Dec 23 2014

Mattermark – An Example of How We Decide to Invest

There is a moment during the exploration of a new relationship where a switch flips and the answer is “I want to do this.”

With Mattermark, I remember the moment clearly – I was at The Kitchen in Boulder with the founders (Danielle Morrill, Kevin Morrill, and Andy Sparks) and my partner Seth. I had just put a garlic french fry in my mouth (if you’ve never had them at The Kitchen, they are epic) and looked over at Seth. He looked at me and gave me that “yeah – we should do this” look. And that was it.

As an investor for the past 20 years, I’ve had this happen many times. When I first started investing as an angel investor in 1994, I was focused on a very simple set of criteria. First, did I care about / have affinity for the product? Next, were the entrepreneurs obsessed about their product? Last, did I want to be a long term partner with the entrepreneurs?

With a slight diversion in the late 1990’s when everyone (including me) lost their mind for a few years, I’ve held to this algorithm for all my investing. If you look at the boards I’m on, including companies like Fitbit, FullContact, Oblong, Orbotix, littleBits, Yesware, and Return Path, this pattern should be pretty clear. And if you ponder how I originally got involved in Techstars, and how my role has evolved, those three criteria loom large.

I’ve been interested in private company data since I started Feld Technologies in 1987. Well before the web existed, I was physically tearing articles out of industry magazines and sending them to customers, prospects, other entrepreneurs, and my partner Dave, who probably got tired of the stack of paper with notes scribbled on them that landed on his desk each day. I’ve been through multiple iterations of competitive databases, endless applications for trying to keep track of companies I’m either an investor in or compete with, and every different type of alerting system you could imagine.

During the first decade of my experience with this, I couldn’t afford to subscribe to anything. Every now and then I’d get a free trial and realize how shitty the underlying data was. For the past almost 20 years, I’ve been able to afford the subscriptions, but the data is still shitty. There have been several efforts to crowdsource this kind of data, or make it publicly available, but none have resulted in anything magnificent.

So, regarding the question of “do I care about / have affinity for the product of Mattermark”, the answer was a strong, unambiguous yes. I know how hard the problem is, how wide open the opportunity is, how far it will scale in multiple directions (not just the data set, but the use case, target market, and ultimate product family.) My affinity in this case borders on obsession, just like it does with the Contact Management problem.

Now, let’s shift to #2: “Are the entrepreneurs obsessed about their product?” If you know Danielle, Kevin, and Andy, you know the answer is yes. But there’s nothing quite like experiencing it. Over the past year, as I’ve gotten to know Danielle, I’ve seen her obsession and focus, not just on the short term Mattermark product, but on the long game she and the team is playing. During dinner at The Kitchen, which was the first time we were face to face since we’d met at the beginning of the year, and the first time I’d interacted with Kevin and Andy, all I had to do was sit there, prompt every now and then, and I got another layer of product vision. Obsession. Endless intellectual exploration of where this could go. When I challenged ideas, there was no defensiveness, just more exploration. When I suggested things, there wasn’t blanket approval or rejection, but rather a socratic inquiry as Danielle, Kevin, and Andy tried to understand what I was suggesting. I watched Seth do his thing and the gang continue to engage the same way. At some point, Seth and I had the look I referred to at the beginning of this post.

I’ve always been impulsive about #3: “Do I want to be long term partners with the entrepreneurs?” For the first decade of my investing experience, I made a lot of mistakes on this dimension. Howard Diamond, a close friend and entrepreneur I’ve worked with since 1996 (now the CEO of MobileDay), regularly criticized me as been too trusting, too willing to see the good in people, and too patient with people. This kicked me in the ass very, very hard between 2001 and 2004. While it didn’t make me cynical, I calibrated my filters as I slogged through three more very long years between 2004 and 2007. I like to believe that I brought a new frame of reference around this to Foundry Group, informed by Howard’s constructive criticism, feedback from lots of other friends, learning from my mistakes, and all the long-term positive relationships that I now had as a frame of reference.

I also have a lot of people in my world who know me well, know what I like, and know who I will work well with. This includes a small set of VCs, such as Jon Callaghan at True Ventures and Greg Gottesman at Madrona who know me so well that they only approach me with companies and founders they know I will love. But mostly I use the many CEOs and entrepreneurs I have developed a long-term relationship with to help me calibrate what Amy likes to refer to as my “poor impulse control”, sort of like Raven’s from Snow Crash.

The combination of my own experience and feedback from my universe – both good and bad – made it clear that I wanted to be long term partners with Danielle and team. Recognize that I’m not looking for unambiguously good feedback – we are all flawed in different ways, make mistakes, and have endless and enormous opportunities to learn. An understanding and appreciation of that by the entrepreneurs I work with is deeply important to me.

Back to dinner. Seth eventually had to leave and we kept at it for a while. Driving home, I rolled around what was left in my mind as questions and concerns I had about making an investment. When I got home 20 minutes later, I had none. When we got together the next morning for more discussion, it was easy to look forward and pretend I was already an investor, which felt good. At some point, we shifted to a mode where I asked Danielle, Kevin, and Andy what they wanted, expected, and demanded from an investor. I let them ask me whatever they wanted for a while. But by this point I was all in, as long as they wanted to work with me.

Sure, we did some more up front work and some formal legal diligence, but in that moment at The Kitchen, Seth and I knew that we wanted to be investors in Mattermark.

And that was that. Last week we led a $6.5 million round in Mattermark. I’m delighted to finally be an investor in a problem I’ve been obsessed about for 20 years. We are at the beginning of the journey – check back in a decade from now to see whether or not we are successful. But, regardless, this is a team I hope to work with for the rest of my investing career.