SAN JOSE, Calif., June 10, 2019 /PRNewswire/ — Vectra, the leader in network threat detection and response (NDR), today closed a $100 million round of funding led by TCV, one of the largest growth equity firms backing private and public technology companies. Existing investors also participated in the funding round, bringing the company’s total funding to date to more than $200 million.
Vectra will use the investment to accelerate global market expansion and R&D innovation, solidifying its Cognito platform as the market-leading solution for artificial intelligence (AI)-driven cloud security using NDR.
The cloud has critical security gaps that leave organizations vulnerable. Cyberattackers take advantage of these gaps without leaving a trail of evidence. Underscoring this risk, a recent survey by the SANS Institute found that one in five businesses had serious unauthorized access to their cloud environments this past year alone, and many more were unknowingly breached.
The Cognito platform addresses these security gaps by providing 360-degree visibility into cloud, data center, user and internet-of-things (IoT) infrastructure, leaving attackers with nowhere to hide.
“TCV has an extensive track record of partnering with enterprise security companies, including Rapid7 and Splunk, from growth stage to public,” said Tim McAdam, general partner at TCV and a member of the Vectra board of directors. “In our research on the category, it became clear to us that Vectra was rapidly gaining momentum with customers by rethinking the way enterprises view both network and cloud security. The Vectra Cognito platform is poised to become requisite in the security infrastructure of multinational enterprises and midsize businesses alike.”
“The cloud has inherent security blind spots, making it imperative to eliminate cyber-risks as enterprises move their business to the cloud,” said Hitesh Sheth, president and chief executive officer at Vectra. “The Cognito platform enables them to stop hidden cyberattacks in the cloud. We look forward to partnering with TCV and our existing investors as we continue our rapid growth.”
Vectra experienced 104% growth in annual recurring revenue in 2018 compared to 2017. The company will continue to ramp up initiatives aimed at addressing the global deficit in cloud security, innovating on its existing platform and expanding its global customer base.
About Vectra Vectra® is the leader in network detection and response – from cloud and data center workloads to user and IoT devices. Its Cognito® platform accelerates threat detection and investigation using AI to enrich network metadata it collects and stores with the right context to detect, hunt and investigate known and unknown threats in real time. Vectra offers three applications on the Cognito platform to address high-priority use cases. Cognito Stream™ sends security-enriched metadata to data lakes and SIEMs. Cognito Recall™ is a cloud-based application to store and investigate threats in enriched metadata. And Cognito Detect™ uses AI to reveal and prioritize hidden and unknown attackers at speed. For more information, visit vectra.ai.
About TCV Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. Since inception, TCV has raised over $15 billion in capital and has helped guide CEOs through more than 120 IPOs and strategic acquisitions. TCV’s investments include Airbnb, Altiris, AxiomSL, Dollar Shave Club, EmbanetCompass, EtQ, ExactTarget, Expedia, Facebook, Fandango, GoDaddy, HomeAway, LinkedIn, Netflix, OSIsoft, Rapid7, Rent the Runway, Sitecore, Splunk, Spotify, Varsity Tutors, Webroot, and Zillow. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, visit https://www.tcv.com.
Modsy, a leading online interior design service that leverages its proprietary 3D visualization technology to disrupt the way consumers design and shop for their home, announced today the closure of a $37M series C fundraising round led by TCV, with participation from existing investors Norwest Venture Partners, Advance Venture Partners (AVP), Comcast Ventures and others.
This round comes at a time when home design inspiration is plentiful and home furnishings is the fastest growing e-commerce category, but helping consumers bring their ideas to life is still a big pain point. Modsy has been building a transformative consumer experience to solve this market challenge and has scaled rapidly, expanding its customer base 450% since its previous funding round and creating over 2 million shoppable lifestyle renders since it launched. Modsy’s groundbreaking 3D technology offers the fastest way for consumers to receive affordable home design expertise by combining its AI-powered recommendation platform to curate items based on layout, style, color, and price. Additionally, 100% of the personalized product recommendations in each design are completely shoppable, which alleviates the burden of parsing through hundreds of furniture items online and in-store. The new funding from TCV will enable Modsy to continue to rapidly scale while further investing in 3D automation, expanding its retail marketplace and enhancing its design and concierge shopping services.
Shanna Tellerman, Founder and CEO of Modsy, said: “Modsy is the future of furniture shopping and we are thrilled to partner with such a forward-thinking and customer-centric firm like TCV to help us fulfill our vision. I founded Modsy on the premise that in the future we would all be shopping from a personalized catalog-like experience within a virtual version of our real homes. This new round of funding will bring us even closer to this reality. We are excited about partnering with TCV to build Modsy into a household name and furthering our mission of enabling our customers to create the home of their dreams!”
In addition to transforming the furniture industry and developing breakthrough technology, Modsy is working to level the playing field of securing funding for female founders. In 2018, 2.2% of women-led companies received venture capital funding, so TCV’s investment in Modsy is significant in helping to further support the growth of female-owned and operated companies. With this round, TCV’s Executive Vice President Tina Hoang-To has joined Modsy’s [female-majority] board alongside Shanna Tellerman, Modsy CEO, Courtney Robinson, Partner at Advance Venture Partners and Jeff Crowe, Managing Partner at Norwest Venture Partners.
Tina Hoang-To, Executive Vice President at TCV, said: “The U.S. home furnishing market is a massive, multi-billion dollar industry and we are seeing a very clear secular shift online. Modsy is redefining the way consumers can buy furniture by leveraging technology and machine learning to introduce efficiency, transparency, and affordability to an antiquated home design industry. We are excited to partner with Modsy and believe the company is well positioned to transform this industry in a significant way.”
Since its previous funding round, the company hired three key executives: Sam MacDonnell, Chief Technology Officer (formerly HotelTonight), Meredith Dunn, Chief Operating Officer (formerly StitchFix) and Mustafa Nafar, VP of Finance (formerly DoorDash, Best Buy). It also launched innovative features that enrich the Modsy journey including Live Swap, an industry-first feature that allows customers to quickly swap furniture and its 3D Style Editor, a groundbreaking tool that enables customers to edit their designs in real-time. Modsy most recently announced its first line of custom sofas and chairs designed completely from customer data to fill a gap in the market when it comes to price, fabrics and style. Modsy’s data-based innovations continue to position the company as a market leader and fast-moving disruptor in 3D technology, design and furniture commerce.
About Modsy Modsy is a leading online interior design service that delivers highly realistic 3D designs of your exact room filled with shoppable pieces of furniture from top brands you can virtually “try on” products and designs before you buy–starting at just $69. At a breakthrough price point, Modsy is providing visualization and design services that were once inaccessible to the masses and making it a no brainer purchase for any consumer on the market for furniture. Modsy provides unlimited revisions to your designs through its groundbreaking tools or by working directly with Modsy Designers. After finalizing a design, Modsy makes the check out process easy and gives customers access to exclusive discounts on their aggregated cart that easily pay back the initial design fee. Modsy’s name even comes from a combination of “modern design” and “easy”! Modsy’s mission is to change the way consumers imagine, design and shop for their homes.
Modsy has raised a total of $70.75M in venture capital funding. In addition to Modsy’s series C round of $37M led by TCV, previous investors include Advance Venture Partners (AVP) who led Modsy’s Series B round of $23M, Norwest Venture Partners who led Modsy’s Series A round of $8M and participated in Series B, NBCUniversal Cable Entertainment, Comcast Ventures, GV (formerly Google Ventures), Birchmere Ventures, and BBG.
About TCV Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. TCV has invested over $11 billion in leading technology companies and has helped guide CEOs through more than 120 IPOs and strategic acquisitions.
