Debt vs. Structured Equity: Finding the Right Fit
Stay up to date
Stay up to date
About NewView Capital
NewView Capital (NVC) provides entrepreneurs, venture capitalists and investors with the freedom to drive continual innovation and sustainable growth.
NewView Capital (NVC) provides entrepreneurs, venture capitalists and investors with the freedom to drive continual innovation and sustainable growth. With over $2 billion in capital under management, the firm focuses on innovative VC portfolio acquisitions and flexible direct investments, pairing their funding approach with significant operational support. Their investments are focused on growth-stage technology companies, with a thematic approach to investing earlier. The NVC portfolio includes Plaid, Duolingo, Forter, Hims & Hers, MessageBird, Scopely and Segment. www.nvc.vc
In this issue of SaaS Talk, Golub Growth Managing Director Peter Fair speaks with Ankit Sud, Principal at NewView Capital, who discusses how investing in growth-stage enterprise software has evolved over the past year and his optimism for the next 12 months and beyond.
NewView Capital provides entrepreneurs, venture capitalists and investors with capital to drive innovation and sustainable growth. Please give us some background on the firm and the opportunities/challenges you see over the next 12 months.
NewView Capital was founded to contribute value and a new perspective to the changing growth-stage landscape. In 2018, we raised our $1.35 billion inaugural fund to purchase 31 companies from New Enterprise Associates (NEA), our first portfolio acquisition, and to make new direct growth investments in companies such as Plaid, Hims and Heap. Today we have over $2 billion in capital under management.
We invest in technology companies through two strategies: curated portfolio acquisitions to provide liquidity and investment capacity to venture capital firms and direct investments into category-leading companies. We work closely with our portfolio companies to provide flexible capital and deep “scale-up” operational support.
The last year has been simultaneously the most challenging and the most rewarding for our portfolio companies. We’ve seen companies like Duolingo, Course Hero, D2L and Udemy leading the way in remote learning when it was needed most, while Forter, Reltio, Bloomreach, Aerospike and Gladly helped support the massive uptick in digital commerce. The acceleration in so many software categories over the last 12 months has given us, and most of our VC peers, optimism about the next 12 months and beyond.
Is there a new investment theme reflected across your portfolio companies that is different from 2020?
The short answer is no. As a part of our strategy, we’ve always invested in growth-stage enterprise software, and that focus hasn’t changed. There are, however, themes that recur in our portfolio from which we continue to learn and evolve. As a team we stay open to new ideas and developments, knowing that there’s always something new and exciting around the corner.
Some of the areas I focus on personally are developer tools and middleware that facilitate data movement and management, such as our investments in Plaid, Segment, Reltio, Code42 and Aerospike. Other trends I’m following include the modernization of the financial and healthcare systems, process automation in the mid-market and technology to help meet today’s customer experience expectations. All of these trends are taking place in both the fintech and broader SaaS ecosystems where I am focused.
How has the last year impacted perspectives—and perhaps operations—of NewView Capital’s portfolio companies over the long term?
The last year has really brought about several new perspectives for most of our companies. As uncertainty gripped the markets in March last year, we hosted a discussion with roughly 20 of our portfolio CEOs to trade notes on best practices during market shocks and ways their teams were “doing more with less.” As companies needed to reduce expenses to preserve cash and increase operating runway, they learned to prioritize investments and double down on what was working.
We’re also seeing a divide in companies showing strong product market fit and those being left behind. The best software businesses are seeing either an acceleration in their top line or pipeline. As businesses across sectors frantically buy new software, our companies are looking to solve the most pressing problems, simplify implementation and shorten time to value. There is a bit of a land grab in many categories and no one wants to be left behind.
Finally, the public markets have become a more attractive and available exit outcome, and the best companies are thinking about IPO preparedness more than ever. This means telling the right story, rigorous focus on metrics, assembling a public-ready board and crafting a public-ready cap table.
How have hiring practices in the tech sector changed over the past year, and where do you see changes occurring over the next 12 months?
It’s no surprise that remote work has widened the talent pool for most companies. I think startups need to embrace this new reality while working harder to create and maintain culture. One way to do this is to offer smaller, domestic satellite locations as companies scale. This can allow high growth companies to access a wide talent pool while offering a physical space for those employees who aren’t located near headquarters.
Many of your portfolio companies are at a later stage in their development. Are there any lessons from their growth and challenges that you think would benefit earlier-stage companies to consider?
The most successful late-stage companies we see have prepared in advance for their scale. One of the best examples in our portfolio is Hims & Hers. The founder, Andrew Dudum, has always been sure of his path to the public markets and has strategically planned accordingly—even while his company was undergoing the kind of hyper-scaling some believe can only take place while private.
That kind of long-term goal setting shines through in everything they do, from their growth vs. burn decisions, to their product expansion plans, and even Andrew’s efforts to set up a world-class board early in the company’s history. Hims & Hers went public via SPAC in October 2020, just three years after its founding.
Planning for scale means having a strong vision several years ahead, not just for the current quarter or year. Even if you can’t predict every upcoming challenge, setting the groundwork for scale pays off. As companies like Duolingo, Scopely and Plaid achieve serious scale, it’s easy to see this same pattern of vision, focus and preparedness across the best teams.
How do you stay disciplined in a premium valuation, FOMO environment?
With a truly flexible check size, ability to lead or follow in rounds and capacity for primary or secondary investments, we have a wide aperture. That said, we invest in themes we believe strongly in and in companies where we know we can be helpful based on their sector or stage.
This allows us to partner with the best teams—those in which we have strong conviction along with similar values. We often partner with CEOs solving for the right price, not the highest price. In a 10+ year relationship, if you’re not also prioritizing partnership and long-term value creation, you’re likely not a good fit for us.
What do you look for when investing in tech companies today that may be different than your criteria pre-COVID?
NewView Capital has always had a focus on enterprise SaaS, often high-ACV (annual contract value) software sold to the Fortune 500. My background and focus are in line with this as well. COVID has drawn my attention to the mid-market, where old-school business practices have yet to be touched by modern software (or any software, for that matter). Even when I look at developer tools or data infrastructure, I’m now more aware of its implications on customers or end users outside of the world’s largest companies. COVID might have been the accelerant, but the trend is secular and significant.
What should software company founders look for in an investor to help them fund their next phase of growth?
Really, you want to view an investor as a partner, and that partnership should be helpful to you along every stage of the journey. At the earliest stages, founders look for a thought partner who offers positive brand signaling for their next round. At the very latest stages (pre-IPO), companies are looking to blue-chip investors who will show well on a public company cap table and provide long-term stability to their stock price. At the growth stage, the challenges are different. Founders are likely focused on achieving the escape velocity it takes to be an industry-defining company and having the discipline it takes to do so efficiently.
At a time when capital is commoditized, founders should spend the time to deeply vet their growth-stage investors. Have they been successful in scaling companies in the past? What have they done for other founders? Will they truly be hands-on when you need them to be? And when it comes time to consider an IPO or M&A exit, will they be your first call when it’s all on the line?
At the end of the day, a strong partnership is based on a strong personal connection. An interesting exercise is to imagine your relationship with an investor if things were to go wrong. If you’d want them by your side at the worst of times, they’re the right kind of partner.
Golub Growth is not responsible for the information or views communicated by representatives of other companies. This material is not indicative of the past or future performance of any Golub Growth product and should not be considered as investment advice or a recommendation by Golub Growth of any particular security, strategy or investment product. Golub Growth has distributed this material for informational purposes only.