Verissimo Ventures Monthly: January 2024
Verissimo Ventures is a Pre-seed and Seed Venture Fund based in Israel and the US. We invest primarily in enterprise software companies and take a fundamentals-driven approach to early-stage investing. We work closely with founders to help them build the strongest, most fundamentally sound businesses with potential for explosive growth and a meaningful impact on the market.
We were founded in 2020 and are currently investing out of Fund 2.
Thoughts on Investing and Starting Up
People often ask what it takes for a software company to raise their Series A. The answer is usually something like: “It totally depends on the company and the investor, so it’s hard to say,” or “$1M of ARR and 120% net retention.”
The real answer is somewhere in between “it depends” and “both.”
Let’s take a step back and think about what the Series A stage / milestone really means from a commercial perspective.
A quality company ready for the series A stage has answered a few key questions:
Who is the ideal customer for our product? How do we know?
How do we repeatably acquire that customer?
What is the path to $10M and then to $100M of revenue?
To effectively answer these questions and satisfy the requirements of most investors, founders will also have needed to figure out:
How does your last couple years of operation/execution better inform the future plans for your company?
What are the key metrics you will use to measure and guide your business and why?
Which of your existing customers and sales processes best represent the optimal path for growth? Where can you find thousands more?
Mastery of and proofs for these questions and answers will demonstrate that the company is ready for the next stage in its lifecycle: the Series A.
Some special founders in certain markets can do this at founding - they are rarer than you may think.
There are key questions for a company at each stage (which are cumulative):
Founding: What market are we going after? Are we the right team? Do we have a strategy on how to develop a product for that market?
Pre-Seed: Can we build the right product and do we have access to this market?
Seed: Is our ability to serve this market repeatable?
Series A: Is our ability to serve this market scalable?
Series B: Can you scale an organization to support the market and product?
Series C+: How can you make this a $100M+ revenue company with a multi-billion dollar outcome? How much is it really worth now and what is the right valuation?
Being able to work through all of these questions over a 7-10 year period is extremely difficult! Having all these questions in mind when you start is helpful, but you will need answers in order. Answering the $100M+ question before the repeatable question will not help you.
The metaphor I like to use is climbing a mountain. You start by picking a mountain to climb, but the summit is very far away: it is almost indiscernible, but from what you can tell, this is the right mountain to climb right now. First you get all your gear and plans ready and go to base camp to get ready. Then as you start working your way up that mountain, you need to continuously make sure that the summit is both as high and as interesting as you had originally hoped: you need to get a better view, and you need to accumulate learnings from the lower parts of the mountain to better navigate the remainder of your trek. Every step in the process is not just one step closer to the top, it is also a higher resolution image of what the top looks like and a better set of techniques to get there.
Pre-seed is base camp. Seed is the foothills. Series A is when the mountain gets steep: you need to grow fast to stay on track.
So where does the $1M and 120% NRR come into play?
In many cases, these quantitative metrics are an indication of achieving the above qualitative milestones. There are, as with many things in startup land, necessary but not sufficient.
How can $1M really be the number for all SaaS companies?
It may not be! But… it probably is somewhere close for most application, vertical and infrastructure software companies.
For $10,000 ACVs, it is 100 customers, for $100,000 ACVs it is 10 customers, and for $100 ACVs it is 10,000 customers. As ACV increases, the amount of information/insight you get from each customer sales journey should also increase. The customers should not only be more valuable in terms of dollars, but also in terms of clarifying the use cases and refining the sales process. For larger ACVs that means more emphasis on pipeline and process. For smaller ACVs it means more data and analysis.
The most important thing is the founders’ mastery of these numbers and processes. They must send the message that they learned a lot from getting here, figured out what works well, and see an near-term opportunity to put some real umph behind it (i.e., raise millions of dollars to accelerate growth).
The more clarity the founders have about where they are, how they got there, and how they can take it to the next level, the better off they will be in the Series A process. Tying this time-based narrative together with case studies, metrics and excitement is not easy, but it is vital. This will illustrate the execution, vision, customers, product, team and market to investors. And most importantly, these questions aren’t just for fundraising - they are what it takes to effectively grow the business and realize the dream!
Portfolio Highlights
Ido and the team at Firefly are changing how companies are managing their cloud infrastructure using infrastructure-as-code. Strong traction with some Fortune 500 companies makes us extremely excited for 2024.
Taimur and Lukas at Causal continue to develop amazing new features that allow anyone, including FP&A experts, to improve their analysis, modeling, forecasting and budgeting. Causal allows you to maintain the flexibility of spreadsheets while seamlessly enabling advanced integrations and automations - improving insights and reducing errors.
Gal, Gal and Yotam at Aligned continue to make great strides commercially and technically when it comes to bringing buyers and sellers together to drive more efficient sales processes. They just crossed 10,000 monthly active users, including customers like Intel, Deel and LivePerson.
Ariel and the team at Receive are helping SMBs solve the cash flow gap with on-demand access to cash for free. It may sounds too good to be true, but that’s the magic! Direct customers and partnerships with marketplaces and POSs are rolling in as they start to invest in growth.
Looking forward to sharing more about our new investments and portfolio as updates become public!