TCV’s internet and software investments include Airbnb, Altiris, AxiomSL, Believe Digital, Dollar Shave Club, ExactTarget, Expedia, Facebook, Fandango, GoDaddy, HomeAway, LinkedIn, Minted, Netflix, Rent the Runway, Sitecore, Splunk, Spotify, TourRadar, Varsity Tutors, and Zillow. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, please visit http://www.tcv.com.
Media Contacts: Allie Rosenberg Modsy firstname.lastname@example.org email@example.com
We believe that many SMB and vertical SaaS companies are starting to exhibit platform characteristics. Some of these companies are beginning to build consumer and supplier networks that are expanding the SaaS model dramatically.
We recently brought the pioneers of these new SaaS models together and were fortunate to have Jackie Reses share her thoughts on the emerging lending opportunity for SaaS. Witty, wise, and incredibly insightful, Jackie is a total superwoman. In addition to running Square Capital, Jackie serves on the board of the San Francisco Federal Reserve Bank and is a former board member of Alibaba. She also worked in private equity for 20 years.
Dave: Great to talk
to you, Jackie! Is it true you started your career on the dark side, as an
Jackie: Yes, I
worked in private equity for 20 years. I just kept going forward. I had a
mid-life crisis without the crisis, as I like to call it. I ran parts of a
large private equity firm, but I much prefer being on the operating side. I
still invest and that’s my fun side project. But I love working at Square. It’s
a really fun place to be.
Dave: Square is certainly
on a tear. Maybe we could start and just talk a little bit about that. Very few
companies reach your scale, and then accelerate. But that’s what you’ve done at
Jackie: Yeah, it’s
exciting. We have driven strong revenue growth at scale since we went public. It’s interesting to think back to when Square
was starting with payments and building on that. That really was the catalyst for
what we should build in an ecosystem in a very different way. Since then, we
have built ancillary products around payments like point of sale, loyalty,
employee engagement, lending, and payroll around an ecosystem.
Dave: You mentioned
that every one of your products is an onboarding product. You don’t think of “land
and then expand,” it’s all onboarding, it’s all “land”?
Jackie: Like lending
we consider it to be a product that will onboard into Square. We have two parts
of our lending business. One is the business lending, and that’s something we
launched with Square sellers, and we extended it outside of Square in the
And then we also have an Installments product which has been
incredible. Installments is a consumer lending product that can have a customer
pay for large purchases with installments, which provides the buyer with
That said, I think about Square Capital first. My job is to
grow Square Capital. That should stand on its own. The product itself has to be
When we launch a new Square Capital product, we launch it
because I think about all inbound customers into Square for lending and then
create a cycle throughout our ecosystem to evolve as they learn about other
Dave: You talked
about Square and the multiple product lines and high rate of self-onboarding.
How core is self-serve to Square?
Jackie: It’s the way we start on every product. They have to be self-serve, elegant and fast as a means to make them remarkable. Driving your thought process around self-serve forces you to create simplicity and ease of use.
Dave: You’ve described
several different businesses that have arguably very different DNA. SMB, point
of sale, consumer cash, credit, etc. How does that work in the same
Jackie: I think
lending is the one that everyone has the hardest time with. If anyone thinks
that payments are regulated, lending is like 10x that.
Managing risk and the dynamics of a high-growth company are very
different disciplines. I think that’s probably the hardest thing I deal with as
an executive at Square. The dynamics of credit risk can really hurt sellers,
and they can hurt us, and they can hurt our ecosystem of investors.
And so top line growth on a lending business is not the
goal. I think you have to have a very different level of responsibility and a discipline
that is almost the inverse to payments, where topline revenue growth can be the
You need to remain focused on what’s good for the end
merchant. There are some lenders out there that have a goal of maximizing loan
size. I think that’s irresponsible. We try to maximize a loan that helps sellers
grow. That’s a very different mindset. We are also very fortunate that we don’t
have channel or customer acquisition costs which helps us take a pretty responsible
Dave: Right. There is a real trade-off between growth, risk, and merchant health. How do you measure your success, what are the metrics you report on?
originations and different views of defaults. We could double our loans if we
wanted to tomorrow. Yet, you double it at the loss of small businesses who
can’t afford the debt that you’re giving up. The one limitation of credit is that
there is a natural debt capacity of what these companies can afford based on
their cash flows. And you’ve got to make sure you’re really good at how to
predict that and then manage it so you’re not putting companies at risk.
Dave: Let’s talk about the risk side. Companies in an earlier phase want to learn. They want to train their algorithms. So in some ways having defaults is actually a data point to trigger. How do you get through that initial learning period?
Jackie: We do the same thing. Although I have to say that many refer to models which really aren’t machine learning models – the data set is too small to be driven off of machine learning.
It’s hard to train models when you have a really narrow data set. Many lenders use basic heuristics to limit who they lend to. That is not a machine learning model – its addition and subtraction in a ton of excel.
Loan losses also can be instructive for
model training, so you need to be willing to invest in your weakest credits in
order to learn. If you look at the public fintech lending companies,
very few of them have actually been successful at long term customer
acquisition and default profiling. It’s a hard, capital intense business and
takes years to do. We think of lending as a platform to help our sellers
grow. The regulatory environment and the amount of capital required to do
this is just really high.
Dave: What about
Jackie: The payments data is super useful but you have the fidelity of moment to moment transactional changes. Matching risk, credit, behavioral and bank data together with payments is very powerful!
Additionally, for model training, its instructive to look at why sellers de-activate off of our system. Insights around business failure and fraud can also be a helpful part of the equation.
Dave: You mentioned
just how different being a lender is than the rest of Square and orientation
around growth, versus risk management. How did you actually set it up so that
it was able to perform this task culturally? Did you wall it off?
Jackie Reses: I
thought about it every day. To be honest I think we’re very unique and lucky at
Square because the way we are owned and run is with a long-term orientation,
which most public companies are not.
Being focused on the long term, you can set up the ethos of
what you need it to be. Because it’s the right answer for that kind of business
long term. But we talk about it every day because it’s really easy to lend
money, and it’s really hard to get it back.
And then the compliance is huge. I have everything
documented in a way that’s profoundly non-tech. And that’s in a product that’s highly
automated. We practically have a lean lending team. And then I have to have all
these policies and reviews and committees. It’s the only product at Square that
has a board committee.
We’re growing fast, but you got to be really strict about it
and stand up if you see issues.
Dave: Let’s switch
gears a little bit. I’d love to take advantage of your experience with Alibaba.
The dynamics in China seem totally different.
Dave: Do you think there’s
a future state in China where you do have to worry about some sort of disaggregation
or actually consolidation of the payment infrastructure?
dynamics in China are really different because there was an escrow system that
existed 10 years ago in China because there were no logistics, and there was no
trust. If you were going to order a package in China, you never knew whether
you were going to get it, how you were going to get it, because neither system
existed around credit and shipping. They just didn’t exist. And so the idea of
an escrow system was the genesis of how Alipay got started. It really became a
predominant payment rail. And it did so in an environment where it matched its
sister company which controls 60 percent of the eCommerce in China. So those
dynamics are really different than the dynamics that exist in the United States
today, where the proliferation of credit options is extraordinary. In the U.S.,
there is no logistics issue with the way we think about freight and the
multiple players. You can trust that if you send a package by FedEx it will
actually show up.
All these dynamics of eCommerce that we take for granted in
the United States are really the reason why there’s such a tight band of
competition in China. I think WeChat is interesting. WeChat evolved after QQ
started. Tencent built an unbelievable business and their second version of it
has just been extraordinary because it’s become like a full utility app for
everyone in China.
