Raise Now & Get Back to Work

There’s a lot of hand-wringing these days about late-stage private venture valuations, crossover investor frenzy hangover and the downstream impact on the Tech IPO market.

As well as the effect still further down the river: on mid-stage follow-on valuations.
You’ve read the data.

More than 40% of 2015 Tech IPOs priced at or below the valuation of their most recent private round.

As of last month, less than 14% of the year’s IPOs involved Tech companies.

Over the last several weeks, we’ve discussed this at each BoD meeting I’ve been part of.

Things are going well…should we raise a follow-on now, given what’s going on, or should we wait until later when our metrics will be even better?

Should we risk the slim IPO window in a vibrating market…or wait until the coast is clear?

At least in private venture markets, the answer — if not the coast — is usually crystal clear.

Raise now.

Valuation compression has already started for Series B & C rounds.  Deal supply is way up.

Just as the bar for Series  A business progress looks like the Series B bar from two years ago, the yardstick for follow-on rounds is getting longer.

More deals in the market empower new investors to be more demanding.

And require that BoDs and management be more pragmatic.

By anyone’s measure, the macro climate of the world we live & work can be viewed as unstable — put mildly.

If there is capital on the table for an emerging company — a private company — it should be taken off the table.

We all love steep, up-and-to-the-right charts.

At the same time, the Defense would like to introduce Exhibit A.

The widely-quoted example in the book The Hard Thing About Hard Things is a putt worth following.

LoudCloud had few financing options at the time of their IPO.  They were in the middle of a pivot of their business towards an encouraging vision, but had less-than-definitive proof points to assure the world that they would be successful.

Like Pure Storage a few months ago & Square this week, they went public in 2002 to much hand-wringing, lower-than-expected valuation and initial market reception.  As a matter of fact, less than 50% of what they had hoped for. The Smart Guys dubbed it “The IPO from Hell”.

But management & their BoD believed in their strategy, they needed capital, and they got the IPO completed.

They got the capital needed for growth and set the table for an eventual 4x multiple from that valuation, upon its acquisition by HP 4 1/2 years later.

Critics and competitors called the raise an act of desperation.

They spread doubt on the street that public investors would ever see a return.

But sometimes a raise just needs to be put away.

When you need to grow your company to get to the next milestone, to get to planing speed & to scale it to prominence — you need capital.

Cash is oxygen.


Everybody Wants to Go to Heaven, But Nobody Wants to Die.

I’m talking to both management & existing investors.

If the company has real chops — if it is worth fighting for — then get on the road to get to Heaven.

If management believes in their business, take the money & get back to work. Take the “W” and get on the bus. Live for the bigger goal.


A company’s long-term valuation trajectory has everything to do with results. It has little to do with short-term market perception.

A financing is not an exit.  It’s a point along the road in a journey as partners.

Why We Partnered with ClearSky Data

We’re stoked to announce our new investment partnership with ClearSky Data.

ClearSky Data

We’re leading an investment round of  $27M, joined by strategic investment partner Akamai Technologies, alongside existing investors General Catalyst and Highland Capital.

I spend most of my time partnering with and looking at companies focused on the Cloud.  SaaS applications, Cloud Infrastructure and Data Science.

So, I can tell you that we’ve entered Generation 2 of the Cloud.  And with it, the next generation of enterprise infrastructure.

Hybrid Cloud architectures enable previously hard-to-solve challenges to be solvable.

They enable leverage of the economy, scalability  and agility of public clouds with opportunities to address performance, resiliency and security limitations.  Limitations which have held back The Public Cloud as true Enterprise-grade foundational infrastructure.

ClearSky Data is a company that exploits Hybrid Cloud possibilities to solve a huge customer problem.

That big problem has resulted in a huge addressable market.

A front-burner challenge for enterprises large and small: reducing the costs & increasing the agility of primary storage.

