Announcing Susa Ventures

June 30, 2014

Note: * Denotes Susa portfolio company

We are excited to officially announce the launch of Susa Ventures, a $25 million seed fund that invests in data-centric founders and businesses.  We started Susa as four friends with the shared belief that despite the hype, the multitude of companies being formed, and the hilarious acronyms, the data revolution is underappreciated.  We have barely scratched the surface of how a focus on leveraging data to make critical business decisions, automate processes, and inform new product creation will disrupt incumbents and create new industries.

Companies with a maniacal focus on data have become the breakout stars by amassing a moat of increasingly voluminous and complex assets.  Examples range from companies like Twitter, which evolved from a communication tool to being the dominant keeper of the world’s most valuable real-time social data, to Waze, with crowdsourced maps, directions, traffic, and incident reports.  Whether generated by machines or humans, companies like Climate Corp and Quora have shown that their ability to aggregate, analyze, and deliver actionable insights yield increased defensibility and significant competitive advantages.

In Health, there is immense value in combining existing data (claims, EMR, genomics, gov’t, trials) with new sources (sensors, mobile, social feeds) to enable better diagnostics, decision support, precision, and preventative medicine -- both at the individual and population level.  Data-centric companies like Flatiron HealthZephyr Health*, and SolveBiothat have set out from the start to create one or more connectable repositories of critical and relevant information (i.e. data on people, lifestyle, drugs, procedures, microbes) that will help us much more rapidly discover treatments, cure diseases, and extend life.

In Banking and Finance, sophisticated machine learning models applied to vast data sources (e.g. social, purchase histories, events, biometrics) are making it possible for young companies like LendUp*, Addepar, and Wealthfront to break down current monopolies like FICO, Fidelity, and First Data to reinvent everything from credit scoring and ID verification to fraud detection.  Startups like Standard Treasury* are helping traditional banks move money and data more efficiently through APIs and digital gateways, while companies like Robinhood* are eliminating friction from equity investing.

In Education, there will be vast improvements in K-12, higher ed, and adult learning.  Overall access to global coursework is improving rapidly via the efforts of 2UUdemy, and Code Academy.  Additionally, Panorama Educationand Clever are making all the data produced by parents, teachers, schools, and students more digestible and usable, enabling easier analytics for a variety of critical use cases.  On the other end, Declara* is helping adults in the workforce perform their jobs more effectively by connecting them to the right content and people on a collaborative platform.

These are just a few illustrative examples across a handful of industries.  Everything from legal to manufacturing to commerce will undergo a step function improvement by collecting, analyzing, and applying data in smart ways.  We hope we can help many of these companies jumpstart their vision to become the market leaders in their respective fields.  Check out our portfolio here, with a few stealth companies still to be launched.  

While there is a proliferation of seed funds of late, Susa Ventures is different in a few critical ways: a) we’re the only $25M seed fund with four operating partners - giving us the ability and capacity to really work with founders in a meaningful way, b) all four partners have either been founders or operators, and bring complementary skills and expertise in areas ranging from product marketing to software engineering to customer acquisition, c) our team consists of both male and female partners, and d) we cover three major geographies - Bay Area, LA, NY.  We feel these differences are our core strengths, enabling us to create a fund that is truly founder friendly in all the ways that matter.

Lastly, a big thank you to our incredible group of LPs for joining us in this journey -- we would not be able to do what we love without them.

If you share our enthusiasm for data, please contact us!

Warmest, Eva/Chad/Leo/Seth

SongHunt

When I saw this I got so excited. We all know that music discovery is a pain. Everyone has their own homegrown strategies. It feels like note taking in that sense. Everyone uses a different process - smashed together apps, manual processes, etc. 

The major music platforms launched 'radio' features, which is just okay. Many others swear by Hypem which is better, but still just okay. 

But this idea of SongHunt, a 'ProductHunt for songs', a daily leaderboard of the best songs got me so excited for a couple of reasons. 

1. Its daily - It would be different everyday. The 'radio' feature on most music platforms will begin to repeat pretty quickly, and will even play similar playlists if you play the same station. 

2. Community driven - I tend to trust highly curated communities more than recommendation engines. If you curated the community in the right way, a la how Ryan has curated the PH community, you would truly get great content. 

3. Diversity - music, even more so than products, comes in more flavors. Music discover is all about exploring the different types, sounds, genres, cultural roots, etc. 

I can't wait for people to tackle this. My friend Jeff and I might take a crack. 