So now you have these two non-bank players in China competing
with one another. Neither have really been able to get into the United States. I
don’t know whether you noticed, but you’ll start to see Alipay showing up at a
register. Go ask how many transactions have actually happened at that counter. There’s
the notion of these Chinese tourists that are coming here but they use UnionPay.
That said, there’s not a lot of demand for it at this point
in the United States. I think they’ll have a better time in Southeast Asia
where they’re more connected and Japan, because they’ve got the Softbank
connectivity that still owns a huge portion of Alibaba and Alipay. I just think
it will be much harder in the United States.
David Yuan: Well
Jackie, that was incredible! Thanks so much for taking the time to share your
The statements, views, and opinions expressed are those of
the speakers and do not necessarily reflect those of TCMI, Inc. or its
affiliates (“TCV”). TCV has not verified the accuracy of any statements by the
speakers and disclaims any responsibility therefor. This interview is not an
offer to sell or the solicitation of an offer to purchase an interest in any
private fund managed or sponsored by TCV or any of the securities of any
company discussed. The TCV portfolio companies identified, if any, are not
necessarily representative of all TCV investments and no assumption should be
made that the investments identified were or will be profitable. For a complete
list of TCV investments, please visit www.tcv.com/all-companies. For
additional important disclaimers, please see “Informational Purposes Only” in
Creating revolutionary technology for hotels has historically been a slog but lately we’re seeing a change in fate for hotel software companies due to increased investment in the space. One of the biggest investors in hospitality tech is Menlo Park based TCV, the growth equity firm that has invested in breakout companies like Sojern and SiteMinder within hotel tech. TCV has also made major investments in the broader hospitality and travel space such as: Airbnb, TripAdvisor, HomeAway, Expedia, Orbitz, SeatGeek and Toast.
TCV is one of the largest names in the world of technology investing with a successful track record in the massive hospitality and travel vertical. Vertical market software is an extremely hot investment theme right now.
“The easy opportunities for disrupting old-line industries are drying up. Now, many of the up-and-coming start-ups that may become the next unicorns have names like Benchling and Blend. And they largely focus on software for specific industries.” New York Times
Long time TCV investor and former SiteMinder CFO John Burke is excited about the opportunities within the vertical market software. John and his team have identified a trend within a sub investment theme that they’ve coined: “SaaS as a Network”. Here’s how they describe the concept.
“When a SaaS provider starts serving a high enough density of merchants, they can leverage that strength to build two-sided marketplaces with the merchant’s customers, suppliers, and employees.”
David Yuan, TCV General Partner
The general hypothesis is that once vertical market software companies achieve scale with regards to their core products they can always bolt on new point solution functionality but would be wise to focus on a much bigger opportunity. Specifically, TCV believes that these software companies can create two-sided marketplaces that connect their users to new channels of customers, suppliers and employees. Back in February, Hotel Tech Report identified the explosion of marketplaces as one of the 5 biggest tech trends at ITB Berlin, a trend that mirror’s TCV’s investment thesis. Of all the software companies creating marketplaces in hospitality, TCV’s portfolio company SiteMinder has the largest scale to date.
Last year SiteMinder threw its hat in the ring with the launch of SiteMinder Exchange aimed at “breaking down the industry’s notorious integration barriers, connecting hotel systems and applications through smart and simple connectivity.”
“The reality is that few industries are as fragmented as hospitality particularly at the PMS level. There has always been demand for many of the new applications, but innovation has been stifled by lack of connectivity and the sales model makes the economics challenging. Some of these barriers are starting to be broken down by SiteMinder and others which I think can unlock a lot of innovation for the industry. But this is a hard problem and it’s a complicated space with lots of moving pieces so that makes it challenging.”
John Burke, TCV Executive Vice President
SiteMinder’s Exchange marketplace is aimed at allowing other applications to access the firm’s broad user base consisting of more than 30,000 hotels worldwide. Most of those hotels are using SiteMinder’s highly popular channel manager which connects hotel inventory to 3rd party distribution channels as well as other products within the firm’s broader guest acquisition platform such as a rate intelligence tool and an online booking engine. The firm is betting that it can add value for users by allowing them to try more hotel tech applications with ease and in turn create new business opportunities for those suppliers.
We sat down with Burke to discuss his views on hotel tech, the future for platforms like SiteMinder Exchange and highlight the most cutting edge developments happening right now within the hotel space.
How did you get into venture investing?
I’ve been in and around venture since 2011. I started my career with EY in their audit and transaction advisory teams. Getting into venture was a bit of good timing and persistence. The TCV team were looking for an immediate hire and decided to take a chance. I was with TCV from 2011 to 2014 as part of the B2B software team. As I thought about what was next for me, I was drawn to the experiences and mentorship of the TCV Venture Partners (e.g. former senior operating executives such as Erik Blachford). The tech market at that time had been heating up with a few high-profile IPOs. It was my belief that the next wave of great investors was not going to be able to rely on multiple expansion or financial engineering. I believed the best investors over the next 10 years would need to be partners driving actual business growth.
That brought me to SiteMinder down in Sydney, Australia. TCV had just led the Series B investment in the company, and the fundamentals of the business were remarkable. On top of that, they were ramping up for aggressive growth across Europe, SE Asia and were about to launch in the U.S. which I thought would be great experience. I was also excited to work with Mike Ford and the entire SiteMinder team. Mike is a special entrepreneur who is not only very smart and a product visionary, but also authentic and humble. I joined SiteMinder initially in an analytics role and then for the next 3.5 years as CFO. For family reasons, we decided to move back to the U.S. last year, where I reconnected with TCV and rejoined the team. I continue to spend a lot of time in the hospitality and vertical software space and TCV just led an investment in Toast, an exciting next-generation restaurant platform.
Tell us about TCV.
TCV was founded in 1995 as a $100M venture fund and today has raised over $15 billion across 10 funds, focusing exclusively on technology companies. We recently began investing out of TCV X, a $3 billion fund. TCV looks to partner with companies that have potential for a sustained category leadership position and are looking to succeed at an even greater scale. This typically means that a company has been growing for several years — with a history of customer trust and engagement and a business model that is reflective of the value they provide. We are flexible on transaction type with experience in public and private markets and are comfortable in minority or majority positions. Over the past 24 years, we’ve had more than 60 IPOs in our portfolio and have worked with some of the largest franchises in technology including ExactTarget, Facebook, Netflix, GoDaddy and Spotify.
At this point, I’ve talked with many investors in the space which helps me appreciate how the various funds are different. For TCV, I think it’s the depth of industry knowledge and a growth mindset. We have close to 100 team members now and our investment team focuses every day on technology and goes deep in verticals and sub-verticals. When we identify a compelling technology trend, we take the time to thoroughly understand the underlying drivers, business model, and competitive environment. Having a developed perspective means we can have much more meaningful conversations about a company’s business and growth opportunities and are positioned to be a better thought partner for the executive teams as they drive towards expansion and category leadership. We’re not afraid to make bold bets especially when we have conviction on category leadership and to do whatever it takes to help companies reshape industries.
Can you talk about TCV’s view on hotel tech and its SiteMinder investment?
Travel and Hospitality has been a core focus of TCV for well over a decade. In addition to SiteMinder, the active portfolio companies we are working with include Airbnb, TripAdvisor, Sojern, Tour Radar, and Klook. Previously we were investors in Expedia, HomeAway, Orbitz, and Travelport, among others.
For SiteMinder, TCV led the Series B round and we have continued to stay active with the company as the lead director since then. Two of my partners David Yuan (General Partner) and Erik Blachford (Venture Partner) continue to serve on the Board of Directors.
SiteMinder has an incredible history, where is the company today?