  1. The Solution:

ClearSky is building a global storage network.  It’s a managed service delivery model for enterprise storage, combining the performance and availability of primary storage with the economics and scalability of the cloud.

Their’s is an innovative approach to primary storage which to help enterprises become more agile and take full advantage of hybrid cloud adoption.

To the point, ClearSky’s cloud-based global network frees customers from legacy storage systems that are expensive, complex to manage, and rigid.

ClearSky solves three major problems for IT of enterprises large and small::

  • Data footprints are huge & keep growing.
  • Businesses crave agility but today’s storage can’t deliver it.
  • The cloud is an incredible storage resource, but latency gets in the way.

These problems cause enterprise IT to spend a ton of time & money to manage their data.

They over-provision storage to play it safe.  They pay for excess capacity and performance that never gets fully utilized. They incur hard-to-plan-for people costs to manage complex, heterogeneous data storage pools that have to be continually upgraded and expanded.

“Hot” data is mission-critical data that a business runs on in real-time and accesses on a daily basis  — which represents only about 5-10% of typical workloads. It needs to be kept close at hand for ready use.

But enterprises  keep lots of “cold” data in traditional storage arrays, in order to play it safe and esure against performance and latency issues. Very expensive. Very inefficient.

ClearSky alleviates storage cost &  complexities — reducing the data center footprint required for traditional storage.

The company has the potential to completely transform the storage market dynamic.

People and budgets previously focused on buying and managing primary storage now have the ability to leverage the cloud for an agile, on-demand,  secure storage model.

  1. The Significance:

The major technology challenge of the last generation of enterprise infrastructure was how to deliver content on demand.

In the first generation of the web, our portfolio company Akamai, solved the content delivery bottleneck problem,

In this 2nd Generation of the Cloud, and the current generation of the enterprise, storage is the current bottleneck.

Storage is the bottleneck for the contemporary enterprise. The basic model for storing data hasn’t changed in decades. In today’s business environment, the costs, complexity and rigidity of this legacy approach (and the need to update storage capacity every 18 to 36 months) are intolerable.

In today’s enterprise, workloads can be hosted anywhere –- on-premise, in public and private clouds or in software-as-a-service (SaaS) environments.  And data needs the ability to move quickly between locations.

Storage needs to evolve to meet this need.

Cloud gateways can’t address the performance, latency, security & availability requirements of enterprise production workloads. They deliver a front-end cache that connects to the cloud over the internet.  Their architectures make it impossible to achieve the high level of requirements that enterprises demand.

ClearSky provides this needed level of performance through its use of PoPs, its global high-speed network, and its Smart Tiered CachingTM technology.

ClearSky is the only company offering an enterprise-grade alternative to legacy storage.

It can be the answer to the enterprise data mobility problem.  A managed service for storage.

  1. The Timing:

Now is the right time for a solution like this to enter the enterprise storage landscape. The service’s delivery model, particularly its metro-based PoPs, gives ClearSky the opportunity to alleviate chronic storage headaches in a more immediate way than any other company has attempted to this point.

Great idea.  Why hasn’t someone else done this before, you might ask?

It’s really hard to do.  There’s a ton of storage chops, hybrid cloud architectural chops and algorithm magic working to make this happen.

Traditional, legacy storage vendor are not likely to be interested in anything near this approach anytime soon.

It’s an anathema to their hardware-based technology and core business models.

This is a unique time in the storage industry where the large players are merging, going private, shutting down business units and struggling to respond to the huge market forces. It’s a great time for a startup like ClearSky to offer a breakthrough solution to a long-standing set of infrastructure challenges.

  1. The Technology:

ClearSky software helps to cache data into hot, warm and cold layers. It’s algorithms  manage each piece of data with information about it, including the performance it demands.

It puts cold data in the public cloud.  Hot data on premise. Warm data in metro PoPs which enable on-prem performance & resiliency without the costs.

It provides customers with more management and storage for less money. It acts like a local storage array in terms of performance and availability, but leverages  the scalability and economics of the cloud.

