The 7 Questions Interview Series: Data and Venture Capital
The 7 Questions Interview Series: Data and Venture Capital “The 7 Questions Series” is an investigative content series where we seek out key leaders in a specific industry and/or subject matter expertise area and ask them 7 key questions that inquiring minds want to know in terms of how they view data as part of their investment process. However, there is a twist to these questions: we provide the interviewee with a hypothesis for each question to help frame and set context for their answer.
Data and Venture Capital Series Objectives
The objective of this series is to establish direct connections with venture capital organizations, angel investors and M&A specialists across the globe and ask them the same set of 7 questions regarding their orientation when looking to invest or investing in companies. We want to derive insights from their direct experiences and expertise that will help companies, both B2B and B2C, at all stages of their evolution. We are also curious to see if their answers are similar or different. These interviews will be featured on their website as part of an ongoing series.
Interview with Gary Swart, Partner at Polaris Partners
Gary Swart is a Partner investing in technology companies from Polaris Partners’ San Francisco office. He was previously the CEO of oDesk, the world’s largest online workplace with more than one million clients and five million freelancers. Gary guided the company to industry leadership and through a merger with Elance, while serving as a leading voice for the future of work and the emerging online work industry.
Robin Smith: Tell us a bit about you and your firm.
We invest in extraordinary leaders and more than 30+ repeat entrepreneurs who choose to partner with us again and again. Polaris has more than $4b in assets under management and has funded more than 250 companies and created more than 40k jobs.
Polaris is a partnership of former operators, who have built small businesses and leading global enterprises. We have been in the seats of running and operating companies. We look for exceptional teams with product market fit. We also focus on products and business models that we know are solving a big problem. We can help those companies to scale because we’ve all built and scaled companies from very small to very large.
Robin: What types of companies, industries and areas are you investing in today? In the near future?
Gary: Polaris Partners invests in both health care and IT. On the IT side we focus on business to business Software as a Service (SaaS) companies who are helping businesses to run more effectively. We have approximately 50 B to B SaaS companies that we’ve invested in the areas of cloud infrastructure, data sciences, marketplaces and health care technologies.
We’re a global firm with a presence in Boston, San Francisco, and Dublin and entrepreneurs all over the world. Most of our companies have a global footprint, so we’re not typically investing in just North America-focused businesses. For example, insidesales.com, where we recently led an investment round, is a truly global business.
Robin: How valuable is data collection to today’s venture capitalist?
Gary: Data is a huge element for companies, even in the B to B SaaS arena. My previous company, oDesk (now Upwork), was gathering data on millions of jobs and workers around the world, and that data enabled us to make better decisions. It became a really valuable asset to our business.
At Polaris, we look primarily at how a company is leveraging data to provide a better outcome for their clients. We want to know how the data differentiates them from competitors and other alternatives. And, can the data be used as a moat around their business to create barriers to entry, lasting value and competitive advantage? These elements all factor into how the company is using data to help keep competitors at bay and give the company a head start or a lead in their end customer markets.
Having personally built a marketplace or “networked” business, while at UpWork, I believe there are phases or “acts” that data centric businesses follow. Act one is providing software for a set of clients and getting paid for that. Act two, in a lot of these businesses, is that the more clients they have, the more they use the system and the more they use the system, the more data is gathered. A “network effect” is created where clients, investors and the company are all generating exponential value from the growth of users and data. We really like these businesses. The more customers, the more data. The more data, the more customers.
“Everybody’s talking about big data but what they really want are actionable insights. They want to know, “What should I do as a result of this data?”“
Robin: Does a company’s technology matter when choosing to invest?
Gary: I do think that it probably factors into diligence. For example, I was looking at a company, and as part of my diligence, I met with their sales team. I wanted to see the technology, architecture and sales process they were using. I was really impressed with how advanced they were. They were using the latest and greatest technologies and processes to accelerate their go-to-market strategy. They were using new CRM technologies and practices that I hadn’t seen. As a former sales leader and operator, it made appreciate how innovative, forward-thinking, and sophisticated they were on their go-to-market strategy and execution.
The company’s use of systems and data weighed in their favor. It made me appreciate the architecture of what they had built, the process that they were following, and how reputable they had made the use case. The result was everybody was consistent in their approach to their client interaction. That’s just one example of where technology played a factor in due diligence.
Robin: What industries are leveraging technology and data in order to innovate, grow and disrupt? Are there any industries that aren’t leveraging data that should?
Gary: Of course, the innovators and forward thinkers have been applying data to big problems. We see it in a lot of our health care investments. They’re all centered around the data. We see it in anything that’s focused on HR and staffing where you can leverage data about people in order to make better hires, retain employees longer and keep employees happy. We’re seeing companies use it in all areas of commerce.
I’m surprised, however, at how some areas have lagged. In health care, for example, despite the fact we’re using data, it’s not being leveraged due to key technology barriers. Many of the systems and applications being used by health care organizations and professionals are antiquated. They can’t work together making it impossible to collectively gather data, let alone get insights from it in order to solve major social and health challenges.
Robin: Why are some SMBs late in adopting technology? Does this hinder your investment decision?
Gary: In small businesses, they have so many things to worry about. They also have limited people, time, and money. If a small business chooses the wrong path, they can go out of business. This ruthless prioritization and focus means some things don’t get attention until there’s heat.
Sometimes you’ll see companies, depending on what vertical they’re in, tackling an issue sooner than those in other industries. They tackle the things that are most important first, and sometimes it just takes time for adoption to set in.
Robin: Are you seeing more data centric startups? Might there be more in the future?
Gary: There’s a lot of ways to look at it. Everybody’s talking about big data but what they really want are actionable insights. They want to know, “What should I do as a result of this data?” We’ve seen the evolution of the data layer evolve from capture, organize and analyze to an advanced layer of producing information and knowledge that can be acted on.
There are data infrastructure companies that are at the center of helping you gather and capture data. There are ones helping organize, analyze and provide insights from data. We’re seeing more and more companies in all of these areas, and specifically, we’re seeing vertical solutions that are getting more and more specialized. Where companies are applying a similar solution that’s already been done in one vertical, they’re coming out with the solution for a new vertical.
About Polaris Partners:
Polaris Partners invests in exceptional technology and health care companies across all stages of their life cycles. With offices in Boston, San Francisco, and Dublin, we partner globally with an unparalleled network of repeat entrepreneurs, top scientists and emerging innovators who are making significant contributions in their fields and vastly improving the way in which we live and work.
Gary’s Social Outposts:
Stay tuned for more expert interviews as part of VL’s ongoing 7 Question Series!
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