SiteMinder is a hotel guest acquisition platform that connects hotels to future guests, so hoteliers can go back to doing what they love. It’s trusted by more than 30,000 hotels of all sizes, across 160 countries and has helped generate more than 87 million reservations worth over US$28 billion in revenue for hotels each year.
SiteMinder is based in Australia, how did you come across the investment?
It was a team effort. Back in 2011 to 2013 we spent a bunch of time mapping out the ecosystem for online travel and hospitality attending industry shows like HITEC and Phocuswright. Ultimately, we identified the channel management sector as promising albeit a lesser known segment in the category. Our view at the time was that online travel was increasingly complicated and in flux with new players vying for hotel distribution. Independent hotels were harder to aggregate but would also allow these same middlemen an ability to offer differentiated supply that was higher margin. Channel management became interesting because it aggregated and provided connectivity to this supply. We thought this was a hard problem particularly to do in a cost-effective way but when executed it could be highly strategic given the long-tail nature of both hotel supply and PMS. From there we focused on the best product and category leader which led us to SiteMinder. One of my colleagues got us an introduction to Mike Ford through an employee. We then got on the 14-hour flight over to Sydney and created a deal.
What’s one piece of advice you have for hotel tech entrepreneurs when raising capital?
Test the investors. Anyone can look at metrics, but make sure you push them on the nuances of your positioning and make sure they understand the depth of your industry and strategic implications of the various alternatives. Mike did this to us in a big way when we pursued SiteMinder and it always stuck with me.
One pitfall I’ve seen is entrepreneurs who get ahead of themselves with regards to the amount of capital raised or valuation and focus on those items vs. choosing the right partner. This can have implications down the road. I would say to raise what you need and what strategically makes sense given your market and opportunity. And focus as much time and energy as you can on the partner. In addition to the strategic perspective which is table stakes, I tend to think entrepreneurs should focus on investors with candor (to drive constructive feedback delivered in the right way) and humility (it’s all about the team and this also makes it more fun).
How do you think the hotel technology space will change over the next 5-years?
It’s a great time to be in hotel technology given how dynamic this market is. I think we are still early in the growth journey for hotel software. In my mind, there is no doubt that software will continue to play a larger and larger role in the next 5 years and continue to reshape the industry and guest and operator experience. We have also been spending a bunch of time on a thesis we are excited about, called “SaaS as a Platform and SaaS as a Network,” which is around the continued extension of the SaaS business model and platform companies leveraging their position in creating marketplaces with employees, suppliers, or customers. I think this trend has many opportunities in travel.
For hotels specifically, I think data, connectivity, and personalization will only increase in importance. Tools like SiteMinder Exchange, which is a data layer connecting PMS with applications and demand channels, can be a big part of this and drive innovation.
I also think there will continue to be more dominant global players with companies like Ctrip continuing global expansion and Google, Facebook/Instagram, and TripAdvisor starting to see momentum on their new models. The lines in the accommodation industry will continue to blur as Airbnb ramps up their investment and focus on hotels as well.
I also feel labor management will matter more, and there will be new innovative ways to tackle this challenge. This is something we’ve seen in the retail vertical which I think will also make its way to the travel industry.
People often say that the hotel industry is a bit slow to adopt technology. Do you agree?
I agree. But I don’t think it’s been driven by the lack of interest or desire. Hoteliers care deeply about guest experiences and the ones that I’ve spent time with often always go above and beyond what’s expected. The reality is that few industries are as fragmented as hospitality particularly at the PMS level. There has always been demand for many of the new applications, but innovation has been stifled by lack of connectivity and the sales model makes the economics challenging. Some of these barriers are starting to be broken down by SiteMinder and others which I think can unlock a lot of innovation for the industry. But this is a hard problem and it’s a complicated space with lots of moving pieces so that makes it challenging.R
If you were leaving venture capital tomorrow and forced to start a hotel technology company — what would it be?
That’s a tough one. Part of working in an operator role at SiteMinder helped me realize how hard it is to be an entrepreneur and scale a company. This only deepened my respect for what they do. I’m a big believer that you need to follow your heart, so I’d want to align it to something I am passionate about. Maybe I’d do something connecting hotels/travel and yoga which is something I’ve come to enjoy. And being a CFO and travelling a lot, I also think the opportunities in corporate travel remain significant.
What is the most interesting or surprising thing that you’ve learned from investing in hotel tech?
Not too much is surprising me at this point. It feels like there is never a dull day in hotel tech! One thing I did notice about some of the larger players in the space is that they serve hospitality, but at their core they are surprisingly not hospitable. One of my partners recently did a podcast with the former CMO at Airbnb and Coca-Cola and he talked about authenticity as an enduring and compounding competitive advantage. I think this is something that will matter more and more. I think it will eventually catch up with those companies who forget that, especially in hospitality tech.
What is the best book you’ve read lately and why?
“The Outsiders” by Will Thorndike. I read it a couple of years ago and it continues to stand out to me. The book profiles eight understated CEOs who took a different approach to corporate management. These “outsider” CEOs often didn’t have the charisma that society has conditioned us to expect and were often in their position for the first time. Humble, unassuming and often frugal, they shied away from advisors and the hottest new management trends, instead focusing on a pragmatic and a disciplined approach to capital allocation which drove extraordinary returns. I found myself getting lost in each of their stories and admiring their independent thinking and patience to wait for the right opportunity. “Shoe Dog” and “Limping on Water” are two others I enjoyed.
What is one thing that most people don’t know about you?
I love yoga and meditation.
For all the startups that might want to pitch in TCV’s office, what can you tell them about your investment criteria?
We recently began investing out of TCV X, a $3 billion fund, so the opportunities we pursue are typically between $30–300M. We tend to be flexible on all other aspects of a transaction type and focus on category leadership potential and growth. I really enjoy spending time with entrepreneurs and would love for folks to reach out even if they are a bit early. Companies can scale quickly so we would love to start a relationship well in advance.
The views and opinions expressed in the post above are that
of the author and do not necessarily reflect those of TCMI, Inc. or its
affiliates (“TCV”). This post is not an offer to sell or the solicitation
of an offer to purchase an interest in any private fund managed or sponsored by
TCV or any of the securities of any company discussed. This post is
intended solely for prospective portfolio companies and their agents regarding
TCV’s potential financing capabilities. The TCV portfolio companies identified above,
if any, are not necessarily representative of all TCV investments, and no
assumption should be made that the investments identified were or will be
profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For
additional important disclaimers regarding this document, please see
NEW YORK, March 13, 2019 /PRNewswire/ — Leading instructional content platform, Newsela, announced today a $50 million C investment from growth equity firm TCV, who has a history of backing successful content platforms, including Netflix and Spotify. Newsela will use these funds to accelerate its rapidly expanding footprint in schools across the country. With over 20M students and 1.8M teachers on the platform, Newsela is now being used in 90% of U.S. schools.
Newsela sources and curates rich, engaging digital content from hundreds of partners, making it accessible and personalized to student interests. Teachers rely on Newsela as a trusted source to help them move past lecturing and deliver a more modern social learning approach that fosters deeper connections with every student in the classroom, piques their curiosity, and enables discussion.
The investment from TCV will also fuel expansion of Newsela’s new Custom Collections offering, allowing districts to customize materials that match their unique curriculum standards.
“At TCV, we focus on finding transformative EdTech companies, and Newsela has proven to be a tool that boosts learning outcomes,” said Woody Marshall, General Partner at TCV. “Our investment will help extend the platform and make it more accessible and even more valuable to students, teachers, and administrators. We are especially excited by the great engagement and feedback that Newsela already has with their users.”
As part of the transaction, Woody Marshall, a General Partner at TCV, has joined Newsela’s Board of Directors.
