Dear Startup Investor:
You must have noticed…
The Startup Investor Portfolio isn’t your standard-looking portfolio.
So today I won’t start with the latest goings-on of our 14 startups. Instead, I’ll explain some things to make it easier for you to use and follow our portfolio.
Let’s get going…
The first column needs little explanation. The companies are listed in chronological order, most recent recommendations on top and oldest on the bottom.
That’s it. I suppose I could list them alphabetically. That way, if you’re looking for a specific company, you could find it right away. But with little more than a baker’s dozen in the portfolio, it’s not something we need to do at the moment.
But as we approach 25 to 30 holdings, I reserve the right to change my mind.
Okay, on to the second column.
It gives you the approximate date you invested. You should take into account the lag time needed to go through the necessary steps to wire your investment.
You don’t need an exact date. Remember, these aren’t publically listed companies. Prices aren’t constantly going up and down. The valuations of these companies stay constant until the next fundraising round is launched.
The third column is next. It serves two purposes. The first is that it clues you in on what the company does. For example, Geekatoo’s sector is “Tech Fields Support.” Hopefully, that helps you remember that Geekatoo makes tech house calls.
Secondly, you can scan your eyes down the column and get a quick idea of the portfolio’s diversity.
We’re now on the fourth column. It lets you know which round of funding the startup is doing.
This helps to put the company’s progress and valuation in context. For example, a seed company’s traction on these two fronts would not be as advanced as a Series A or Series B company.
It also allows you to pick out certain telltale patterns. Take a look at the portfolio. Do you see that all the seed rounds are debt-financed via convertible notes?
The fifth column refers to a startup’s valuation.
The valuations that are “capped” refer to our “convertible note” investments. They put a ceiling or cap on how much the startup can charge you for shares when your note converts to shares (usually scheduled for the next round).
One more thing to note here: If the duration of your note expires before a follow-up round takes place, the startup will have a formula in place to convert your shares.
The next-to-last column describes the “investment type.” There are three kinds: convertible note, preferred shares and common shares.
You see two of the three listed in our portfolio. Common shares are the missing one, because they’re used much more in the later rounds than in the earlier ones.
The chart finishes off with a “Round Status” column. An “open” status says you can still invest into the round. “Closed” means the company has finished fundraising, and it’s too late.
So here is how your Startup Investor Portfolio is looking today…
You have no way of knowing this, but it’s missing a column. We’re calling it “Next Round Valuation.” As our startups begin their next fundraising rounds, they will get new valuations.
We’ll be tracking their fundraising activities and giving you the new valuations. A few quick points here…
Valuations usually go up from round to round if a startup is hitting its milestones. How much they go up represents your current paper gain.
But you can’t cash out until the startup IPOs or is bought out. The valuations given to startups as they start each fresh round are by no means frivolous. They’re a thrashed-out product of revenue growth, user growth, upside potential, the valuation of peers and “cost of replacement” (how much a company would have to spend to recreate what the startup is doing).
Another note: Rounds are undertaken at roughly 12- to 18-month intervals. So, at the least, you get a new valuation every 18 months on each of your startups.
I don’t want you to be left completely in the dark while you wait. So I’ll be giving you monthly updates in the meantime.
The updates will help you stay informed of a startup’s latest accomplishments and newest initiatives. And if we see something amiss, we also pass it along.
We have 14 companies in our portfolio. And we’re adding new ones at an average of two a month. Each month, we will choose a handful of companies to feature, those that in our view have been the busiest or have made the most noteworthy progress.
Today we’re featuring Apploi, Appvance, StackIQ and Connect.com. So let’s start off with Connect.
Connect: Picking up Speed
We suspected it. Now we know. People really like what Connect does.
As a reminder, Connect pulls data from the major social networks so you can see where your friends are in real time and connect with them.
Just three months ago, it had 200,000 users and was adding 7,000 more a day. Two months ago, it passed the half-million mark.
Not bad. We liked the company’s traction at the time, and we thought it would get better.
Turns out we were wrong. It’s exceeded even our most optimistic expectations.
In a recent interview, Ryan Allis, an old friend of my colleague Adam Sharp, said that Connect now has over a million users. It’s adding around 25,000 a day.
At that rate, it’ll have added 3,450,000 more users by the end of the year.
That’s not just good traction. It’s great.
The company is enjoying near-viral growth, averaging 1.5 new users for every current user it’s signed up.
The upshot? Connect will be in a position to do another fundraising round sooner than we expected, perhaps as soon as this fall.
