Dough, greens, moolah — no matter what you call it, cash is often the elephant in any room where you’ve gathered a number of entrepreneurs. Besides customer discovery and building a viable product, funding is probably the number-one priority on any founders to-do list. It may not be considered polite conversation, but in order to build a team, scale your product, and grow your company, there’s no shirking the truth that you will need to come by some cold, hard cash.
For many entrepreneurs who want to scale quickly, the best (sometimes the only) way to do this is to raise a funding round. But, especially for first-time founders, there’s a lot of mystery as far as how to go about looking for a funding partner, how to identify who is right for you and your company, and what this partnership will entail down the line.
Mark Buffington is an Atlanta native that can truly say he knows the funding world here, inside and out. Currently BIP Capital‘s Managing Partner, he has two decades of experience in the investment space and has been involved early on with companies such as Vendormate (acquired in 2014 for $220M), Ingenious Med (sold in 2014 for $110M), Brightwhistle (sold in 2015 for $20M), and Pindrop Security.
Buffington gave Hype an investor’s perspective on what a good partnership looks like, how to make your pitch stand out to potential investors, and why now is a great time to be in the Atlanta tech scene.
BIP Capital calls its approach to investing “Entrepreneur-First.” What does that mean?
I really look at our business like we have two customers. One is obviously the investors that we serve, but the other is the entrepreneurs that we partner with. They have different needs across the spectrum, both capital needs and operational needs. We help them accelerate or plug in to different services at different times and at different stages of need across that life cycle — this is something we’ve found that they greatly value.
A business that we invest in at the early stage may not need, nor are they capitalized, to go build out a robust demand generation automated sales process, for example. But we can help them get keyed up for that as they start to get traction and to think about the decisions that they’re making for later down the line. That helps all sorts of things — it helps them accelerate faster, bring in revenue faster, but also be better positioned to raise capital down the road at the appropriate time.
We also help a lot with leadership hiring. Most of the time, the people that we’re backing are first-time CEOs; they’ve never run sophisticated hiring processes. So we have a lot to bear there. Whether in product assessment or product advancement and how to set up a technology stack, whether it’s demand generation or sales process or customer success processes. All of those areas are where we have experts on staff that have been there, done that.
We’re not trying to be dictatorial at all, but we absolutely want people to be able to tap into, not just our own knowledge, but the knowledge of our network of portfolio companies as well. And we’ve found this to be a value proposition that entrepreneurs really appreciate.
What are the criteria that you look at when you’re deciding what companies and entrepreneurs are investable? What are the measures of success that you look for?
We’re in a lot of different industries and sectors, so that’s not the delineating factor on why we would or wouldn’t invest — we’re fairly industry agnostic. We’re really business model-focused, so we’re looking for fast businesses and recurring-revenue model businesses.
We’re a multi-stage fund. So we will invest at different stages — as little as $50,000 or all the way up to $15 million in a given deal. But we’re not putting $15 million in a early stage or seed stage company. What we do there is make small bets, help them scale, and we’re determine how solid our partnership is. Then as we start to gain traction and the business starts to be de-risked, then we’ll make much larger bets into the company to help them accelerate.
We often hear from entrepreneurs that they just frankly, don’t know how to approach a venture firm. How do you suggest founders go about that process?
There’s not a week that goes by that I don’t get 10-15 pitches and business plans, and that’s just the ones that are even relevant to take a look and we don’t screen out. But honestly, the ones that grab our attention are not what comes out in a presentation deck. Those are all kind of structured the same way: “We’re raising this much capital, here’s the market, here’s how big the problem is.” If we’re really being honest, very rarely do I read a deck where I can get the secret sauce out of it.
But almost all of our deals have some kind of reason that differentiates them from the crowd. The ones that grab my attention have some angle. What we’ve found is that the easiest way to figure out if something is special is to take it to our contacts in the industry. So say they’re in the healthcare market— we’ve got tons of contacts in that market. And, to continue the example, if we see major hospital executives start to get excited about this, that’s when we know we’ve got something.
A pitch is a pitch and that might get us started. But what really differentiates run-of-the-mill presentations from ones that we’re more likely to fund, is really reaction and positive response from the marketplace. Figure out how to differentiate yourself. And figure out how to, early on with a capital partner, make it about a partnership and not about something where they’re trying to sell us. That is a turn off.