Data Science for Social Good

The technology sector can be a rather insular and homogenous establishment. Your success, failures, impact and legacy are always compared in a relative fashion to the other apps, founders, and investors. 

That's why when I read this article about Data Science for Social Good I got really excited. For all the crap the technology sector gets for cranking out 'yet another photo sharing app', we produce exponentially more meaningful technology that never gets the attention it deserves. At Susa Ventures, we tend to look at data intensive businesses and founders. The technologies that we see everyday are amazing, and usually include some form of data science, machine learning, and or NLP.

I've always wondered what it would look like if we pointed some of that tech directly at social good issues that were not constrained or burdened by the need to build a company or make a profit. This program is the answer to my curiosity. 

Although I am a passionate capitalist at heart, and often feel that for profit entities are a better way to solve problems than non-profits, I am all for experimenting with what I would call 'technical non-profits'. 

I suspect the output of this organization will be orders of magnitude larger than its counterparts. 

I hope Data Science for Social Good changes my, and many others', perspective of what a non-profit can look like and the impact they can have. 


Verticalization of Pinterest, Reddit, Facebook

Inventing new UIs and UXs on the internet is hard. 

But every once in a while, companies develop and entirely new experience that immediately captures the love of users. The facebook news feed, the leaderboards of Reddit, or the pin board layout of Pinterest are all great examples. As I read this post yesterday, about Houzz raising a massive round, I couldn't help but think it looked similar to Pinterest, which also raised a massive round of it's own not so long ago, however both companies took very different approaches to the unicorn club

Houzz feels like a vertically focused Pinterst board with some tools to help you act on your inspiration. That's it. Pretty simple. But pretty powerful. 

What's amazing is that Houzz raised at a valuation that is almost half of what Pinterest raised at. Pretty incredible to think that they peeled off a single vertical, really nailed it, and built a very large business in a short amount of time. 

It's a great reminder that you can build incredible value with a vertical play.

I think part the reason why vertical plays can be valuable is that you can build specific tools tailored to that vertical. For example, it's easier to build a lead generation funnel on a single vertical than a lead generation funnel for everything that on Pinterest. Furthermore, I think a single vertical has a better chance of building a really strong community. 

I think Hacker News and Product Hunt were great examples of vertically focused r/reddits. Furthermore, there are many companies that have copied Pinterest for a specific verticals, and don't even get me started on the number of sites that have been inspired by the newsfeed for sports, politics, etc. 

For me, the important take away is not to discount vertically focused companies or ideas. Often times, really knowledgable founders, such as those from Houzz, Product Hunt or Hacker News, see an opportunity in a very large and neglected market and can build a great business with tools specifically tailored to that industry. 



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Something that should exist: smart phone-enabled sports lockers at public gyms, parks, fields and courts

I wrote a great tweet yesterday that no one commented on. So naturally, I am going to blog about it. 

"If it's a great idea, and no one wants to listen, keep telling people until they listen." -me

I live in NYC. Like most New Yorkers, I love exploring everything this city has to offer. One of the very best things is the public space - the gyms, parks, fields and courts.

But buying and carrying around a basketball, tennis racket, soccer ball, or bocce ball set can be a burden. Just like the Citi Bike ride sharing program, I want a 'play sharing' program for all the things that make public spaces so much fun. 

I think the city would be willing to sponsor this, or at least put a grant toward it. It would help maximize the utilization of the public spaces. Never again would I have to see a sad tennis court on West Side Highway go unused, or a basketball court on Canal go untouched just because the great citizens of NYC can't find a ball. 

So what would this look like? One possibility:

Imagine a BLE-enabled locker that can be opened by a smart phone. Each item inside (balls, rackets, frisbee, etc) have a RFID tags so you know exactly what was removed when opened or put back in. Users would create an account and add a credit card. They could walk up to any of these lockers at fields, courts, parks, or gyms and rent a item for $5/hour or whatever. Then just return it when they are done. 

Most of this technology exists, and I have seen the RFID stuff work for other applications, namely for inventory tracking. The lid could be controlled in a similar way to some of the new smart bike locks or even Citi Bike. This is doable. 

I think this would be awesome. If you think this would be awesome too, hit me up and we can build it. 

Here is a really accurate and colorful drawing of what it could look like: 


VCs should be more like Elon Musk

My friend Joe recently posted this story to facebook. 

