships and credibility to help you raise subsequent rounds of capital. After that, it is all about performance with the hope that you don’t have to keep raising capital as revenue funds growth!