Our co-founder Robert Taylor spoke with Jon Seeber from Updata Partners Growth Equity about what he looks for in aspiring Founders, the growing tech eco-systems to keep an eye on in the US and what companies are leading the way in terms of software innovation. 

Robert: What is the investment thesis in your words for the Updata fund?

Jon: I guess we think about this in a very specific way. We're focused on B2B software companies that are capital efficient, that are balancing that capital efficiency with rapid growth and that are typically founder-led companies outside the typical Bay-Area venture capital ecosystem.

As the barriers to starting a software company are lowered thanks to the Cloud, thanks to the availability of more and more developers and thanks to the broader trend of software penetrating virtually every industry, you're seeing software companies start outside the traditional hubs of San Francisco, New York and Boston and we seek those out. We apply capital and our expertise as former operators in the software industry to help those businesses grow at rapid rates and ultimately achieve what you would call escape velocity.

Robert: What are the three industries that you're most excited about heading into 2023?

Jon: This is always a tough question for me because I think one of the great things about the software industry is that it moves so quickly and they emerge so rapidly. We invest at a stage where companies have achieved some scale, right? They're typically 5 million or more of ARR and so we are looking for companies from a funding perspective, relatively mature spaces. Because we spend our time in the business-to-business world, the areas that we spend our time in actually tend to be fairly consistent. I will always be an active and interested investor in security. That's a market that has been relevant and present since software started and it will continue to be so as the industry itself changes, the ways and the places that computing and network power take place are changing. And as bad guys, people who want to exploit digital capabilities will change their tactics, so security is, and always will be an exciting area and there are lots of sub-sectors within that that we could talk about that are interesting.

Of course, data is really, really interesting, as well. In a world where cloud has expanded so quickly, where the software as a service has expanded so quickly, where the ability to collect bits of information has expanded so quickly.

Obviously, a massive industry has emerged around how to manage, analyse, and move data. We've made lots of investments recently and have several in the pipeline that are in line with that theme. Just that the simple manipulation, movement and usage of data.

The third area that I also like to spend a lot of time in is the revenue generation funnel, right? Sales software, marketing software. How do you, create the right content and experience and journey for someone who's going to buy? How do you allow marketers and salespeople to benefit from the signal that is sent off? And how do you ultimately change that into a more optimized and efficient sales funnel for businesses? Whether they're selling to other businesses or consumers. So those are the three areas where I'm spending most of my time right now.

Robert: The majority of your investments are in the US, what are your thoughts on the tech landscape in the US right now and what emerging geographies should we be keeping our eye on stateside? 

Jon: This is a pretty awesome time to be a tech investor for a few reasons. It's really the themes that moved our firm away from general investing and into growth equity investing focused outside the Bay Area has continued to really play out. That means that more and more geographies are getting interesting. Computer science education such as cloud platforms, and distributed development platforms allow people to be remote.

In the post-Covid world, it's almost hard to say one geography is or isn't more interesting than another. I think the remote geography is really cool because now someone, in Arkansas, which is not thought of as a tech hub, can run a credit card and start a business with an AWS data centre in Suburban Virginia and hire a data scientist in Portland, Oregon. And then a user interface person in Phoenix, Arizona. It's pretty fascinating to see how companies are managing all of that, in a post-Covid world.

There are certainly hubs that have been emerging for a long time or that are newly emerging. We spend a lot of time in the Pacific Northwest. There's a lot of interesting, stuff going on. Portland and Seattle are really driven by ecosystems that Microsoft and Amazon and some other companies built a long time ago, we are seeing lots of great engineers and very product-focused people in that area.

For years, Austin has been a well-known tech hub, but increasingly Dallas, as well as Houston, Texas in general is a place where we spend a significant amount of time. And the non-New York areas of the Northeast, Boston, Philadelphia and then into Canada with Toronto and Montreal, lot’s of exciting companies that are being spun out of these hubs. 

Robert: What are the biggest traits or primary experiences that you look for in any aspiring founder that's looking to raise capital from Updata?

Jon: This is a great question, because if you ask my partners and me, what is the most important thing about a company that we're evaluating? It is the leadership, as wild as it may sound even more so than the product.

It is the leadership and the traits that we look for in a Founder. Obviously, integrity comes above everything else.

If we're going to back someone, with money and trust them with a team and customers, then they've got to be full of that. That's number one. Obviously, we want to believe that leadership is present in that person, and that they're capable of both managing an organization generally, which is a complicated thing, and even more so through the growth stage when the variables of a business are changing almost on an hourly basis.

I really look for a very deep, deep understanding of the end customer, right? What's the problem we're solving or the job we're trying to get done? Who is the person that we're trying to serve with the piece of software that we're selling? And how do we reach and address them? If they're a good person, who's really driven to be a strong leader and they understand what problem they're trying to solve, I think the rest of it is so coachable.

Robert: You talk a little bit about the post-covid world and that hiring remotely has actually been a benefit for a lot of businesses going forward. I'll be intrigued to understand what would you say are the biggest challenges that your portfolio companies face when it comes to hiring that you see?

Jon: There are a million logistical ones right now: remote or not remote. The supply of talent not matching the demand for really good, particularly executive talent and development talent in the tech world.

But I think the biggest challenge that our portfolio companies have, has been the same one for as long as I've been investing now, and that is that they don't know how to hire. It's a difficult thing. I won't pretend that I am good at it myself all the time, but I think that the actual process of managing a funnel of candidates, assessing their capabilities, thinking through the scorecard of what is it that we're trying to hire for? Getting beyond the surface level references and really speaking to people who know the person and being able to call out the real traits. Nothing impacts a business more than a poor hire. If I could wave one magic wand across my portfolio if would be that that everyone would be much better at hiring and I wish I were better at it too.

Robert: Heading into 2023, are there any particular companies, whether they be in the portfolio or even external to the portfolio, that you feel are really leading the way when it comes to software and innovation heading into next year?

Jon: Yes, we've made some really exciting new investments over the last couple of years and several of our companies are continuing to lead the way in terms of innovation.

I'll call out a few, one is Netwrix, which is a US-based, security and compliance-focused business. It actually combines data and security in that it helps businesses understand what sensitive data they have in their systems and how best to configure their systems to protect that data. Rather than reinventing the wheel, most of their focus is on how do we make an integrated suite. How do we make it really easy to use, and how do we build it so that we can sell it quickly, effectively, and cheaply stayed into the IT operations organization.

Another is Piano, they are a company that's a US and Europe-based business, headquarters now in Amsterdam actually. Piano helps companies that sell digital services, so think of digital media companies, banks, even airlines, companies that are selling tickets. Helping them to personalize the experience for a customer, understanding the customer's behaviour, affect the payments that need to happen to facilitate those services and it's a very rapidly growing global company that, really takes the ability to touch the customer and monetize the customer and put it in the hands of the business team.

And further, on that theme, I'll round out this section with a third company. We invested in a business called Improvado that's based in California. That is all about taking a low-code or no-code approach to managing data and allowing marketers to integrate the output of their various systems and analyse what's going on with their customers, in a way that doesn't involve IT. That is a very complicated problem to distil down and what they are doing is so exciting. 

 Investors Spotlight is our short interview series where we shine a light on experts hoping to illuminate the topic of the day.

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