What attributes do you look for in the entrepreneur?
Everything we’ve built that has been successful has required a number of A-plus members on the team to get it there. All of our successful investments have involved an A-plus team. We’re looking for people who are committed early on and know the value of building a great team. They should know the value of capital efficiency and be really mindful of the capital that we’re going to entrust them with.
And, it’s important to be easy to work with. Our deals are like marriages. We’re with somebody for 5 to 10 years, you’re going to have ups and downs just like any other relationship. For us, we try to gauge early on, is this somebody that we want to be in the trench with for a long time. Are they going to listen, and are they going to teach us as much as we teach them? Do they make decisions that are ego-driven or are they really about what’s best for the business?
What is your favorite Atlanta success story that you have been involved with thus far?
I know this is going to sound a little cliché, but the truth of the matter is that some of our failures have been just as enjoyable as some of our big successes. Because from those I’ve learned so much, and watched the entrepreneur learn. Frankly, they’re probably that much more backable after coming out of those situations.When we make mistakes and learn those are the kind of life lessons that guide us going forward. That said, there’s a camaraderie with every company that we’ve exited. Vendormate was our first big exit, so you never forget your first. That was outstanding.
It really is about the quality of the relationship and what you learn back-and-forth. We’ve had the privilege to do that with multiple companies. So, honestly, it’s hard to pick a favorite. You love your children for their differences, but you don’t love them any less or more.
You recently made an announcement about a merger of firms. BIP merged with Accelerant and took on their $25 million dollar fund. Why was now the right time for this and how did it come about?
We have continued to scale at BIP Capital: we now have 26 businesses in our portfolio and plan over the next 2-3 years to scale that to somewhere between 36 and 40. To do that and continue providing the level of service that we commit to, we need to continually bring in operating talent that can really deliver on our value proposition to entrepreneurs.
This means helping them develop leadership teams, making sure their products are built in a scaleable way, helping top of the funnel demand generation, with the sales process, taking care of customers once they sign them. All those areas. We had worked with Paul (Iaffaldano, of Accelerant Venture Capital) in 5 or 6 other ventures and knew we had very similar mindsets on how to approach this.
Now Paul needed a platform — you can be a very talented individual investor, but once you get to 6 or so individual deals that you’re running, your bandwidth runs out. So to continue doing what he was doing, Paul really needed to scale himself. It was really a one plus one equals ten.
And I can tell you, we just got back from New York where we were with investors and would-be investors, and even somebody we’re recruiting. In all of those different meetings, it was just apparent in watching the interaction of the team, it’s very impressive. I think that it’s clear that from BIP Capital’s perspective, we made a great partner. And I think Paul would say the same thing.
What do you see is the next big space in tech in Atlanta and the Southeast? What are you most excited about at BIP?
I’m changing your question a little bit, but I think what’s really interesting about Atlanta, is not a specific industry, a healthcare IT or MarTech or whatever. I think what Atlanta has going for it is that people have realized now that we have all the ingredients of building a world-class innovation city. We actually have a lot of advantages that some of the other places, a Boston, New York, or San Francisco, don’t have. Mainly a cost advantage, but also a quality of living advantage.
I think people are waking up to the idea that, with our tremendous operating talent, access to enterprises, world class transportation and the airport, this is a great place to build and scale a company — and you can do it from a more capital-efficient standpoint.
When you really study the depth of venture asset class performance in those areas, it’s interesting— actually, only a few funds in the Bay Area really perform at high levels and there’s hundreds of funds that are just awful. But when you look at other high-quality and consistently-performing funds, they tend to be in places like us in Atlanta, Indianapolis, Nashville, Austin. There’s a lot of evidence that smaller, tech-minded cities that have the right ingredients can deliver tremendous venture results. I think people are waking up to that
There’s something going on in Atlanta that doesn’t have anything to do with any one sector. I’ve never seen as much deal flow. I was in New York yesterday where two years ago, I could barely get an audience. And this time I got in every door with all of the institutional investors and there was tremendous buzz around what’s going on in Atlanta. I think that’s telling.
Inline image courtesy of Vendormate.