Ask Me Anything with Jeff Clavier, Founding Partner at SoftTech VC
It’s hard to talk about startups and not talk about something that Jeff Clavier has invested in: FitBit, Eventbrite, Teads, Mint, USTREAM, Front, Songkick, Postmates, Sendgrid and (many) more. His fund, SoftTech VC, was one of the first microfunds in Silicon Valley and has done almost 200 investments to date. And they’ve evolved a lot over the years.
“I would invest 100K in startups I liked and 250K in startups I loved.” — Jeff Clavier
Jeff’s investment strategy has changed a lot over the years. Today, SoftTech is investing out of it’s 5th seed fund. But when we go back in time and look at how they operated at the time of their 2nd fund, things were very different; Jeff says that before, he would invest 100K in startups he liked and 250K in startups he loved. But he quickly realized that as an investor, you really should only be investing in startups you love.
The US and European divide.
Jeff exclusively invests in American startups. But he doesn’t necessarily encourage European startups to all jump on the first flight to the US and set-up shop. For him, there are great examples — like Blablacar — that demonstrate that European companies can be very successful without wasting time, energy and money in the competitive US market. He also hinted at potential immigration difficulties for non-American entrepreneurs, as a result of the Trump Administration.
When it comes to European versus American investors, however, he points to a very clear difference in mindset. For him, US-based investors will take incredible and sometimes ridiculous risks in order to make money, whereas he finds European investors are more interested in avoiding losses. These are 2 radically different approaches to investment that perhaps point to why we don’t see the same radical successes (and failures!) in Europe as we do in the US. Jeff also mentioned that he has seen a clear shift from the best firms towards bolder, bigger bets.
“We are contacted by over 3000 startups per year and invest in 15.” — Jeff Clavier
What I love about Jeff’s is his brutal honesty. He has no problem telling the audience that probably 99% of them will unfortunately send an email and get a pass — but that’s just the name of the game.
The fund is contacted by over 3000 startups per year — a majority of which come through contacts or network, they don’t count the annoying “Dear Sir or Madam” blanket emails. They then screen out 500 startups that that they actually meet with. They’ll end up doing due-dil and will make an offer to about 15–20 startups or so per year. To my surprise, Jeff says they even get the rare entrepreneur that turns them down, once or twice a year.
What is “founder-market fit” ?
When evaluating a project, obviously they look at a lot of criteria (the idea, the product, the team, the market…). But Jeff also talks a lot about “fit” and specifically “founder-market fit.” This refers to the entrepreneur’s deep knowledge of the industry or market that he is working in. Without that deep knowledge, there’s not likely to be any deal — unless the entrepreneur brings in a radically new, disruptive approach to tackling market opportunity.
Of course, there are a lot of other factors to take into consideration as well, including timing. In fact, it’s likely that a great startup will get turned down by the fund if there is another “more exciting” deal that the fund is choosing to focus on at the time.
So, what’s Jeff’s favorite deal?
He mentions a lot of his portfolio companies throughout the session (Front, Mint, PostMates, Fitbit, Shippo, DroneDeploy and loads of others) — also demonstrating the variety of companies and entrepreneurs he’s invested in. But he says an investors favorite deal is always the last one he invested in :)