It reminded me about all the other crazy stories I have heard and read about Elon Musk. From funding his own crazy ideas to get them through tough times, to attempting to build the first private space transportation company (SpaceX), to reimagining transportation (Tesla) and renewable energy (SolarCity). Elon has always made bold bets. 

As I think more and more about the best VCs, they too have always made bold, often crazy looking bets. Unicorns usually don't start off looking as magical as they end up. Early investors in Google looked crazy. At the time, Google had no business model, inexperienced founders, and were playing in a very crowded market. The examples are endless. 

At Susa, I want to make sure we are thinking big enough. Making bets that may look questionable at the time, but have the potential to be category creators or winners. 

I think the same kinds of people that make great founders, make great investors. And the inverse seems to be true as well. Just look at founding partners of A16Z, Khosla, Sequoia, etc. There are obviously exceptions, but people who see the world differently tend to make the biggest splash. 


On Demand Everything - what comes next?

Steve Schlafman from RRE put together a great presentation called On Demand Everything. If you haven't checked it out, do it. I always appreciate when people share their great research. It's how we all move this thing forward. 

I have reviewed his presentation a number of times. At Susa Ventures, we see a ton of companies building on demand services, and his presentation is always a great starting point when thinking about how a new business fits into the space. The key enabler to the on demand economy is the mobile phone. 

Smart phones are relatively new. Although it seems like we have had them for decades, remember that the iPhone came out in 2007. Apps in the early days primarily just delivered content for this new platform; however as smart phone penetration reached a critical mass, building on demand services became viable. We are now at a point, where essentially overnight, a company can build a product and enable millions of people to book a car (Uber), book a cleaning (Homejoy), order some food (doordash), or get groceries delivered (Instacart). 

While I think we are still in the early days of imagining and re-imagining what services can be changed with the advent of mobile, it's fun to look a step beyond that.

As a consumer, I am already starting to get lost in all the app choices. In the food delivery category alone, you can choose between doordash, munchery, zesty, spoonrocket, fresh direct, sprig, seamless, grubhub, etc. Add in the growing choices in home cleaning, dry cleaning, and grocery delivery and you start to get a bit overwhelmed. 

I think there is a need for a 'service layer' for the on demand economy. Alfred is a great example of a company that can sit above all these great services and provide a unified customer experience, especially for more repeatable and recurring services.

There is a ton of value to capture if you can pull that off. The company that does will understand the customer better than anyone. What they eat, what they wear, how often they travel, etc. But it won't be easy. 

Just last week, Uber went after 'supply side platform' Breeze. Although slightly different, it's a good example of the big on demand players wanting to own/collapse the entire value chain (as Steve writes in his presentation), and control the user experience end to end, including who is providing their service to customers. 

I look forward to tracking this space and watching the emergence of the on demand economy's 'service layer'. Thanks Steve for starting the conversation. 


Product Hunt

If you haven't checked out Product Hunt, I highly recommend you venture over to their corner of the internet. 

Product Hunt is a dead simple way to discover new products (mostly digital products). That's literally it...for now. 

As a VC, the value of Product Hunt is obvious. It's a window into new product and technologies, ideally before they scale. I don't even need them to keep building new stuff and I will use it for years to come. But the team over at PH is hungry. And they tweet a lot, which pretty much means they are up to no good. There is something brewing over there.

So what are they building and what comes next? 

Here are a couple things I would love as the product evolves:

1. A product feed - the idea of a 'feed' dominates the most popular consumer products. Facebook pioneered this with the news feed, and others such as Twitter, LinkedIn, and even newcomers like Secret have followed suit. It's used by literally thousands of products today. Although they would have to break away from the current model of a voted list everyday (which I do very much enjoy), I think a product feed would be freaking awesome. (the PH twitter feed gives you a taste for this and it's amazing)

2. Product store - much like Birchbox sends out samples in a box but then users come back to buy the full size item, I think PH is well positioned to be a great storefront for products that they have covered. Perhaps it will look like FindTheBest for products. The data they collect about the products and user feedback won't hurt either!

3. Organic product launches - Most of the products on PH are added by the community, but I see that shifting to more and more founders as it becomes more popular. Launching a product is painful. Talking to reporters, herding media outlets, blogs, blah, etc. PH is a great way to organically launch a product and get real users feedback almost immediately. I love trying stuff out far more than reading a journalists spoon fed story. Maybe PH will allow a founder to just: tell a authentic story and press submit. Then let others reporters write stories based on the communities feedback around that product. 

