How Can We Help? Announcing Signia’s 2nd Fund
Today, we are pleased to announce our second early-stage fund — the $85 million Signia Venture Partners II. Together with our first fund launched in 2012, we are now managing over $160 million focused on finding disruptive technology start-ups with the potential to impact the world. We would not be here without the support of both the world-class investors (LPs) and the amazing group of entrepreneurs we have the privilege to serve. We want to take this opportunity to thank everyone and to tell you a little bit more about ourselves.
When we started Signia four years ago, we wanted to build a firm that reflected the type of investors we would have wanted to work with in our entrepreneurial careers. It all began with a simple mission that still holds true today: be the entrepreneur’s most helpful investor.
As former entrepreneurs (over a dozen companies which we started/ran ourselves), we know that great investors come in many different forms: Some investors are your go-to for anything (our goal), some leave you alone (which is ok) and some drive you completely crazy (which is not ok). We decided that to be great investors we wanted to focus on where we could be most helpful, which is in the early stages of a company’s lifecycle (seed and Series A). We’ve been the first check and lead investor for over 80% of the investments we’ve made so far. Most of the time that’s nothing more than a team with an idea and an early prototype or product. Sometimes it’s just a one-person team!
What do we look for and invest in? The two key questions we want to see every company answer are: Why Us? and Why Now? The “Why Us?” is meant to help us understand what it is about the team that makes them the ones to win. They should be mission-oriented, passionate, data-driven, and looking to go the distance. Location is also important as we find we aren’t as helpful when we’re not meeting with entrepreneurs face-to-face. We largely invest in Bay Area start-ups or those within an hour or two plane flight. There are exceptions to that rule of course, but only when there is a relationship with the entrepreneur that allows us to still help virtually. We also force ourselves to ask the “why us” question going the other way. What is it about Signia’s expertise or network that can help this company succeed? If there isn’t an obvious answer to that question then we’re not the right investor.
The “Why Now?” helps us understand the market conditions that now make it possible for the potential investment to have global impact. We’re looking for cash-efficient disruption of large existing markets or the creation of new ones. Broadly speaking, we invest in technology companies that are taking advantage of mobility and data. Mobility to us means not just the rise of the smartphone as the dominant computing platform, but also new technologies such as Virtual Reality and Augmented Reality (VR/AR). Data doesn’t just mean Hadoop, it also means companies that are helping others take advantage of the huge surge in all different types of data being collected or delivered (from commerce to commuting to mobile video delivery). Many of the sectors we invest in are just starting to tap into their potential for huge impact, including transportation, fintech, commerce, VR/AR, big data, mobile SaaS, and AI. Check out the ideas section of our website for other areas we’re looking at.
What happens after we invest? Our model of service is also simple. We don’t outsource like a bigger venture firm might do. We think of ourselves like a start-up and so all of us get our hands dirty in all sorts of different ways. In our careers we have run product, sales, marketing, BD, ops, engineering, finance, and been CEO many times over. So when our friends and family ask us what we do everyday, we tell them it’s part investor, coach, therapist, consigliere, marketer, designer, recruiter, and anything else one of our portfolio company needs.
If we’re only seeing you at board meetings then we’re not doing our jobs. We typically meet with all our portfolio companies once a week with many more texts and calls in between. Over the years we’ve also built a great network of venture partners, advisors, LPs, and friends of the fund that we call in to help whenever necessary. The journey of starting and growing a company is never smooth. We’re here to help in the good times and the bad. If you want to learn more about how we operate, read more here.
Humility and transparency are two of the key traits we look for in entrepreneurs. It’s only fair that we hold ourselves to the same standard. Part of being humble means that we never imagine that we are solely responsible for the success of any company. We prefer to work behind the scenes and have the credit go where it is rightfully due: to the founders and their teams! You can learn more about the portfolio here.
We are transparent and direct with our portfolio and measure our success partly by how much our entrepreneurs call us versus how much we call them. Transparency is not just for the companies we invest in; we do our darnedest to provide feedback to every entrepreneur we talk to. We’ll meet with 500x more companies in a year than we can invest in, so it’s important to us to make sure every entrepreneur walks away feeling like they gained something by meeting with us even if they didn’t get the answer they wanted. You won’t find us checking our phones in meetings (there is a fine donated to nonprofits for that) and we strive to make decisions quickly and to always be available.
We invest as a team, meaning when you get one of us, you get all of us with deep conviction. The partners on the investment team (Ed, Rick, Sunny and Zaw) all started Signia together back in 2012 and have known and worked together going back much farther than that. Longtime principal Sunny was promoted to partner as of Fund II and we also brought on Linus to help lead our big data and AI initiatives. A big thanks to the rest of the fantastic team that has also been with us since Day One: Anagha, Fay, and Gina (you rock!).
We only make 6–8 investments a year across our entire team. With our broad, early-stage mandate, we can lead seed rounds of $1–2 million (sometimes less) or go all the way up to “pre-Series A” rounds of $5–8mm. This small number of investments and larger check sizes is not typical of most early-stage funds. We saw an opportunity in 2012 to start a venture fund that filled the gap between the surplus of angel investors / syndicates and the established brand-name funds that were moving up their Series As to $10–15 million and looking for a lot less risk in their investments. In many cases, we also double down by leading a pre-Series A for our seed investments that have shown phenomenal growth but haven’t yet hit the key metrics that would “qualify” them for a $15 million check. This strategy has already paid early dividends, with two ~$1 billion exits for portfolio companies Cruise and FunPlus just last year.
Fund size was an important consideration for us as we put together Signia. We are the largest single LP/investor across both our funds and firmly believe that this, along with sub-$100m funds, aligns us with both the interests of our entrepreneurs and our LPs. We’re not in this to collect management fees and when something goes sideways, we’re not keen to write a company off and move on.
In closing, we want to give our thanks again to all of those that helped get Signia going and to the entrepreneurs that we’ve been honored to partner with. We’ll leave you with this quote that we think epitomizes the journey of building start-ups:
“Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.” — Albert Einstein