This is web-delivered software.  No hardware or software installs or updates needed. A dashboard enables views of capacity, availability, performance & latency.  Account, customer service & billing information are also viewed.  SLAs guarantee high performance, end-to-end security and high availability.

Security is enterprise-grade.  Encryption, key management technologies and policies ensure compliance with industry and government standards.  Multiple mechanisms and layers ensure integrity and separations of customer data in transit an at rest. It closely monitors and protects three distinct data domains — customer data, metadata (indexing and describing that customer data) configuration/management data.

An on-demand network.  Think SaaS for storage.

  1. The People:

CEO and Co-founder Ellen Rubin is one of those people I’ve wanted to work with for years.  I’ve followed her career from her Netezza days, where she created market acceptance of a new technology category; the data warehouse appliance. She led market strategy, product marketing, complementary technology relationships and marketing communications through their IPO, which led to their eventual acquisition by IBM for $1.8B. She then co-founded and did much the same for cloud enablement company Cloudswitch, through their acquisition by Verizon, where she was responsible for strategy & roadmap for all cloud offerings. A great track record in leading strategy, market positioning and go-to-market for companies in hyper-growth mode.

CTO & Co-founder Lazarus Vekiarides is another one of those people. I’ve heard my good friend Don Bulens rave about Laz’ contributions to Equallogic, which  was acquired by Dell for $1.4B.  He’s spent 20 years in technical and leadership roles — also with companies like 3Com & Bayan Systems — delivering transcendent technologies to market.  After Equallogic’s acquisition,  he was executive director of software engineering for Dell’s Storage Engineering group.

Behind them is a team full of rock star architects, developers and company-builders.  Supported by a Board which includes Jit Saxena (Founder of Netezza), Paula Long (co-Founder of Equallogic), as well as David Orfao (General Catalyst) anSean Dalton (Highland capital.

Having Akamai (Andy Champagne – VP Product & Technology for their Enterprise Cloud Group) will be great help as well, as they share our collective belief that ClearSky’s has the right model to disrupt the enterprise storage industry, and will partner with us to meet global customer needs.

Nobody else has created an architecture that approaches ClearSky’s global storage network.

The team’s competition is the status quo.  Expensive, complex, multi-vendor, multi-architectured  storage pools with legacy hardware-based architectures which have to be constantly maintained, upgraded and expanded.

Incredibly-expensive TCO solutions.  Solutions  of from traditional storage arrays .  From companies like Dell/EMC, NetApp and Hitachi.

This market is being completely transformed by the cloud and by new service models.

We’re now in the 2nd Generation of the Cloud.

The next generation of enterprise infrastructure.

And perhaps the next generation of data management and storage.

Moving Fast. Keeping Things Together.