“Today’s digital-savvy kids have unprecedented access to content they care about. But in the classroom, they’re often limited to textbooks and other outdated, inflexible materials that aren’t engaging. Most teachers resort to piecing together content found in web searches, which is not sustainable. This lack of relevant, safe, reliable and accessible materials has created a massive engagement gap in our schools. The future of education lies in closing this gap,” said Matthew Gross, CEO of Newsela.
“With high-speed broadband now ubiquitous and 1:1 computing (a non-shared laptop available to every student) the norm in classrooms, school districts are actively seeking solutions to this problem. They’re increasingly choosing Newsela to provide safe, trusted, accessible and engaging content and assessments, while giving teachers the freedom to personalize for their students’ interests and needs. With this investment from TCV, we will scale efforts to help districts turn their technology infrastructure into quantifiable results that improve learning outcomes.”
For more information about Newsela or to join the team, visit Newsela.com.
Newsela is an Instructional Content Platform that combines engaging, leveled content with integrated formative assessments and insights to supercharge engagement and learning in every subject. Students and teachers use Newsela to find digital content from 100+ of the best sources—from National Geographic to NASA, Biography.com to Encyclopedia Britannica, the Washington Post to the Wichita Eagle. Content is instructionalized to meet students where they are, with interactive tools and analytics to take them where they want to go. Newsela has become an essential solution for schools and districts, with a presence in over 90% of U.S. K-12 schools. Newsela is the content platform for the connected classroom. www.newsela.com
Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. Since inception, TCV has invested over $11 billion in leading technology companies and has helped guide CEOs through more than 115 IPOs and strategic acquisitions. TCV’s investments include Airbnb, Altiris, AxiomSL, Believe, Dollar Shave Club, EmbanetCompass, EtQ, ExactTarget, Expedia, Facebook, Fandango, GoDaddy, HomeAway, LinkedIn, Netflix, OSIsoft, Rent the Runway, Sitecore, Splunk, Sportradar, Spotify, TourRadar, Varsity Tutors, WorldRemit and Zillow. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, visit https://www.tcv.com/.
McCarty and his partners built an innovative software company that transformed
the quality standards movement. Glenn recently sat down with TCV General
Venkatachalam to talk about the early days of the company and
deciding to sell it 25 years later. He also shares advice for founder CEOs of
technology companies looking to scale their business and what to expect if they
decide to go down the private equity path. Key topics include:
ETQ’s origins and early pivots
How to assess your buyout options and find the right partners
Preparing for success in the due diligence process
How to bring your team on board
The Early Days…
Kapil Venkatachalam: How would you describe
what ETQ does?
Glenn McCarty: Most people today know ETQ
as a provider of a quality management software platform that automates the
process of organizing operating data for managing compliance and quality
improvement across a variety of industries, including automotive, healthcare,
pharma, energy, food and beverage, and chemicals. It’s designed to layer onto a
company’s existing processes while opening up much better visibility into
opportunities for increasing quality and competitive advantage.
Kapil Venkatachalam:I’d love to hear more about the roots of
the company…the cocktail-napkin story. As I understand it, you were a consultant
rather than a technologist when you launched ETQ.
Glenn McCarty: Technically, I was an
auditor. In the 1980s the U.S. had gotten behind the curve for manufacturing
quality. The rest of the world was pushing ahead with ISO 9000, an
international standard for improving manufacturing processes, as a way to
improve product quality. It was becoming hard for U.S. companies to sell
products in Europe and Asia that didn’t come from factories with ISO 9000
Kapil Venkatachalam: How did this lead to
the formation of ETQ?
Glenn McCarty: I was working as a
quality engineer for Underwriters Laboratories in the U.S., and I was getting bored
with testing hairdryers. ISO 9000 was the big international trend in
manufacturing at the time. So I joined a group that was doing ISO 9000 audits.
giving failing grades to tons of manufacturers, because their processes just
didn’t measure up to the standard. We would get together with other auditors
after work and feel terrible. I was a 20-something quality auditor sitting in a
boardroom of a large company and telling the executive team all the quality issues
Kapil Venkatachalam: Did you see the vision for ETQ
given the demand and had it figured out from that point on?
even close. We started a consulting firm, because we saw that the big
accounting/consulting firms did not offer services to address ISO 9000. So we
pioneered that market. The thing is, we were able to help a lot of companies
achieve ISO 9000 certification, but then they struggled to maintain it. American
manufacturing was heavily oriented toward inspections and testing, while ISO
9000 focuses much more on process management with continuous improvement.
Pivoting to Software
Venkatachalam: What led you to
pivot from consulting to software?
McCarty: Two things. First, we knew from our auditing and
consulting experience that every company was different. They really valued the
processes they had developed to become successful, but there was so much
variation from company to company. While consulting was a great business that
filled a need, it was not scalable — we had to start over with every company
to learn their business. The other issue was that to maintain ISO 9000, U.S.
companies had to collect tons more information about their processes than they
were ever used to and capable of. It was a serious data management problem.
Venkatachalam: And this was decades before what we now call the “digital
McCarty: Exactly. No one was offering software focused
in this area.
Kapil Venkatachalam: What did you initially
envision for the product?
Glenn McCarty: We knew there was a need
for something more versatile than the document management systems of the time,
which had some nascent workflow capabilities. Companies needed real
workflow-based systems to lead their operating personnel through the process, track/capture
their process data, to capture their decisions. So we decided to develop
technology to track everything: all the
training records, audit findings, document approvals and revisions, different
corrective actions or non-conformances that went on in a factory.
When we made
the software, the first epiphany was that we had to develop software that could
be configurable, not customizable. And it all came from our auditing/consulting
days, knowing that companies have distinct processes. They had to be able to
layer the software over their own processes.
Assessing the Private Equity Route
Kapil Venkatachalam: When did you start
thinking about an exit? What drove that decision?
Glenn McCarty: Things were going well
for us, growth was high, and the profits were great relatively speaking to
where we came from – we started in a basement. And we said, “Let’s
continue growing this, we can do this.” We kept our heads down and kept
hitting our targets. As a founder, you think there are no limits to growth. And
while I still believe that’s true, I began to realize that home-grown leadership
had its limitations. That’s simply reality. I began to wonder what was out
Kapil Venkatachalam: How did you put that realization into action?
Glenn McCarty: The truth is, we used to get letters from
various companies saying they were interested in investing in us or acquiring
us. We didn’t even respond to them. Then one of our competitors was bought by a
large company. I called that company up and said, “Hey, why did you buy our
competitor? We’re stronger than them, we’re bigger than them, we’re better than
them.” They said, “Well, you wouldn’t talk to us.” That’s when we
started to explore our options to bring on a partner.
Kapil Venkatachalam:Did you have a framework to evaluate
Glenn McCarty: We didn’t have much of a
framework, but we did have some goals. The main goal was to maximize the value
and the potential of the business. That, for us, meant we wanted two things in
our partner. One was keeping ETQ intact as a business. We had seen scenarios where
competitors were bought by a platform company and integrated into another model.
We didn’t want that. The other key aspect for the partner was to bring a lot
more than money. To maximize the value and potential of the business, we needed
a partner with domain expertise, someone who could understand what we built and
take it to the next level.
Kapil Venkatachalam:What about a good fit in terms of culture?
Glenn McCarty: Really important.
Working with like-minded people, who see things the way you do, makes
everything easier. That realization came quickly, after we began meeting with
potential investors. A lot of them had their standard approach, and we were
supposed to just fit into it. For example, there were the folks that said,
“When we buy you, we’ll keep you folks as the executive management team.
We want to come to board meetings and have you report to us on how great you’re
Kapil Venkatachalam:Was that appealing?
