Author Archives: Jim Scheinman

Over the last couple of months at Maven, we have spent time reviewing our Fund I investment strategy and results as we prepare to begin investing our second fund soon. We invested Fund I over about 2.5 years and have a total of 22 portfolio companies in our inaugural fund. Any additional capital in that fund is reserved to continue supporting our existing investments. The performance of our Maven Fund I has exceeded our aggressive and hopeful expectations. We’ve had one acquisition to-date and our remaining 21 portfolio companies are all still alive and well. Over 50% have raised a second round of funding — in some cases at 10x the valuation of our initial investment — and the companies have collectively raised over $150M since we first invested. We are grateful for all our startup founders who work so hard every day to achieve the impossible.

Portfolio construction — the exact number and size of our investments — is a key topic for us (and any venture fund). Looking forward, we feel that 8 – 10 investments per year is the right-sized portfolio for our Fund II with a larger initial investment amount.  Our team is very hands-on in nearly every investment we make, and even more so at the earliest stages. This pace allows for us to remain very active while still offering enough diversification across a high risk/ high reward early-stage investment portfolio.

Our philosophy on portfolio construction highlights another trend in the industry — the rise of the Institutional Seed Investor. While the “Micro VC” term largely dominates the discussion, I see a lot of variation across funds. The definition is also increasingly broad, including any fund sub-$100M. Many Micro VCs follow a volume-based strategy, writing small checks to dozens of companies, more focused on sourcing and accessing many deals rather than choosing a smaller number of companies and rolling up their sleeves to help. This strategy may work out well for a small number of lucky Micro VC investors. We prefer a more targeted approach, writing more meaningful checks (in terms of dollar size and percentage of the fund’s capital), and working very closely with the founders through their Series A. We’re often an extension of the team through the first six months post-seed investment– a critical and precarious time in a startup’s life. During that time, many great habits can be developed that will serve the founding team and company well for years to come. Conversely, many bad habits can be formed that could kill the startup. This is what we mean by an Institutional Seed approach. Institutional Seed Investors don’t just offer cash, but also meaningful time hands-on and a depth of experience that is critical to building successful companies. It’s the modern iteration of what “Series A” players used to do.

Over the past eight years as a professional investor, I’ve learned many lessons in raising and investing consumer startup capital. The hands-on, concentrated strategy has worked well for us, and we are doubling down on this strategy for our next fund, investing in slightly fewer startups with larger investments. This strategy has helped us outperform the market over the past 8 years and we’re convinced we’ll continue to do that with Fund II as we invest in and help build important and valuable consumer businesses.

Thanks to my talented Maven teammates, Sara Thomas and Robert Ravanshenas, for reviewing and editing drafts of this post. Follow us on Twitter @mavenvc. 

Specialization is a new and emerging trend in the early-stage venture market that serves LPs, founders, and certain venture investors well.  At last count, more than 250 “Micro VCs” – typically defined as venture funds under $100M – were flooding the market. Many LPs, founders, and venture investors, including our team at Maven, think this is just too many and will correct over the coming years. This is the third frothy Silicon Valley market cycle I’ve experienced over the last 20 years of my career. Just like in the past, the industry will right-size (likely in the next 12-18 months) when there is a market correction. Post-correction, we will see a more sustainable number of early-stage venture investors with the right expertise, passion, and track records. And, those early stage investors who specialize will have a significant leg-up.

An Emerging Trend
If you look at this list of Micro VCs, you’ll notice that the overwhelming majority are multi-sector generalists. Of course, that alone isn’t enough to judge quality. I know many incredible generalist investors who I respect and happily work with. However, in the last several months, I have seen an emerging trend of more focused funds. At Maven, we focus our investing on consumer software startups. Other great examples of funds with different focus areas that raised in the last few months are Engineering Capital (investing in engineers with a tech infrastructure focus), Zetta Venture Partners (an analytics fund), and Eclipse Ventures (a hardware-focused spin-out of Formation8). These are just a few examples and we will see many more early-stage investors specialize as this market matures.

Why We Focus
Early-stage investors often differentiate on two points: value-add and access, and a focused strategy helps with both. At Maven, we stick to what we know: early-stage consumer software investing. I’ve been fortunate to have massive successes in consumer software startups as an entrepreneur and investor (NBCi $6B IPO, Bebo $850M acquisition, Check $360M acquisition, Tango $1B+ valuation). Because of our team’s background, we can immediately add value to consumer software founders; but not so for enterprise, clean tech or big data startups, which are very different to build. Focus makes our value clearer and more impactful. We have more experience with the specific obstacles our companies will face, stronger relationships with the partners and service providers who matter, and deeper expertise to offer tailored product and marketing advice.

Access to Deals
Our differentiated investment strategy helps us stay top-of-mind with consumer software founders and co-investors. If someone sees an interesting consumer startup and they want an expert point of view, it’s more likely they’ll think of Maven versus other investors who consider a wider set of opportunities. Our founders think the same way when they refer their friends to us. And, the best consumer software startup founders desire acceptance into our exclusive Maven consumer hyper-growth incubator, where we accept less than 0.5% of the applicants.

Consumer Software: An Opportunity to Outperform 
In addition to value-add and access, which play in the favor of all specialized investors, we’ve identified a few additional advantages of a specialized focus on consumer software:

1. Consumer software startups are less expensive to start and cheaper to scale.
2. It’s especially hard to identify early winners at the seed stage for consumer startups, so we have a significant competitive advantage. Because we only look at consumer software startups – and we see 2,500 of them each year for our 10 investments – we get to spot consumer trends before most folks. Really smart, successful investors like Marc Andreessen have said it: they’ll invest early with enterprise but have to wait and pay-up later with consumer. When we spot the right team with the right consumer vision, we have stronger conviction than others to write that first seed check.
3. It pays off. Of companies with a $1B+ valuation, consumer-focused startups drive 72% of the value – even as enterprise companies require and receive more capital.

We love meeting and co-investing with other venture investors who have that special eye for early-stage consumer startups, and we’re actively looking for new companies to bring into our portfolio at Maven. If you are a founder working on the next big consumer software startup, check out what we look for in an investment, and I hope you’ll get in touch.