Thursday, September 14, 2006
Interview with Scott Petty, vSpring Capital
vSpring Capital (www.vspring.com) is a venture capital firm located in Salt Lake City, and is very active in investing in the Intermountain region. We spoke with Scott Petty, one of the partners at vSpring, to get an idea of what kinds of investments the firm makes, and what the firm is looking for in entrepreneurs.
Techrockies: Tell us a little bit about your firm?
Scott Petty: We're a regionally based fund, focused on Utah and the Intermountain west. We have two funds under management, for a total of about $200 million. We primarily do early stage and seed stage deals, focused on IT and Life Sciences. Since we are regionally focused, we're fairly broad across the types of IT and Life Sciences deals we do. We have a group of four partners, with various backgrounds, and our whole premise is that Utah has a long and interesting history for startups. Historically, the area base been a little under-capitalized, and that's something we're hoping to change by bringing more capital to the region.
Techrockies: Can you give us some examples of the investments you've made--I know you have some good successes under your belt?
Scott Petty: Probably the most notable, from an exit point of view is LANdesk, a company which was an opportunistic deal. The firm is a spinout of Intel, a later stage deal where the company had revenues and cash flow. My partner, Ed Ekstrom, knew the firm very well, and we helped to grow it over a couple of years. It was recently purchased by Avocent, in a deal that just closed late last week. Ed was involved from the beginning, and helped to orchestrate the firm from beginning to end. That's our biggest exit to date. Another notable investment of ours is Control4, which we funded a couple of years ago. Control4 is in the home automation space, and we participated in the first round with Thomas Weisel Partners out of the Bay Area. It's had two or three rounds, a couple of new investors, and has steadily grown. The management has really nailed it from a market/customer need standpoint. The home automation market has been traditionally dominated by larger players, who offer very expensive systems for wealthy people. Control4 has developed a low cost, wireless based solution that appeals to more of a mass market. Another notable deal is Myfamily.com, sort of a dot com company, which has been around for several years. We funded that company a few years ago, and participated in a turnaround and restructuring of the firm, stripping off non-revenue generating businesses. The company is doing very well and is cash flow positive and growing.
Techrockies: It seems like you have a pretty dominant role here in Utah?
Scott Petty: There are other players here, like Wasatch and Utah Ventures. We all invest in the region, but we all have slightly different focuses in terms of stage and types of investments. We also have all coinvested together in deals, and certainly don't carve up the market or work alone. We all look at deals together, and collaborate.
Techrockies: We have lots of entrepreneurs reading our news, what are you looking for in an entrepreneur?
Scott Petty: As far as entrepreneur, we're looking for someone who has relevant industry experience in the business they are focused on, and the business plan they are generating. They should know the space, have worked in it, know the customer, and understand the customer and their needs and pain point. We like entrepreneurs who can sell and grow revenues and understand what it takes to build market and channels and build revenue. We also ideally love an entrepreneur who has done it before.--who has maybe had a successful startup or who has had a startup that hasn't been successful but has learned their lessons, and generated experience to take them to the next deal. We also like entrepreneurs who are very open minded about what their strengths and weaknesses are--who are willing to hire and surround themselves with the talent needed to compensate for those weaknesses.
As far as business opportunities or companies, we're looking for IT or life sciences space, going after large market opportunities. We have a fair amount of money to deploy, and we not looking for ten or twenty million exits, we are looking for several tens or several hundred million exits. We're looking for markets that have the potential to generate those kinds of sales and opportunities.
Techrockies: What's your opinion on the current investment climate and opportunities in Utah?
Scott Petty: It's great! Every year we see better and more deal flow. We see a lot of great deals, including deals we can't find or are not a fit but are still great opportunities for others. We are seeing a higher caliber of entrepreneurs, entrepreneurs with previous success at startups--the deal flow keeps on getting better. Success breeds more success. We have a couple of entrepreneurs and CEOs of companies where this is second or third go-around, including some that we've funded previously and had strong relationships. we are very interested in building relationships and maintaining relationships with entrepreneurs going forward. One of the things we've tried to do to foster the entrepreneurial community the v100, an organization that we've sponsored that allows entrepreneurs to identify each other and vote on each other, and to identify top 100 entrepreneurs who are likely to have a successful startup in the near future. It's a great way for us to identify and meet entrepreneurs who we haven't had relationships withus previously. It also allows us to bring together successful entrepreneurs and let them get together and network.