Mattermark – An Example of How We Decide to Invest

There is a moment during the exploration of a new relationship where a switch flips and the answer is “I want to do this.”

With Mattermark, I remember the moment clearly – I was at The Kitchen in Boulder with the founders (Danielle Morrill, Kevin Morrill, and Andy Sparks) and my partner Seth. I had just put a garlic french fry in my mouth (if you’ve never had them at The Kitchen, they are epic) and looked over at Seth. He looked at me and gave me that “yeah – we should do this” look. And that was it.

As an investor for the past 20 years, I’ve had this happen many times. When I first started investing as an angel investor in 1994, I was focused on a very simple set of criteria. First, did I care about / have affinity for the product? Next, were the entrepreneurs obsessed about their product? Last, did I want to be a long term partner with the entrepreneurs?

With a slight diversion in the late 1990’s when everyone (including me) lost their mind for a few years, I’ve held to this algorithm for all my investing. If you look at the boards I’m on, including companies like Fitbit, FullContact, Oblong, Orbotix, littleBits, Yesware, and Return Path, this pattern should be pretty clear. And if you ponder how I originally got involved in Techstars, and how my role has evolved, those three criteria loom large.

I’ve been interested in private company data since I started Feld Technologies in 1987. Well before the web existed, I was physically tearing articles out of industry magazines and sending them to customers, prospects, other entrepreneurs, and my partner Dave, who probably got tired of the stack of paper with notes scribbled on them that landed on his desk each day. I’ve been through multiple iterations of competitive databases, endless applications for trying to keep track of companies I’m either an investor in or compete with, and every different type of alerting system you could imagine.

During the first decade of my experience with this, I couldn’t afford to subscribe to anything. Every now and then I’d get a free trial and realize how shitty the underlying data was. For the past almost 20 years, I’ve been able to afford the subscriptions, but the data is still shitty. There have been several efforts to crowdsource this kind of data, or make it publicly available, but none have resulted in anything magnificent.

So, regarding the question of “do I care about / have affinity for the product of Mattermark”, the answer was a strong, unambiguous yes. I know how hard the problem is, how wide open the opportunity is, how far it will scale in multiple directions (not just the data set, but the use case, target market, and ultimate product family.) My affinity in this case borders on obsession, just like it does with the Contact Management problem.

Now, let’s shift to #2: “Are the entrepreneurs obsessed about their product?” If you know Danielle, Kevin, and Andy, you know the answer is yes. But there’s nothing quite like experiencing it. Over the past year, as I’ve gotten to know Danielle, I’ve seen her obsession and focus, not just on the short term Mattermark product, but on the long game she and the team is playing. During dinner at The Kitchen, which was the first time we were face to face since we’d met at the beginning of the year, and the first time I’d interacted with Kevin and Andy, all I had to do was sit there, prompt every now and then, and I got another layer of product vision. Obsession. Endless intellectual exploration of where this could go. When I challenged ideas, there was no defensiveness, just more exploration. When I suggested things, there wasn’t blanket approval or rejection, but rather a socratic inquiry as Danielle, Kevin, and Andy tried to understand what I was suggesting. I watched Seth do his thing and the gang continue to engage the same way. At some point, Seth and I had the look I referred to at the beginning of this post.

I’ve always been impulsive about #3: “Do I want to be long term partners with the entrepreneurs?” For the first decade of my investing experience, I made a lot of mistakes on this dimension. Howard Diamond, a close friend and entrepreneur I’ve worked with since 1996 (now the CEO of MobileDay), regularly criticized me as been too trusting, too willing to see the good in people, and too patient with people. This kicked me in the ass very, very hard between 2001 and 2004. While it didn’t make me cynical, I calibrated my filters as I slogged through three more very long years between 2004 and 2007. I like to believe that I brought a new frame of reference around this to Foundry Group, informed by Howard’s constructive criticism, feedback from lots of other friends, learning from my mistakes, and all the long-term positive relationships that I now had as a frame of reference.

I also have a lot of people in my world who know me well, know what I like, and know who I will work well with. This includes a small set of VCs, such as Jon Callaghan at True Ventures and Greg Gottesman at Madrona who know me so well that they only approach me with companies and founders they know I will love. But mostly I use the many CEOs and entrepreneurs I have developed a long-term relationship with to help me calibrate what Amy likes to refer to as my “poor impulse control”, sort of like Raven’s from Snow Crash.

The combination of my own experience and feedback from my universe – both good and bad – made it clear that I wanted to be long term partners with Danielle and team. Recognize that I’m not looking for unambiguously good feedback – we are all flawed in different ways, make mistakes, and have endless and enormous opportunities to learn. An understanding and appreciation of that by the entrepreneurs I work with is deeply important to me.