4. Beta platform - one of the most valuable assets PH has created is the community. No one has really cracked the nut on helping companies find really passionate users to try new features and products before they launch. Building a way to connect companies with users in the PH community for feedback would be awesome. 

I could go on and on, but what this boils down to is two things: community + data. 

PH's community is extremely valuable. They are early-adopters, eager, smart, passionate, real, authentic and respectful. Pointing this community at any new feature or product that PH creates will be amazing. 

PH's dataset (although small today) will become increasingly more valuable. They created a simple way for users to give them data about new products that are launching, what those products do, and how popular they are. As that dataset grows, the possibilities are limitless. 

I'm excited to watch PH grow and I'm glad there are some great guys behind it. 


What is a Special Purpose Vehicle (SPV) and how did SV Angel lead a $200M round in Pinterest?

News broke last week that SV Angel led a massive $200M growth round for Pinterest. For those of you that scratched your heads, you are not alone. 

How did a seed fund lead a growth round many times the size of their entire fund?

People who do early stage private investing do it because they love it, but not necessarily because it's the most lucrative stage or asset class. Given seed fund economics, there is only so much upside when you have a fund of $10M-$40M. This upside is not only capped for the General Partners, but also for the fund's investors, the Limited Partners. So seed VCs have found other ways to make economics better for themselves and their LPs. One of those ways is through Special Purpose Vehicles. (it's worth noting that SPVs are used by other investors at various stages). SPVs are used by seed VCs when the investment they are making falls outside the stage, size, or strategic focus of the core fund. 

Simply put, a SPV is an investment vehicle set up for single, special purpose. Picture a stand alone bank account set up just for a single investment. In this case, SV Angel would have gone to their Limited Partners (family offices, institutions, fund of funds, endowments, etc) and asked if they wanted to invest more money into Pinterest. If so, they would collect their money into a SPV and make the investment via that special entity with it's own governance and terms. 

Although other investor types use SPVs, it suits the seed VC asset class very well for three reasons. 

1. It allows a seed VC to put more $$ to work - in a single investment, SV Angel essentially doubled or even tripled the amount of capital invested this year, creating more upside for them and their LPs

2. Seed VCs often build very strong relationships with management teams because they are involved early. This is the only way and seed VC to pull off a late stage SPV like this. The management team at the company must really trust and value the investor.

3. Seed VC funds are typically much smaller than some of the other funds that their Limited Partners may be involved with (Series A/B VC funds, growth VC funds, PE funds). If the LPs really like what a seed fund manager is doing, they will want to put more money behind them but are often limited by the size of the fund. SPVs are a great way for an LP to put more money to work behind a great seed fund manager that they really believe in. 

I wasn't surprised by the investment, but rather I was surprised by the nature in which is was reported. Very rarely are these deals reported publicly. Twitter, for example, raised a ton of money from SPVs late in its life, but only a tiny bit of that was ever covered publicly, and even then it was only during the S-1 filing and IPO given the hood was lifted on its fundraising history. I suspect that we may see more public disclosure of SPVs, especially as companies are taking longer to IPO, since SPVs are a great way to raise capital from people you already know and trust. 

Kudos to the team at SV Angel. They really are a great firm with a 'founder first' mentality. It's nice to see that paying off. It's a great lesson for all seed VCs that if you work very hard for your founders and portfolio companies then special opportunities like this can pop up. This seems like a win-win-win for Pinterest, SV Angel, and SV Angel's Limited Partners. I hope we at Susa Ventures are lucky enough to be able to do this one day with a great portfolio company and our LPs. 


Feature Monday

Foursquare recently split their app in two. It has been covered a number of times. 

I am not here to talk about that, or app constellations, although both are indeed interesting topics. However there is a new little feature that popped up in the new Swarm app they launched that I think is pretty neat. It's called 'Nearby Plans' and I think it's awesome. 

I have always longed for a product to allow me to push my plans out and just let people indicate their interest in joining. Plancast tried this, but it never really took off. I suspect there will be other attempts at this problem too. 

'Pushing' out your plans to friends is a much more efficient model then individually 'pulling' people by emailing, texting or calling given most of the time people are busy. What can sometimes take an hour to plan is solved with a single post. In a way, this isn't too different than posting on facebook that you want to grab dinner, but that always feels out of place and foursquare has a simple advantage in that it easily limits the posts' reach to nearby friendly only. 

I am excited to see if this feature takes off, or maybe just like the 'lists' feature in the old foursquare app (that i used all the time), it will remain a very cool little feature that never really takes off.