Howard Leibman is a director of Equity Venture Partners, exclusive adviser to Deputy in relation to its Series-A capital raising. Upon completion of the Series-A investment, Howard joins the Deputy board as non-executive director.
On Christmas Eve 2016 Deputy signed definitive documents for a US$25M Series-A investment from OpenView Venture Partners. The prior eight weeks had been intense and competitive. In the true sense, OpenView won the deal. Here’s some of the story.
A Brief Context
Deputy is one of those exceptional Australian startups which, from virtual obscurity a year or two ago, is now rapidly establishing global leadership in its category. Self funded to date, Deputy has flown largely under the radar whilst going about building an extraordinary platform and quietly acquiring market share across some 50 countries in which it today has a presence.
Not surprisingly, over the past year the company has come to the attention of the US venture community and has been fielding inbound enquiries with increasing frequency. (As a longstanding adviser to the Board, I’ve had a front row seat as the level of interest has amped up.)
Some six months ago we decided it was time to raise capital. We prepared thoroughly. We had all our materials in good shape, our models locked down and the data room ready to go. In late October we spent a week between San Francisco and Palo Alto in back-to-back meetings with over a dozen venture firms, including most of the biggest names. Some we met twice over the week. A couple, three times.
The level of interest was overwhelming. Every day these firms see the best startup opportunities the world over, yet within a week of our return to Sydney we had some ten funds expressing interest, diving into the data room and commencing serious work. We found ourselves in the thick of multiple parallel due diligence processes as some of the most high profile investors in the world scrambled to get ahead of the process.
A week later we were receiving term sheets and indicative offers and found ourselves in the unexpected position of having to choose our investment partner.
First Impressions Count
Most initial meetings followed the standard format. Casual intro’s, the Deputy pitch, follow-up discussion. Virtually all meetings were positive, but one stood out.
We met OpenView at the nondescript office of one of their portfolio companies in downtown San Francisco. To our surprise, after standard small talk, the OpenView team asked whether, rather than having us pitch, we’d allow them to present the Deputy story to us. They proceeded to demonstrate an astounding depth of understanding of our market opportunity, our platform, the competitive environment, our target customers, our potential strategic roadmap. They had tracked down several key customers, conducted multiple interviews and shared with us compelling market insights derived through their own primary research.
Like many firms, OpenView had identified Deputy some months before and had proactively made contact. We’d had a couple of conversations, but this was our first meeting. We were floored.
As an emerging venture firm not yet able to rely on brand quite to the extent of some of its peers, OpenView perhaps recognised the need to work just that bit harder. We’d met with some of the biggest firms in the Valley, names admired in the startup community the world over. We’d had productive meetings and established great rapport with a good number of them. Yet through sheer initiative OpenView had leapfrogged their larger and higher profile competitors to position themselves ahead of the process from the very first meeting.
Walking the Talk
Capital in Silicon Valley is a commodity. Funds compete not by the capital they deploy but by the value they bring beyond the cash. Every firm we met played that same story, most with great credibility. They’re at the top of their game, their businesses are well resourced and their connections within the global startup community without question. Their ability to add value beyond the cash is self evident. Yet, once again OpenView stood apart.
We’d mentioned in our initial meeting that we’d be revisiting aspects of our pricing model. Unprompted, OpenView rallied specialist internal resources and prepared a pricing study. (Insights from this early work have subsequently rolled into a more comprehensive analysis, now well underway.) We’d discussed potential gaps in our US org chart and within a couple of days we had five candidate profiles in our inbox, all individuals within their network who they’d reached out to and offered to introduce. Within a week, interviews were underway at Deputy’s Atlanta office.
OpenView has a dedicated internal growth team who sit alongside the investment team but whose sole purpose is to provide specialist expertise to support portfolio companies. An emerging model across many venture firms, this is clearly not unique to OpenView. However OpenView was alone in its decision to spool up resources and truly activate their growth team’s capabilities well ahead of any deal being signed.
A Calculated Risk
Barely a week after our return from the US, a number of investors were scheduling visits to Australia. We pushed back, advising that we would not be hosting investors until the following week. I remember well a call the next day with Ricky from OpenView. “Hope you won’t be pissed”, he said, “but we decided not to cancel our flights. George is mid air as we speak and Dan and I will be landing tomorrow.”
OpenView had clearly made the decision to go “all in” to win the deal. It was a calculated risk — had they won us over sufficiently that having three partners show up on our doorstep would be seen as conviction in a partnership rather than an unwelcome attempt to exert pressure? The decision to board the plane would either win them the deal or risk them losing it. I think they knew it. I thought it a very big call.
If the Price is Right
By the time we sat down with OpenView in Sydney we were comfortable that they were the right partner. We had spent many hours in meetings and on multiple calls with each of the team. They had demonstrated both their internal capabilities as well as their willingness to lean in with conviction. We had done a bunch of reference calls and all feedback confirmed our view. There was clear cultural alignment and a shared vision both for the business and for the partnership.
With several offers on the table, the temptation is to begin playing one off against another. We chose not to go down this path. OpenView’s position was clear — that they considered Deputy a potential “generational software business” and, within reason, they would not lose the deal over price. We all knew we wanted to work together. We all knew also that there were other investors waiting in the wings. Ultimately we landed on a set of terms that all parties felt fairly reflected the scale of the opportunity.
And after a whirlwind tour of Sydney, the OpenView team headed to the airport, signed term sheet in hand.
Deputy continues to add thousands of new paying users every week. In the two months since signing the term sheet, the company has accelerated its rollout through Qantas, landed its largest ever US customer, and seen some 20% growth in the top line.
OpenView’s investment in Deputy marks the fund’s first foray into Australia and its largest investment to date. The OpenView team approached the deal with conviction and resolve. I’m certain it was the right call.
Check out Ashik @ Deputy’s own perspective here: https://www.deputy.com/blog/openview-invests-25m-deputy