move fast
      …The M.O. in driving towards extreme growth. But it comes back to haunt as a company shifts through the growth gearbox.
      Common discussion threads with CEOs, founders & teams I partner with every day dig on several basic challenges:
  • The Need for Speed. Balancing Innovation, Ideation & Agility with Process.
  • Scaling. Evolving teams beyond the start-up phase through the multiple “Acts” of company-scaling & maturation.
  • Hiring Discipline & Peer Review. Adopting manical focus for making certain that every hire is an “A” hire. Establishing ownership of team members for selecting each other. Having the team hold itself to the highest standard of performance.
  • Communications & Leadership.  Developing managers into leaders.
  • Establishing and Developing a dynamic Company Culture.  Building Core Principles as a team, enforced as a team.
  • Holding it Together. Keeping The Vision front of mind for every employee.  Having every employee focused on their individual role & their part in achieving team success.
      Yep, every company, situation and environment is different.  But, like most people, I draw on past experiences to problem-solve my way through challenge. I find myself going back to lessons learned at the outset of my career as a manager, then entrepreneur, and then later again as a manager and executive.
      One super-formative set of experiences was at Lotus Development Corp.
      Many today might not even recognize the name, but Lotus at one time was one of the two largest software companies in the world. Well over $1 billion in revenue and over 14K employees. It rose from a standing start to $53M in revenue its first year, through IPO a year later, through the then-largest exit in industry history — a now-paltry-sized :) $3.6 billion acquisition by IBM in 1995.
      Extreme growth. Lotus, in its day, was an incredible place. A super-diverse aggregation of super-smart, sub-30 year-olds from the best technical and business schools, fresh off the campus or their first roles from the best tech vendors of the day.  All looking to learn, to take risks, to create a new industry. To get somewhere fast and to get big fast.
      At an early sr. management offsite, Founder Mitch Kapor and CEO Jim Manzi led a group of discussions about what kind of company we really wanted to be when we grew up. How would we build our foundation?  How would we treat our customers? How would we treat each other? How do we get shit done with thought and speed?
      From that first meeting came our Magna Carta. Our “operating system” as a team. The doctrine guiding how we’d compete externally, how we’d work together, and how we might protect ourselves — from ourselves. Through explosive growth & the daily roller coaster of getting things done.
Lotus Operating Principles
      Brilliant, sensical, thoughtful stuff I end up paraphrasing every day.  The process to develop them as important as the ideals themselves.

Lily Pads

Several times over the past several days I’ve been speaking with both entrepreneurs with whom I’m working, as well as those with whom I’m exploring.

Again and again, the subject of balancing opportunity and focus comes up:

  • How to establish a strong first market beachhead. And then to select and execute crisply on a second. And then a third.
  • How to prioritize introductions of products on a roadmap.
  • How to think about planned company acquisitions and the value of a target company’s product as it applies to our company’s core business, assets and values.
  • How to get started on the journey of ideation behind founding a company.

When my thoughts are asked about how to approach these decisions, the conversations — while about completely different subjects relating to companies at very different stages of development — invariably come back to a simple strategic principle I’ve followed for many years.

The Principle of Lily Pads.


What the what?

It’s a concept I’ve incorporated into my personal thinking and advice I’ve offered as an entrepreneur, operator, company leader and investor.

It’s a checkpoint I’ve used on myself in building my career and in building my company partnership portfolio.  And also in helping to build our firm’s technology investment team strategies.

It’s input I give again & again to talented founders, managers and investors:

  1. Aim to be truly competent — and be known for that competence.
  2. Realize real, measurable success in that area of competence.
  3. Weigh the value of adjacencies.
  4. Assess the value of leverage.
  5. Then — and only then — consider expansion to other areas of target focus.

Brilliant Old Schoolers like Geoffrey Moore and his market entry philosophy of “Bowling Pins”  touch upon my principle. Target one market, then the next adjacent one.  Rinse & repeat.

But the Principle of “Lily Pads” — maybe someone can quote me and call it a Law — that would be awesome :) — can be applied to company formation, career development, corporate development, growth hacking, striving for K-factor or Seeking Alpha.

Get established as the best in an area.  But critically — pick the next areas by virtue of not just opportunity — but also the adjacency of  skills, assets, success and reputation.  And the potential leverage of each.

  • Company founding: Is the founding vision broad enough to enable the balance of laser focus and future expansion?
  • M&A: Can the to-be acquired product(s) be sold to the same customers?  Economic Buyers? Through the same selling effort?
  • Product Roadmap prioritization: Beyond business plan benefits, does it leverage existing dev skills & resources? Go-to-Market readiness? Customer support inferences?
  • Career Development: Has one’s experience, body of work, reputation and advisory network yet enabled expansion to broader focus?

On & On.

A pretty simple Principle.  So, OK, maybe not on par with Bernoulli.  And, as potential Laws go, certainly below the pay grade of Metcalfe.

But one that cross-checks for me in my simple mind again & again.