Glenn McCarty: When we asked, “How are you going to help
us with our products, with sales and marketing?” they said, “Well, we know
people.” And I said, “No, that’s not going to work.” Then we had other
people say, “We’re going to send you back to “school.” You’re going to
have to do this our way.”
engineer and went to many years of school before I graduated. The last thing I
wanted was to change everything we had built and stood for. What we were
hearing was either status quo or a reeducation program, but our main goal was
to maximize value and potential. We
recognized that we needed a partner who offered value creation via a true
partnership. Once that came into focus
our next steps became clear. I would
advise founders to seek a partner who can think about your business and your
goals the way you do and bring in improvement and new sources of value. Because
you’re going to be talking about that value, and working on that, side by side,
for months to come.
Kapil Venkatachalam:Once you knew what type of partner could offer
the right fit in terms of your objectives and culture, you headed into the
private equity journey. In hindsight, what lessons would you offer to other
people who are thinking about taking this journey?
Glenn McCarty: In retrospect, the most
important thing is to prepare. Like everything else in life, luck favors the
people who are ready for it. You have to think ahead about what buyers want, so
you don’t wind up doing fire drills down the line because you weren’t prepared.
You want to show them a smooth-running business with a ton of potential.
Kapil Venkatachalam:What are the keys to good preparation?
Glenn McCarty: I would say there are two things. First,
surround yourself with good advisors. You are not in the business of selling companies,
so get people who are experienced. Your cousin, your sole proprietary
accountant or lawyer, the people on your softball team might say he or she can
advise you, but it’s unlikely. The reason it’s unlikely is, if they were
experts in buying and selling companies then they would be doing that for a
living. You don’t ask your CFO to write code, because that’s not what she/he
Kapil Venkatachalam:Also, no one expert or firm is going to
be the best at everything.
Glenn McCarty: That’s right, you want experts in each area of
financials, taxes, legal, and so on. And this gets us to the other big thing
about preparation: you have to get your management team ready. In most cases,
they are going to be the ones working with your expert advisors, and then with
the experts from the acquiring company. As the CEO you are relying on your
management team to raise the bar to meet the due diligence level. You need to
make sure that the right people on your team are aware of what’s coming their
way and connect them with the right coaches, so they can be prepared in terms
of their time, their systems, and whatever information they are going to have
Kapil Venkatachalam:What are some of the points you might
use to differentiate buyers?
Glenn McCarty: You want to know how many founder-owned
companies the potential partner has acquired in the past. How many of those
companies did the buyer scale up successfully? What is their expertise in sales
and marketing or product development? How many other companies in their
portfolio could become customers or business partners for you? You want to know
all these things, because the potential buyers are doing exactly the same
analysis of your company.
Kapil Venkatachalam:Let’s dig a little deeper here and talk
through the different areas of preparation for the due diligence process.
Glenn McCarty: The first thing to realize is that it’s going
to be time-consuming. It’s easy to think that you already have your house in
order, because your business is humming along. But the buyers have a completely
different perspective. They will require you to participate in a due diligence
process to demonstrate your companies past and future potential.
Kapil Venkatachalam:Explain why financial systems matter,
along with the numbers.
Glenn McCarty: In hindsight, while you might think the world
of your business and its strategic value, at the end of the day the objective
measures of success are financial. If you think you are headed for private
equity, you may want to invest in better financial systems first. If you do not
have a CFO, you might want to seriously consider bringing one on even though
you only have one to three years to go before exiting. One of the benefits is that your financial
advisors won’t have to work so hard to explain your financials. They are going
to spend some time at this no matter what, but better systems speed it up.
Kapil Venkatachalam:Many founders are aware of the need for
strong financials, but they are surprised by the amount of purely legal work
that also has to get done.
Glenn McCarty: We had not realized that our contracts with
customers and suppliers would be scrutinized. You have to prepare an amazing
number of documents for a transaction. So yes, you need good legal advice and
some leverage for document creation, and it should be from a firm that
specializes in the type of transaction you are doing. Even with support from an
outside legal firm, your General Counsel will be spending a huge amount of time
on a transaction, so you have to make plans for them to continue with the
business operations while the transaction process is in play.
Kapil Venkatachalam:So now you have your advisors lined up.
They’re all experts. But the people on your team may not be experienced in the
process ahead. What do you tell them? How do you prepare them?
Glenn McCarty: First, it’s important to understand the
implications of what you are asking. In our case, we had a lot of long-term
employees who had worked their way into senior management, so they had never
seen this process somewhere else. In that situation, you have to ease them into
the whole idea, bring them into your thinking, and get them aligned before you
start explaining what they’re going to have to do.
Kapil Venkatachalam:Is this an area where you can get
Glenn McCarty: I think you have to get them involved, because
they know the drill and probably most of your team doesn’t. They can provide
education about the process before it starts and coaching all the way through
it. You need this because the same employees you are asking to help you sell
the company are also running it. No matter how you look at it, this is an ask
that is an additional task to their day job. The danger of distraction is
there. You need your team to be on top of the due diligence process, while also
making sure the ship doesn’t lose speed or direction.
Kapil Venkatachalam:That’s great, thanks, Glenn. My final
question is about the takeaways for founders who may be looking at these
options. What’s your advice in a nutshell?
Glenn McCarty: Private equity firms provide an interesting
alternative to help you maximize the potential of what you have already built.
That said, you have to take the time to find the right firm for you – whose
values, experience, and vision are aligned with yours. As we discussed earlier,
you have to prepare your team for the journey before you lead them on it. And
finally, recognize the value of good advisors. They are worth the money because
they bring you the right partners and prepare you for a successful partnership.
Selling your business is both exhausting and exhilarating, and I am grateful
for all the support I received.
Kapil Venkatachalam:Thanks so much, Glenn.
The views and opinions
expressed in the transcript above are those of the speakers and do not
necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). This
transcript is not an offer to sell or the solicitation of an offer to purchase
an interest in any private fund managed or sponsored by TCV or any of the
securities of any company discussed. TCV has not verified the accuracy of
any statements by the speakers and disclaims any responsibility
therefor. The TCV portfolio companies identified above, if any, are not
necessarily representative of all TCV investments, and no assumption should be
made that the investments identified were or will be profitable. For a complete
list of TCV investments, please visit www.tcv.com/all-companies/. For additional important
disclaimers regarding this document, please see “Informational Purposes Only” in
HELSINKI & MENLO PARK, Calif.–RELEX Solutions, a leading provider of unified retail planning solutions, today announced that TCV has made a $200 million minority investment in the company. TCV is one of the largest providers of capital to growth-stage private and public companies in the technology industry and has backed industry-leading companies, including Airbnb, Facebook, Netflix, Splunk, Spotify, WorldRemit and Zillow.
RELEX provides an end-to-end retail planning solution enabling companies to improve their competitiveness through accurate forecasting and replenishment, localized assortments, profitable use of space and optimized workforce planning. RELEX has consistently achieved 50 percent year on year growth and attracted leading brands across the globe including Coop Denmark, Franprix, MediaMarkt, Morrisons, PartyCity, Rossmann and WHSmith.
RELEX will use the funding to continue to fuel its successful growth. The company’s three founders, Mikko Kärkkäinen, Johanna Småros and Michael Falck, see the additional funding as a means of fulfilling their vision of changing the world of retail planning. The founders will stay in their senior management roles, remain significant shareholders and will continue to set the strategy and direction for the Company. RELEX’s existing investor Summit Partners will retain an equity stake in the business and will continue to hold a seat on the RELEX board of directors.
“The development of retail and supply chain planning has been held back by siloed organizations and limitations in how technologies integrate,” comments RELEX’s CEO Mikko Kärkkäinen. “Our vision is to change how the field works by driving a more responsive unified planning process. We are already off to a good start — now we will increase our speed by accelerating our product development ambitions, hiring more tech talent and investing further into the development of our organization as well as further expanding our retail-specific machine learning and AI capabilities that complement our core data processing platform.”
