The New Jersey Tech Council held its Annual Venture Conference on April 7 at MetroTop in Iselin, New Jersey. The conference served to bring entrepreneurs together with some of the region’s top active investors. The event’s program included pitch presentations, exhibits, panel discussions and a keynote by Rachel Holt, Regional General Manager of Uber.
Funding which is so critical to startups and early stage tech companies was the focus of the first panel discussion. Alan Wink, director of EisnerAmper, moderated the panel comprised of venture capitalists and a representative of the NJEDA: John Elton, Partner of Greycoft Partners, Suresh Madhavan, Investment Manager at Verizon Ventures, Tom Wisniewski, Managing Director at Newark Venture Partners, Ryan Ziegler, General Partner of Edison Partners, and Kathleen Coviello, Director of Technology and Life Sciences at NJEDA.
Each panelist was asked to give an introductory overview of their organization that included areas of interest for investing, typical check size, investment criteria and other key information that those in attendance seeking funding would find helpful. Each panelist responded as follows:
Suresh Madhavan: “…Verizon Ventures is a corporate venture capital organization which means that we make strategic investments aligned to our business. The notion of strategic has broadened over time as Verizon finds itself operating in more spaces. Historically that was things like mobile networking technology and infrastructure plays, but over time, we have expanded our focus into adtech, fintech and even artificial intelligence. We tend to be a later stage investor. We typically come in at the Series B level although we have done several Series A deals. Typical check size ranges as it depends on the deal, but is typically around $2M.”
John Elton: “Greycoft Partners is a venture capital firm based in New York and LA. We invest in the US, Europe and Asia. We have a $300M growth fund and we have a core fund of $200M for early stage fund investing used across the internet and mobile opportunities.”
Tom Wisniewski: “… I am the managing director of Newark Venture Partners. We are a $50M fund based in Newark, New Jersey, backed by a lot of prominent companies and individuals. Amazon is our lead investor. We offer both an accelerator space for our companies and a number of other resources. Because we are in the same building with Amazon and Audible, we are able to tap into their people in a very real way and bring that value to the companies we have.”
Ryan Ziegler: “Edison Partners, we are a growth stage fund based in Princeton, New Jersey. We are coming up on our 30th year in business. What growth stage means to us is we are customer funded, boot strapped companies that want to scale and they are looking for a partner to help do that with them. We like to think we built out a set of services and platform to help entrepreneurs to go down that journey from 5-10 to $100M in revenue.
We typically tend to be B to B software investors, we go to market in industry verticals. We have a leading marketing technology team. We have a financial technology group, healthcare IT and enterprise that includes security and mobility type investments. Typical deals that we do in our core fund are $5-$12M initial checks in Series A-B type investments. We are allocating a smaller portion of the fund for earlier stage investments that are still revenue generating but we think are dramatically interesting to the industry team running them.”
Kathleen Coviello: “The New Jersey Economic Development Authority has a little different of an approach than my fellow panelists. We have a portfolio approach on how we support New Jersey technology and life science companies.
Relative to venture, that includes a fund to fund strategy. We have invested over $40M across a dozen funds and when we invest as a limited partner into one of these funds, we then mandate that they match our money and invest in New Jersey based companies. We have five funds that are actively investing at the moment. Edison Partners is one of those funds for us. We’ve been with Edison Partners from fund two to fund eight and just about every fund in between. They are a strong partner for us in New Jersey.
We also invest across a number of earlier stage funds as well including life science funds. The great news is if we have a strong company, we can get you in to meet with some of the GPs that we think have a good mandate that match up with your business strategy. If that is not going to work, we have other resources that can help you that includes for the companies that might not be ready for venture some tax credits and tax incentives.
We are also working with the angel community quite closely to get them to look at New Jersey companies and to that end there is an incentive for investors to invest in NJ tech companies. We administer a tax credit program for the investors. If they invest in New Jersey companies, they get a 10% refundable tax credit. Last year, we saw about $150 million in investment going to New Jersey companies from the angel community, half of those investors being out of state. So the state of New Jersey actually sends them a thank you check for investing in New Jersey companies.
We have a couple other programs including the ability to sell your losses in the state. Once you are successful in matching and raising angel or VC money, we have a matching loan program where we can help extend the runway for you. So if you have not spoken to anyone on the team, you should be talking to us as we have a full portfolio of projects that we can help you with.”
Moderator Wink further queried the panel: “So you all invest in sort of different stages of a company. What are the characteristics of a company that is ready to talk with a venture capitalist like yourselves?”
Ziegler: “From our perspective, typically its businesses experiencing higher growth, higher margin. We associate that with value in differentiation in the marketplace. Your customers are willing to pay for your product and also you can drive high margin in terms of the value you are delivering. For us, it’s about scalability and repeatability of your model. So it’s your ability to wash, rinse, repeat and take market share or accelerate in the new category that we get really interested in.
We’re software investors so we are also looking for long term sustainable differentiation but also the fundamentals of building a high growth, profitable business so it comes down to business model fundamentals to build an interesting business. I think mastery of your market is pretty important and self-awareness of what you good at and not good at, and focusing on something you could be very good at and dominating the market. Then landing, expand within accounts and in market are things that we look for when we enter a business and entrepreneurs have a handle to execute.”
Wisniewski: “I’m in a different end of the market, it being more upstream. I do seed and pre-seed investments so the answer to the question is going to have to be totally different because companies at this stage don’t have quite as much. I am investor in products, people and substance. The thing I won’t invest in is the idea…The wonderful thing in software these days is that people can create companies and businesses for very small amounts of money.
It is a high bar for people with ideas thinking about raising money, but that’s what you’re up against. Every other entrepreneur in the market is doing so you need to do. I would like to see a product of some kind of outside, some kind of traction, some kind of outside validation. It could be in the form of revenue, it could be in the form of partnerships. I want to see that the core elements of the team are there. The thing that differentiates companies the most in my sense is the level of validation and what kind of traction they have.”
Elton: “For us, it’s a broad swath. We do invest in crazy ideas, but we also invest in companies that are growing at very high rates with hundreds of millions of dollars in revenue. What we are really known for is we do a lot of Series A investing. We were the second most active Series A investors in the U.S. last year and, at the stage, we split about 60/40 B2B, B2C. Pre C can still be pre revenue but generally the companies that we’re investing in on the consumer side are having incredibly high growth rates on some sort of metrics that are consumer related. And then on the B2B side, at a Series A it is similar around a $1M AR that we look for. One thing we do is we talk to a lot of customers, so if you don’t have customers it is really tough for us to validate it from a B2B landscape.
Madhavan: “We tend to come in at the later stage so Series B is where we enter. At that point, the general expectations that we have are that the company has some solid traction. So typically, they’ve got a product, a strong management team, and in most instances, also generating revenue. I think the other thing that is further unique from a Verizon perspective, is that we also look at companies that are at a point of maturity that they can really engage with us. As a business strategically so, do you have a product or solution that can be tested or trialed in the network or that can form part of a product strategy? So that strategic engagement and awareness that the company has the ability to strategically engage with us typically through a trial or other kind of internal validation is pretty important in terms of what we look for.”
Coviello: “We headquarter here and we register to do business here. Really, what we are looking for are companies that are going to grow jobs in the state. So app companies usually don’t work for us because the human capital is very thin. Other than that, we generally look for companies that have strong IP positions. We will do high tech, biotech, and clean tech. We are closing a battery storage transaction right now. For the most part, we are looking for 75% of your employees to be in the state of New Jersey.
