I was having a conversation recently with a colleague who invests in venture capital and private equity. We were talking about some of the challenges of investing in early stage companies and specifically about picking winners amongst a group of early stage opportunities. She likened picking winners in the early stage to choosing the winners in a kindergarten class filled with 5-year-olds. How can you know at that stage which ones will be the winners? Yet there are firms which have, over long periods and in different markets, been able to pick a high-percentage of winners at the earliest stages.
Some firms say it’s all about the people. Others say it’s all about the markets. For us, it’s both coupled with a lot of hard work. I don’t often write about portfolio companies, but it’s easier to understand what I mean by taking the example of an early stage investment we made a while back in ToutApp. ToutApp is on the trajectory of a winner.
It’s all about the entrepreneur… Without great entrepreneurs, there would be no successful startups. Great entrepreneurs are the cornerstone of success. There have been many books written about the characteristics of great entrepreneurs, but for me a few characteristics rise to the top. They are both wicked smart and incredibly humble. They know a lot and have a strong conviction for their vision, but they also know that they don’t know everything and need to actively seek out counsel from others with more experience. The great entrepreneur seems to always be on the lookout for the flaws in their thinking. And finally, a great entrepreneur is tenacious - failures are but momentary setbacks from which much can be, and is, learned.
When I first met ToutApp founder and CEO Tawheed Kader (TK), I thought he exhibited many of the characteristics I look for in great entrepreneurs. He was clearly tenacious and resourceful having grown his small team of 6 to almost $1m in ARR mostly through force of will. But it’s only through working with an entrepreneur over time that you can truly judge. Having watched TK operate over the last 15 months, I’m even more convinced today that he exhibits the characteristics of a great entrepreneur than I was when we made our initial investment. He is not just tenacious, he is smart, humble, driven, and focused. I consider myself lucky to be helping him build his vision.
Of course, great entrepreneurs are necessary, but not sufficient. To pull the trigger on an early stage opportunity we also have to see a great market, and ToutApp is going after a huge market ripe for a solution like theirs.
Since the dawn of the internet, sales and marketing have been going through a major transformation. I benefited from the early innings of that transformation in marketing first as the co-founder of a marketing automation company, Connectify, that sold in 1999. I did so again as an early investor in a very successful B2C marketing company, Responsys. A big part of the transformation of marketing that Connectify and Responsys were a part of has been using everything you know about your prospects to deliver the right message at the right time. And while marketing will always have a role to play there, often the person who knows best what message to deliver and is also able to deliver that message most effectively is the sales rep. Ultimately they close the deals. The technology should allow sales people to become mini-marketers. Who better to know what message is the right message than the sales person.
CRM has done an amazing job of helping to systematize sales over the last 15 years, but it was built for sales managers. What sales people need is a platform that enables them to do a more effective job of communicating with their prospects to close deals and drive revenue. What sales needs is a sales platform for sales people - and that’s exactly what ToutApp is delivering.
This is why over the 15 months since our initial investment they have added hundreds of new customers to the platform, maintained a >150% Direct Dollar Renewal Rate, grown ARR by >3x and grown the team by >5x. All of that progress has caused others to sit up and take notice. And today the company is announcing another major milestone - that we’re adding a fantastic new investor to the team and board - Scott Weiss from Andreessen Horowitz. With the right combination of a great entrepreneur and team, great market opportunity and lots of hard work, ToutApp is building a true market leader. I am excited about the future of ToutApp and look forward to working with TK, Scott and the entire team on the next stage of growth.
