Interview with Ron Heinz, Signal Peak Ventures

Last month, Signal Peak Ventures (, a new venture capital fund located in Salt Lake City, announced it had acquired the assets of Canopy Ventures. The new fund is led by former Canopy Managing Directors Ron Heinz and Brandon Tidwell. We spoke with Ron Heinz about the firm and its investments, to get some of the story behind the new fund, plus what the venture firm is hoping to do next.

Ron, thanks for the time today. Can you talk a little bit about how you went from Canopy with Brandon to the new fund?

Ron Heinz: We'd been running Canopy for five and a half years. We had a number of different companies in the portfolio, spread across two funds, Canopy Ventures I and Canopy Ventures II. We had 18 companies, six exits, had closed a copy, and ultimately had ten companies come over in the purchase of the assets from the firm to the new fund. Really, what was behind it, was Canopy Group, our limited partner, has a number of different asset classes and asset allocations, and made a decision to exit the venture side of the world, to concentrate on real estate and property holdings in Salt Lake. That's where the opportunity for Brandon and I came from, and why we made the proposal to acquire the fund, setting up a new fund called Signal Peak.

What are your plans with those companies, and are you going to be raising new capital or investing in new companies?

Ron Heinz: How it works, is we led a syndicate which purchased the assets. The financial backer it out of StepStone, in San Diego. Signal Peak Ventures, the fund we're running today, has ten companies and some additional to reinvest into those ten companies. We do plan on raising a second fund, but we have no timeline laid out yet. The current fund is set up just for the current portfolio of companies.

Can you give us an example of some of the notable companies in your portfolio now?

Ron Heinz: We think they're all really strong assets, because we've been working with all of them for awhile. We've gotten to know the companies for the past four or five years, and we're believers that they will all do well or have the potential to do well. Some of the more well known firms in Utah are Solera Networks, which provides security and content management appliances, which is really starting to get traction in the enterprise security space. We have a couple of co-investors in that company, and they have a lot of visibility, because it's in the nature of what they do. Another company is Smartbomb Interactive, which is a maker of children's games. They have a virtual world called Animal Jam, set up for the demographic of kids aged 6-12, which is a joint venture with National Geographic. That brings a world of animals and places to explore across the globe to young kids. Another of their games is Snoopy Flying Ace, which is sold on Microsoft Live Arcade. Another company we have is C7 Data Centers, the colocation and data company. Their business is doing well, and they're also in Salt Lake. The interesting thing is they get lots of customers from outside of the Utah market, because of the lower cost of power, and overall efficiency in datacenter operations.

Over the years you've been at Canopy, what have you learned on what makes the most successful investments?

Ron Heinz: When we think about an investment, we look at first, the technology itself; second, the people, and third, the addressable market. The policy we've put in place since the beginning is to look at an investment and evaluate the ongoing performance at the company. We look at how strong the technology is, does it have the ability to disrupt the market, is it innovative, can it be brought to market pretty quickly. Second, we look at how strong the management team is, what's their background, what's their work ethic, and do they have the attitude to be successful in the venture world. The third, is the size of the addressable market. You might have a hot technology, and good management team, but you may have missed the size and scope of the market. That can really limit success. By looking at these factors, we've been able to make our decisions more methodical, and makes things more predictable, rather than just hoping things play out. Having said that, as an early stage investor, no one predicted the 2008 to 2010 downturn in the market. We were pretty fortunate to weather that fine with the companies and growth we've seen. But, the lesson learned is that we try to find those three legs of the stool, to keep our companies as solid as possible, and hope for the best as well. We also tend to gravitate to business models with lots of leverage. Those are things like software, or some kind of offering where a company can scale quickly from a revenue and profit standpoint, without adding a lot of people or cost.

Does this new fund help you in respect to the pressures of the typical 10-year cycles from LPs?

Ron Heinz: That's the idea. But, you can never duck LP pressure--people want to see a return on their invested capital, and you have to be responsible and drive a good outcome. Having said that, one advantage we have with how we put the invest together, is we have three, four, and five year old companies, and we expect them to start entering harvest mode earlier than you typically might see in an eight to ten year fund. The good news, is we feel like we have profitable companies who have witnessed the market, and have a pretty good shot at returning capital in the new fund earlier than you might otherwise except. That should be helpful both for us and our limited partners.

Thanks for the time!