TCV’s General Partner John Doran says: “We seek to partner with businesses and management teams that are poised to grow to dominate global markets in their sectors. We are impressed by RELEX’s modern, highly flexible and cloud-based software, as well as its exceptional data processing performance. RELEX has very high customer satisfaction with customers benefitting from inventory and waste reduction, improved stock availability, more efficient goods handling and less time spent on ordering. We are aligned with the founders’ vision for RELEX and look forward to supporting the management team.”
“With a robust product and a keen focus on delivering ROI to customers, RELEX has built a significant customer base across numerous retail segments and geographies. We are thrilled to continue our partnership with RELEX and delighted to welcome TCV,” adds Han Sikkens, a Managing Director with Summit Partners.
RELEX Solutions is dedicated to helping retail businesses improve their competitiveness through localized assortments, profitable use of retail space, accurate forecasting and replenishment, and optimized workforce planning. Our SaaS solutions deliver quick return on investment and can be used independently or jointly for unified retail planning, enabling cross-functional optimization of retail’s core processes: merchandising, supply chain and store operations. RELEX Solutions is trusted by leading brands including WHSmith, Morrisons, AO.com, Coop Denmark and Rossmann, and has offices across North America and Europe. For more information go to: www.relexsolutions.com
Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. Since inception, TCV has invested over $10 billion in leading technology companies and has helped guide CEOs through more than 115 IPOs and strategic acquisitions. TCV’s investments include Airbnb, Altiris, AxiomSL, Believe, Dollar Shave Club, EmbanetCompass, EtQ, ExactTarget, Expedia, Facebook, Fandango, GoDaddy, HomeAway, LinkedIn, Netflix, OSIsoft, Rent the Runway, Sitecore, Splunk, Sportradar, Spotify, TourRadar, Varsity Tutors, WorldRemit and Zillow. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, visit https://www.tcv.com/.
Category-creating companies typically tackle a problem people didn’t know they had, or a problem considered too big to solve. Under CEO Jeff Hudson, Venafi has taken on one of the largest unrecognized problems imaginable: managing the encrypted communications between the machines that run in every organization and the internet. As result, Venafi is defining a new category called Machine Identity Protection.
At TCV, we’ve been watching the number of machines grow exponentially. It’s not just that IoT (Internet of Things) is connecting physical devices to the internet. It’s the software machines – virtual servers, containers, microservices – that are proliferating even faster due to cloud computing and the shift to mobile apps. These software machines are now creating machines on their own. Everything we do online involves machines identifying each other before granting access, delivering data, or conducting transactions. If those encrypted connections are not secure, nothing is.
But surprisingly few companies are trying to crack this problem at the necessary scale. Instead, the world poured billions of dollars into securing human identities, while the number of machine identities grew exponentially behind the scenes. When Jeff Hudson came to Venafi in 2010, driving the company’s evolution toward machine identity protection, we saw a great fit with our core investment thesis that continued growth in the digital economy depends on security. Creating the Machine Identity Protection category positions Venafi at the intersection of multiple major tech trends including cybersecurity, the cloud, IoT, SaaS, and DevOps. So we are truly excited to invest in the company and partner with Jeff’s team in scaling Venafi to its full potential.
The company has plenty of momentum, with more than 300 customers, and with its portfolio of 30 patents, Venafi has lifted machine identity out of the fragmented, nuts-and-bolts phase and elevated it to full solution status. The Venafi platform gives enterprises global visibility into their machine identity risks, generates actionable intelligence for managing them, and automates the processes for addressing them. Early adopters have learned that the Venafi platform transcends and unifies many of the security point solutions out there, from inventorying and policy enforcement to analytics and threat detection. And once customers discover what Venafi can do for them, they want more.
None of this comes as a surprise, because Jeff has a rare combination of strategic vision and disciplined execution. He plays the long game and that’s why he increased Venafi’s R&D efforts to address a problem most people didn’t see coming: the need to secure encrypted communication not just between people and machines, but between the machines themselves. At TCV, we also witnessed Jeff’s skill in recruiting world-class talent at a time when the supply of engineering talent is getting tight, particularly in the cybersecurity sector.
Jeff and his team recognize the critical role security plays in the digital economy. It’s not just about selling product, it’s about securing connections, data, and commerce. It works with anyone’s cloud and any type of machine. The open, public key infrastructure (PKI) system that underlies internet security has created a horde of “Certificate Authorities” (CAs), to the point that many large companies don’t know how many different CAs they are dependent upon. We believe Venafi dissolves these complexities, giving enterprises a unified, vendor-agnostic, dashboard-driven view of machine identity.
Given the growing risks that all companies and consumers face from cybercriminals, it’s essential that the fragmented security industry find more cohesive solutions, and Venafi is showing a way forward. TCV is excited to come onboard and contribute to the journey.
The views and opinions expressed in the blog post above are that of the author and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). This blog post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified above are not necessarily representative of all TCV investments and no assumption should be made that the investments identified were or will be profitable. Certain information contained herein has been obtained from third-party sources, including any portfolio companies described above. Such information has not been independently verified by TCV, and TCV does not assume responsibility for the accuracy of such information.
Salt Lake City–November 29, 2018–Venafi®, the leading provider of machine identity protection, today announced the closing of a $100 million round of financing, led by TCV with additional participation from existing investors, QuestMark Partners and NextEquity Partners. TCV is one of the largest and most respected providers of capital to growth-stage private and public companies in the technology industry and has backed industry-leading companies, including Airbnb, Alarm.com, Cradlepoint, Genesys, Netflix, Rapid7, Silver Peak, Splunk, Spotify and Zillow. As part of the transaction, TCV general partner, Jake Reynolds, joins Venafi’s board of directors.
The funding will be used to accelerate Venafi’s growth and to cement the firm’s growing market leadership. In addition to fueling growth, $12.5 million of the investment will be made available to third-party developers in the first tranche of the new Machine Identity Protection Development Fund. Venafi created the fund to accelerate the integration of machine identity intelligence into a wide range of machines in the enterprise and further enhance and expand the machine identity ecosystem. The fund will allow developers, including consultancies, systems integrators, fast-moving startups, open source developers and cybersecurity vendors to apply for sponsorship. This sponsorship will allow recipients to build integrations that deliver greater visibility, intelligence and automation for Venafi customers across any technology that creates or consumes machine identities.
“Identity is the foundation of security,” said Jeff Hudson, CEO of Venafi. “The cyber world is made up of machines, and all machines require identities for the cyber world to be secure. As a society, we understand the risks associated with human identity theft very well, and we spend over $8 billion per year protecting human identities. However, most organizations don’t yet understand the risks associated with machine identities and, as a result, spend almost nothing to protect them. This leaves our global digital economy at risk. TCV has a long history of partnering with the world’s leading technology firms, so we’re very excited about the opportunity to work with them. Their investment and expertise will help us ensure that the world’s machines, including hardware and software from smart machines, virtual servers, applications, containers, and more, are connected, safe and secure.”
Just as usernames and passwords are used to identify and authenticate humans, machine identities enable the trusted relationships between machines that control the flow of sensitive data. Because machine identities are poorly understood and often unprotected, they are subject to being exploited by cybercriminals. The Venafi platform protects the machine identities whose underlying technology is cryptographic keys and digital certificates by providing unparalleled visibility, intelligence and automation.