And when it does, we can expect to see its valuation jump, given its recent outperformance.
Apploi: White House blues or jailhouse rock?
This little company gets around.
It’s been spending time with Fortune 500 companies as it fine-tunes its hiring tools.
And it’s also been huddling with a litany of White House operatives – for a good cause, mind you – helping people get jobs.
The White House took official notice of Apploi’s efforts in a report called “Ready to Work: Job-Driven Training and American Opportunity,” released at the same time the president signed the Workforce Innovation and Opportunity Act. It said…
Apploi’s unique jobs and hiring ecosystem is expanding access to jobs across the country and world. Jobseekers can find and apply to jobs from personal computers, smartphones, and iPad kiosks installed at companies, and at community centers, libraries, and malls throughout the world. This groundbreaking initiative will be initially focused on jobs within the 35 biggest cities where Apploi currently operates, and then expanded across the country and world.
- When I wrote about Apploi in June, it had just over a thousand clients. Since then, hundreds more have signed up. Among them are huge national retailers like Williams Sonoma, Payless, Clarks, Gymboree, Pottery Barn, Prudential, Town Sports and Finish Line.
- From President Obama’s digs on Pennsylvania Avenue, it’s only a short jaunt to an unimposing jailhouse in Montgomery County, Maryland. That’s where Apploi is helping people who are soon to be released to apply for jobs now. It’s the first of many partnerships Apploi hopes to forge with incarceration centers.
- How early do you do your Christmas shopping? Apploi is already preparing for the holidays. Its gift is to put a million people to work in paying jobs by Christmas. You can follow its progress on the Apploi website.
- This disruptive jobs company has set up an Apploi kiosk in three new malls this month, including my home state of Maryland (plus Florida and Seattle).
- Apploi is beefing up its advisory committee with several new high-ranking executives in the HR sector.
These initiatives show that Apploi is making impressive headway.
StackIQ: Ready for Prime Time
StackIQ will probably never be a household name. But that isn’t preventing its customers from expressing their appreciation.
Alcatel-Lucent calls StackIQ a “best in-class partner.” StackIQ helps it manage Red Hat’s OpenStack Platform for its CloudBand™ NFV (Network Functions Virtualization) Platform. This is technology used by some of our country’s biggest telecom operators like T-Mobile, Telefonica and NTT.
Customers of Hadoop also value what StackIQ brings to the table. Listen to Hadoop customer Johns Hopkins (a Maryland-based hospital whose quality of care is world-renowned): “If we had to build a new Hadoop cluster from scratch without StackIQ, it would take up to a week. With StackIQ Cluster Manager… It takes just half an hour to get the servers up and running…”
Other big companies like AT&T, Comcast, Gap, Dow, P&G, NRC and Disney are already, or will shortly be, using OpenStack-powered clouds.
The deployment of big data is just getting started. That means StackIQ’s upside is tremendous as one of the key integrators in big data storage and deployment.
Appvance: Avoiding Another Healthcare.gov Disaster
The New York Times recently interviewed Mikey Dickerson on how to avoid another healthcare.gov disaster. Mikey was a key member of the team that fixed the HealthCare.gov website in just six weeks.
To refresh your memory, the website fell apart as soon as it opened to the public. So what did Mikey say?
Well, he postulated the problem well enough… “Having a multiyear project with no checks along the way and the promise of one big outcome is not a highly successful approach, in or outside government.”
But what about the solution to the problem, as The New York Times puts it, of “devising a government system, which has to deliver complex information or payments to millions of people across the country starting on Day 1”?
Mikey’s answer was startlingly bereft of details: “It may take two years to do a government project, but you have to check in on it, find ways to see if there is a problem.”
If The New York Times had interviewed CEO Kevin Surace of Appvance, it might have learned a lot more about existing technology that would have prevented the healthcare.gov fiasco from happening. Kevin could explain how Appvance’s technology would have enabled the healthcare web developers to put the site through a series of thorough tests before granting access to the public.
As you know, Appvance can create complex tests in minutes, and with no coding. Word is getting out. Just recently, Appvance was recognized as one of the most promising cloud-computing companies in the country.
If Kevin Surace and Mikey Dickerson can agree to anything, it is surely one of Dickerson’s central points in his New York Times interview:
“…when possible, use things that have already been invented…There are things that work in the private sector; there’s no reason we can’t use these in government, too.”
Just maybe the government is beginning to figure things out.
That’s it for now. Talk to you next month.
Sincerely,
Andy Gordon