By Hadley Harris, Founding General Partner, Eniac Ventures
Today, we’re announcing that our portfolio company Anchor has agreed to be acquired by Spotify in a significant acquisition. In the three short years since we led their seed round, Anchor has created significant value, becoming the dominant platform for creating, distributing and monetizing podcasts. As of January 2019, Anchor powers 40% of all new podcasts.
We led Anchor’s seed round in 2015 because we believed audio was an underserved form of content and a platform that enabled people to easily create and distribute podcasts was a natural way to address that unmet opportunity. While huge platforms had been built around photos (Instagram), video (YouTube) and text (Twitter), there wasn’t a platform that let users share audio as a way of communicating and expressing themselves.
My partners at Eniac and I have thoroughly enjoyed working closely with Mike Mignano, Nir Zicherman, and the incredibly talented team they’ve built. We are thrilled that Anchor will continue to execute on their vision of democratizing podcasts.
Reflecting on our time with Anchor, there are four key takeaways we feel will continue to drive how we work with founders.
1) Ownership is critical
Traditionally, venture capital funds have been very ownership-oriented, but that strategy hasn’t always permeated down to seed stage firms. Often seed investors focus more on making lots of smaller bets based on the idea that the power law of venture-backed startup outcomes would yield optimal results for that approach. At Eniac, our approach has been to make fewer investments with ownership in each deal closer to those of traditional series A/B firms. This gives us the ability to focus our efforts to have a greater impact on accelerating each portfolio company and allows us our investors to benefit substantially from outcomes like Anchor that result in returning a significant percentage of our fund. We believe this approach better aligns us with our founders enabling everyone around the table to benefit from these types of outcomes.
2) Don’t be overly dogmatic
In 2015, one of our areas of focus was the consumer mobile space. As the consumer app ecosystem continued to evolve, we came to the conclusion that investing in pre-launch consumer mobile companies was becoming prohibitively difficult. Therefore we decided to avoid these kinds of investments in favor of post-launch consumer and B2B companies. Soon after, we were introduced to Anchor by our friends at Betaworks. We loved the founders and their vision but were faced with a difficult decision based on our new perspective. By focusing on first principles versus blindly following our own rules, we were able to come to the conclusion that Anchor was a bet worth making, even if it conflicted with a part of our strategy.
3) Cofounder relationships are pivotal
One attribute of a startup we’ve always weighed stronger than most other seed investors is the shared history of the founding team. Having known my partners at Eniac since our undergraduate days in the late ’90s, we strongly believe in the ability of tight-knit teams to execute. This opinion has been corroborated by our experience working with Mike and Nir. Not only did they work closely together for years at Aviary, but their strong relationship was evident from their interactions during our diligence process. We continue to see this thesis play out in our investments with tight-knit co-founders such as Alloy, Boxed, mParticle, Owlet, Shine and, Tapcommerce to name a few.
4) Following your theses allows you to see opportunities others miss
Before meeting Mike and Nir, we had a strong thesis that audio was an underserved form of user-generated content. While huge platforms had been built around photos (Instagram), video (YouTube) and text (Twitter), there wasn’t a platform that let users share audio as a way of communicating and expressing themselves. When we met the team, we immediately believed we had finally found a company whose vision aligned with our thesis. As I explained above Anchor was at an earlier stage than we wanted in invest in consumer UGC companies, but our shared vision helped give us the comfort to move forward and partner with Mike and Nir.
Make sure to check out Hadley’s Seed to Scale podcast with Michael Mignano: