At a time when Austin startups are finding it difficult to raise expansion-stage capital, a California venture firm says it wants to do those deals.
And the firm, March Capital Partners, has opened an Austin office to find them.
Based in Santa Monica, March Capital has set up shop in downtown Austin, and partner Jim Armstrong plans to spend a week a month here scouting for deals.
In addition to Armstrong, who was with Austin Ventures from 1995 to 1998, other March partners will be making visits.
The Austin office is March Capital’s first outside of California.
512tech spoke with Armstrong about the firm's investment strategy and why it thinks Austin is a good fit. This is an edited transcript of the conversation.
512tech: How do you describe March Capital?
Armstrong: We are a classic venture capital fund. We raised a $250 million fund last year and we do a lot of enterprise technology and data-driven marketplaces, those are two of our big themes.
We also have partners who specialize in other areas, including one who is focused 100 percent on digital media, gaming and eSports. He (Gregory Milken) hasn’t done anything in Austin yet, but he is planning to spend time there.
We’re based in Southern California but we make investments all over including the Bay Area, including India and all over the U.S. We try to cast a wide net. So far we have done one investment in Austin -- cybersecurity company SpyCloud.
Why did you open an Austin office?
We are a good fit with the existing venture environment. We know the folks at Silverton, at Next Coast, at S3 and LiveOak. They focus on early-stage investments, and when I went out and talked with them they said they would love to have us here because as their companies grow it would be great to have someone lead a follow-up round of financing.
I got to know Austin when I was at Austin Ventures, and built a lot of relationships. We are also the lead investor in Vast, which (CEO) John Price moved from Silicon Valley to Austin about six years ago. Through John, I got to know a lot of the Trilogy crowd, which is a great network. Our office is in Vast’s building in the (former) La Zona Rosa.
What’s your take on the Austin startup community?
The reason we’re in Austin is it very much punches above its weight in terms of attracting talent. It is really incredible. The town and the culture and the environment has the ability to attract some incredibly talented technologists, product people and serial entrepreneurs, people who have seen the movie before, and it gets easier each time.
But there are some metrics where Austin still has room to grow. The Bay Area really continues to have an incredible percentage of large market cap companies. Companies that create a lot of wealth for a lot of the employees. Austin has had some, but not has many as people would have expected.
Why do you think that is?
From what I observe, I would say a lot of companies there choose to sell early. At one point I was on the board of PayPal and had offers of $300 million and $500 million from eBay. LinkedIn had several offers on the way up. There’s a certain attitude that comes from a lot of Bay Area companies that’s ‘a billion or bust.’ There’s a very high tolerance for risk. All good companies that are growing will get offers. It takes a lot of fortitude as they’re going up to say no to those.
It also has to do with serial founders who put a lot of ambition in the company, even if they start in a niche market. A lot of those founders want to hold out for the really big play. They want to go out, not just make money, but go out and impact the market.
You typically aren’t the first investor in a startup. At what stage do you come in, and what do you look for?
We’ll typically invest in the stage where a company is pulling in revenue. But more important is product market fit. If a company has the economics of engagement, if it has a product that is getting a lot of usage, then even if they haven’t figured the revenue model out, that is okay. That’s a risk you’re almost happy to take. In terms of money, $10 million would be our average. If the company needs more, we’ll build a syndicate.
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