Back to dinner. Seth eventually had to leave and we kept at it for a while. Driving home, I rolled around what was left in my mind as questions and concerns I had about making an investment. When I got home 20 minutes later, I had none. When we got together the next morning for more discussion, it was easy to look forward and pretend I was already an investor, which felt good. At some point, we shifted to a mode where I asked Danielle, Kevin, and Andy what they wanted, expected, and demanded from an investor. I let them ask me whatever they wanted for a while. But by this point I was all in, as long as they wanted to work with me.

Sure, we did some more up front work and some formal legal diligence, but in that moment at The Kitchen, Seth and I knew that we wanted to be investors in Mattermark.

And that was that. Last week we led a $6.5 million round in Mattermark. I’m delighted to finally be an investor in a problem I’ve been obsessed about for 20 years. We are at the beginning of the journey – check back in a decade from now to see whether or not we are successful. But, regardless, this is a team I hope to work with for the rest of my investing career.

  • Love that story, and I’ve been a big fan of Mattermark and Danielle’s team from Day 1, when they were 6 on the team. Their data was a feast to me as I started writing using their data as part of the story.

    “I got another layer of product vision.” Key statement. It’s great when you have that discussion with an entrepreneur, and the more they de-layer their vision to you, the more you get attracted to them. All you have to ask is “What’s the vision.”, and if the river starts flowing in a direction and intensity you like, that’s an amazing feeling.

    • Yup – you mentioned them to me early on. It was fun to see your name on the cap table…

      • You know, when Danielle tweeted she was in Boulder a couple of months ago, I immediately thought she was there to see you & guessed you would invest. Was just a hunch at the time, but an educated one 🙂

  • Ah. nice to see the rationale. I saw your name on the Venture Beat article and was wondering how this fit in your thesis…

    • It’s in our “Glue” theme.

  • It is pleasure to see how you are able to express the intermix of emotions and professional criteria which leads you to such an important decision. The most important point for me is the big personal decision that you take when investing which is actually entering a new person into your life and only people whom have gone through the path of startups understand the how true and meaningful it is.

    • Good observation. At this point I’m being very selective about adding “deep” relationships. I’ve got so many “shallow / medium” relationships that I spend time on already, so my ability for more deep ones is limited.

      • In my experience I have shifted through multiple themes and notions about what kind of people would be best to work with in terms of commitment, passion, open communications and professionalism (willing and capability to learn). I moved from assuming people I know for a long time would be best up to new people where I had a good hunch on them and I have to modestly admit I did not get to any winning formula. Every venture I was involved in happened in a different part of my life and their life and eventually at the most critical points I have witnessed different things then my original expectations from them, surprisingly good or bad. Even from myself:) So I fully agree that the best thing you have for taking the decision is the inner light which is your best guide at the moment and if you have this sync with another person like Seth then it is a blessing.

  • “regardless, this is a team I hope to work with for the rest of my investing career.” – no matter how good the opportunity, how promising the returns might be, this is the best of all litmus tests.

    • Indeed. It’s the question I always ask myself – some version of “do I want these people to attend my funeral?”

      • Having buried my father earlier this year, I very much understand that. The people who come to honor a life are usually the people who honored that relationship in life. Investors are a part of an entrepreneur’s life for the long haul. It’s actually a question I’ve asked myself about potential investors as well.

  • One of my favorite posts Brad.

    At the end of the day, its all about the human touch and the people that inherit the ideas and the passions behind the companies.

    • Thx. Yeah – it’s easy to forget that ultimately humans are still behind all this stuff and understanding them is key.

  • Great post, Sir.

    I especially love this line: “When I suggested things, there wasn’t blanket approval or rejection, but rather a socratic inquiry as Danielle, Kevin, and Andy tried to understand what I was suggesting.”

    I wonder if too many times entrepreneurs are so emotionally attached to grab capital that they will accept concepts that are potentially out of line with their business model without really thinking it thru.

    I don’t think I can state this enough: It’s not easy (and takes courage/leadership) to tell your backer that you disagree with them.

    However, when engagement is handled like that of your Mattermark team then you got great chemistry and engagement. That, my friend, is an underpinning of a fantastic relationship.

    Do you ever get suspicious of an entrepreneur that is too quick accept whatever you may tell them? And do you test them at the beginning as part of some larger litmus test?

    Thanks for the posts, Brad. Please keep them coming.

    • Re: “Do you ever get suspicious of an entrepreneur that is too quick accept whatever you may tell them? And do you test them at the beginning as part of some larger litmus test?” – yes and sort of. I know I’m wrong a lot, have plenty of stupid ideas, and can’t possibly be as educated about a business as founders who are living it 24 hours a day. So, I listen carefully to the responses and watch the body language carefully. Overcompensation in either direction is a bad signal for me.