“The team at TCV is excited about our partnership with Venafi,” said Jake Reynolds, general partner at TCV. “DevOps and IoT are driving growth in the number of machines thanks to cloud computing, virtualization, and the proliferation of connected devices. Venafi is well-positioned to provide the machine identity protection for enterprise machines, and we look forward to supporting the Venafi team as they continue to scale in this rapidly expanding market.”
With over 30 patents, Venafi delivers innovative machine identity protection solutions for the world’s most demanding, security-conscious Global 5000 organizations, including the top five U.S. health insurers; the top five U.S. airlines; four of the top five U.S. retailers; and four of the top five banks in each of the following countries: U.S., U.K., Australia and South Africa.
Venafi is the inventor and cybersecurity market leader in machine identity protection, securing connections and communications between machines. Venafi protects machine identity types by orchestrating cryptographic keys and digital certificates for SSL/TLS, IoT, mobile and SSH. Venafi provides global visibility of machine identities and the risks associated with them for the extended enterprise—on premises, mobile, virtual, cloud and IoT—at machine speed and scale. Venafi puts this intelligence into action with automated remediation that reduces the security and availability risks connected with weak or compromised machine identities while safeguarding the flow of information to trusted machines and preventing communication with untrusted machines.
Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. Since inception, TCV has invested over $10 billion in leading technology companies and has helped guide CEOs through more than 115 IPOs and strategic acquisitions. TCV’s investments include Airbnb, Altiris, AxiomSL, Dollar Shave Club, EmbanetCompass, EtQ, ExactTarget, Expedia, Facebook, Fandango, GoDaddy, HomeAway, LinkedIn, Netflix, OSIsoft, Rent the Runway, Sitecore, Splunk, Spotify, Varsity Tutors, and Zillow. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, visit https://www.tcv.com/.
A spoken or written account of connected events; a story.
What separates companies that move quickly towards a common goal from those that struggle to find unity? Why is it that some teams can routinely find a second, third, or fourth gear of execution? How do people who start with divergent objectives find common ground? Perhaps most importantly, why are some leaders successfully plug-and-play no matter what technical problem, cultural issue, or market challenge they are tasked with addressing?
In my last post on “Hiring for Leaders”, I talked about how you can both screen for and cultivate leadership qualities as your company scales. These qualities include taking positions, creating environments where multiple perspectives are acknowledged, and being adaptable. In this post I’ll build on that framework to discuss narrative – a critically important concept that is talked about often but still remains confusing for many people in business.
Why Is Narrative So Important?
During my time at Facebook and Pinterest, I noticed one element that drove successful outcomes: the connection between people and company objectives. This connection can take different forms: intuitively understanding the why of what people were tasked with, linking personal goals with company goals, creating less friction with other teams, and being resilient in the face of obstacles. The differentiator in all of this was the construction and delivery of a narrative.
Narrative creates the ability to connect people to your company and your company mission and drive collective action. The corollary to this deceptively simple statement is that narrative is not one thing – it’s not just a story. Narrative binds individuals to a living set of company attributes.
The following tenets are core to creating a compelling narrative.
Establish Clear Mission and Vision Statements
You can think about the mission and vision as the why and the how. Both are critical to any organization, large or small, because they become the scaffolding for how teams construct their roadmaps and how leadership talks about them.
At Pinterest, the mission was to help people discover and do the things that they love. As our technology advanced and our customers engaged with it more fully, our vision of how Pinterest could change the world also changed. This taught me that while the vision of a future outcome may not stay the same, the mission – the why – should remain stable. It’s the foundation for how people and teams answer the “Why are we doing this?” questions that naturally arise. Changing the mission can create confusion about priorities.
Make sure every team creates a mission and vision statement for the work that they do. You may call it a scope doc, a PRD, MRD, or something else entirely. But if the mission doesn’t answer why people are working on something, and the vision doesn’t show how that work changes things for customers and the company, it’s difficult for people to understand why and how their work is helping the company achieve its objectives.
Develop Long-Term Roadmaps
A roadmap is a narrative about where you’re going and what happens along the way. Push your teams to create three-year roadmaps. Acknowledge that the value in the exercise is not the accuracy with which teams can predict the future, but rather the exercise itself.
Teams with a roadmap for the future end up moving faster because they have already envisioned a journey in the process of creating the roadmap. They’re not disoriented when the real road turns or twists, because they already foresaw and prepared for some of them – and anticipated that there might be a few surprises along the way. That in turn alleviates the level of oversight and explanation that leaders need to provide, because their teams are advancing within a larger, more longitudinal comfort zone.
In creating the roadmap, aim to resolve it to a vision statement. This should be a 1+1=3 exercise where individual functions intersect and combine to create an even more powerful outcome. The company vision should be a leading indicator of what teams should strive to accomplish.
A good way of thinking about this at the team level or even division level is to break out into thematic areas and assign varying levels of confidence in the work. Those confidence levels will decrease the further you get out into the future.
Even if the technology you envision doesn’t exist, writing down the roadmap is a helpful exercise to plotting out an initial path.
Everything is measurable, but not everything can be measured in the same way. Create space for teams to define their metrics so that their output can be measured in ways that are meaningful. These metrics naturally generate narratives about how to meet or exceed them. They become a source of ongoing conversation within teams and between teams: Do we have the right metrics for meeting company objectives? Should we adjust them for technology or customer behavior? Do our metrics mesh with our mission and vision?
When these conversations take place, people feel naturally connected to the company and its goals. This process is so powerful that it’s essential to make sure that all the team-level metrics ladder up to company-level objectives. You don’t want people embracing their metrics (and their roadmap) and then arriving someplace the company did not want them to go.
You also need to ensure that team roadmaps do not collide and create conflict. If they do, reflect on each team independently and try to assess how it moves the company forward towards its top-level goals. If one team comes out on top, talk to the other team in the conflict about how they could adjust their roadmap and still achieve their goals and the company’s goals.
Know that there will always be trade-offs to make, and that your job as a leader is to create the narrative that keeps teams informed, aligned, and excited.
Create Cross-Functional Narrative Forums
Often as companies grow quickly, the first thing to go out the window is inter-team communication on strategy and goals. This can lead to misalignments, political posturing regarding resources, and management attrition. A great way to prevent this is to create regular forums for your leadership team to sit together and explain to one another what they are doing and why. You’re not asking them to justify their existence or run their numbers. You’re asking them to tell everyone else a narrative about their mission, vision and roadmap, and how the journey is progressing.
Smart leaders will bring a narrative that is tightly aligned with what they hear from their teams. It also gives the narrative “legs” for traveling across the entire enterprise – something that is otherwise rare.
Getting team-level narratives elevated to the leadership level, across functions, accomplishes a number of positive outcomes. First, it creates empathy among and within the leadership team about other team members’ goals, challenges and objectives. During resourcing conflicts, you want leadership team members to be able to advocate just as empathically for another team as they would for their own.
Second, it forces understanding. Anytime you have to tell a good story, you have to understand that story far better than the people you are delivering it to. The requirement to share your team’s story with other leaders forces you to master that narrative. Detailed work has to be distilled down to essentials. Technical complexity has to become clarity. Acronyms disappear, replaced by meaningful, memorable terms. Just the process of preparing a narrative about your team can help you spot work that is not truly aligned with company objectives.
Third, delivering cross-function narratives establishes trust at the inter-team level. Putting leaders in a position to explain to their teams why other teams are doing what they are, or why a trade-off decision went against them, establishes an authentic authority.
The most successful teams have leaders that can weave a story using the foundations described above and connect it at various altitudes throughout the company. Driving board alignment around a strategic shift isn’t that different than getting your ops teams to the same place. It’s about creating shared understanding that drives people’s internal connection to the company’s goals.
Metrics, technologies and quantitative goals are important for any business to succeed. But without a narrative that makes people own them, they’re just components of a machine without a soul.