      • We (entrepreneurs) are always being watched. And if technically not, we should always play the game as though we are.

        Have a happy holidays, Sir.

        • You know I have learned you just have to be yourself and not play the game. It is too hard to play the game. The energy and CPU cycles you use trying to play the game take away from the actual you.

          That’s easier said than done however.

          • I’m with you… When I say “play the game” I am relating it to a sports competition – always hustling and playing to win. Hope that clears up any misunderstanding. Cheers!

  • Rick

    “Contact Management problem”
    .
    If you describe the objective in detail it should be easily doable.
    .
    Mattermark appears to be another great example showing we really are in the information age.

  • Blcarey

    Brad,

    About a year ago, I looked at the Mattermark and other similar products (PrivCo and Pitchbook) and found the offering somewhat wanting… there was little data about the people in the investee companies and even less about the investor companies. I hope that this problem gets solved, because right now, if I wanted to, I could spend $30,000 a year in subscriptions and still not get the data I’m really seeking.

    Who invested what, when and how can I contact them to ask more questions or see if they’re looking for similar ideas. Or who’s running interesting product companies (Software,Hardware, HealthTech, MedTech, Life Science, etc.) whom I could help grow.

    Maybe it’s time for me to take another look at Mattermark…

    • Great feedback and yes – this has been the problem for the past 20 years. Give it another try – feedback welcome!

      • Blcarey

        Allright.. I’ll schedule some time in my calendar for next week.

        Thanks for your great work.

  • Raven/Snow Crash cameo in a post on leading Mattermark’s round? Series A for Awesome.

    • You seem to be the first person who caught that. Look for a lot more sci-fi references in my posts in 2015 – that’s one of my easter eggs I’m going to do more of.

      • 🙂 Looking forward to it. I enjoyed the MIT Science Fiction Society shout out in your other recent post too. Incidentally, have you read William Gibson’s latest, The Peripheral? A little confusing at the beginning but evolves into pure gold. I think it’s right up your alley.

        • Both Amy and I read Peripheral in Bora Bora. We each loved it.

          • Nobody paints visions of the future like Gibson. I came away thinking about what themes/startups/products out there today are playing into his thesis. Fun thought experiment for evaluating new tech.

  • It’s fascinating as well as a privilege that you allow others to get into your head, so once again thank you for the unparalleled transparency/ authenticity. It works because it’s real. And it’s *deeply* appreciated.

    I had seen on Crunchbase that Foundry Group was leading the 6.5 M round.

    I find Danielle Morill uber-smart from having listened to her in an interview, as well as reading a few posts on her blog. She would be obsessed with her product.

    I was intrigued earlier this year when you did an Angel List syndicate to raise an angel round for Mattermark.

    Good for them to be working with you.

    Another example of good Karma at work 🙂

  • Very underrated evening newsletter as well!

  • Brad- once you had a gut positive feel for the problem and the founders, how much of a role did MM’s traction & metrics play in the decision?

  • Alex Iskold

    Awesome!

  • You had me at Danielle. She’s awesome. First met her at SFNewTech when Jeffie Lawson did his first Twilio demo onstage many years ago. She was employee #1 at Twilio and responsible for marketing/developer outreach, etc. I could tell immediately she was someone very special and poised for greater things. We are still only seeing the beginnings of what she is capable of.

  • ME SAY AWESOME!

    IT GOOD PRODUCT NOW, WITH PEOPLE THAT GOING TO MAKE IT BETTER.

    • My favorite endorsement of the day!

    • john francis

      looks too good be true /does come a leash!!!!!

  • Jeff Boodie

    Great read- a friend just sent me the “Welcoming Brad Feld to the Mattermark Team” article and I landed here eventually from a separate link. As an entrepreneur raising seed funding for JobSnap currently I needed to read this article- As much as the investor chooses you, you also choose them as you journey on. Your 3 points on what you look for are spot on. In the end we are humans looking to work with people who are passionate about their product, we like and that we believe in.

  • Very insightful and very true not only for what investors should consider when investing in startups but also as a general guide on developing meaningful and impactful relationships:

    1) aligned interest
    2) mutual respect for the belief system of the investor/entrepreneur
    3) aligned vision
    4) long term commitment
    5) basic feeling of comfort and liking to work with each other

    It is that simple. It is not about valuation, dilution, pro-rata rights etc. if we as entrepreneurs, investors and business professionals don’t get the human Dale Carnegie concepts right in building trust in a business relationship, none of the specifics matter. In my view, the specifics should never be discussed before the basic human elements in a business relationship are aligned. Well written Brad.