Get really good.  Then think about the merits of the next leap.  Ensure probability of execution by making the leap short.  Drive long-term success by testing, sampling, measuring,  Attain repeatability.  And increase the speed of every leap that follows.

Simple is as simple does.

frog lily

The New World Order of Sales & Marketing

Last week in a small restaurant in San Francisco, 35 founders and thought leaders from the @polarisvc portfolio and beyond gathered for an intimate discussion about the future of sales and marketing.

Or, as I introduced the topic, “The New World Order”.

Led by @InsideSales co-founder @KenKrogue and @GrowthHackers_ @qualaroo founder @SeanEllis, the conversation centered around the criticality of accessing and working with new sources & levels of data.

In other words, of incorporating predictive analytics into the ethos of Sales & Marketing in order to achieve high-velocity sales success.

Ken headlined the discussion outlining the operating model which Oakland Athletics GM Billy Beane of “Moneyball” fame offers to Sales & Marketing.


Billy & his Oakland Baseball Ops team changed the way professional sports are played. They transformed and entire industry forever by driving their own New World Order.

Using data, statistics, math and predictive analytics to choose players and make decisions.

The Triumph of Science over 150 years of Art.

It was a fantastic evening where the conversation never stopped, with stories shared, lessons learned, and insights offered well into the night.

The themes of Data Science and Actionable Operational Insights are two of several that drive @polarisvc technology investment strategy.

Transformative SaaS technologies and models which enable true Business Process Innovation are being innovated everywhere.

But in particular — just as we see in the healthcare industry — the sales and marketing industries are being driven towards sweeping change.

In SaaS, consumerization has clearly transformed how product must be designed, and how it must be marketed and sold.

In a world where customer churn can make or break a business, start-ups and multi-billion public companies alike must understand not only “what” of the sales process — but also the why, who, how and when — in order to truly transform themselves and generate breakout efficacy.

It’s here where predictive data, actionable insights, and smart analytics come into play.

Years ago, power officially shifted away from IT to “prosumers” within the enterprise.

Understanding the purchasing behavior of these individuals — and how they share value with their co-workers — drives high velocity sales success.

Like all investors, we take pride in seeking out disruptive technologies.

But disruptive business models — and data-based technologies which enable operating transformation — like high-velocity sales & marketing — are also fundamental to our interest.

Do data science and operational insights really work? Is change management — doing things differently — a destination or an ongoing journey?

Success over time tells the story.

The Oakland Athletics — operating with limited capital assets compared to their competition — are one of the most successful franchises in professional sports over the last decade. They’re at the head of the class in this year’s American league race.

As Ken told the group:

Technology is the lever of young entrepreneurs to make change.

Science tries to explain why technology actually works and whether it can predict further success.

Gone are the days when old school baseball scouts could spot a winning ballplayer by “just looking at him”.

Gone also are the days when old school sales and marketing execs could drive success without precise data, measurement, and predictive platforms to guide, incent and retain a new generation of contributors to success.

There are currently 3x more inside salespeople worldwide than outside salespeople. And the gap is getting wider each year.

Guiding successful outcomes and incenting desired behavior of a new generation of sales workforce is impossible without repeatable, data-driven, technology-enabled processes.

There is not a marketing function than can exist — much less succeed — in generating customer demand without technology-enabled analytics playing a central role in functional culture.

SaaS consumerization, data science, sales transformation, customer acquisition marketing transformation, and actionable operational insights are big themes.

They present opportunities for significant companies to be built. Companies that develop platforms that address the major shifts to the New World Order.

Thanks to all of our entrepreneur partners who came out last week to lend their thoughts to a topic that will truly transform industries.

The Triumph of Science over 150 years of Art.

Gary Swart, Polaris Partner

My Polaris Partners and I am stoked to announce that Gary Swart will be joining us as our Partner.

He’ll  join our Tech Investment Team as Venture Partner, based out of our San Francisco office.

Gary was most recently the CEO of oDesk — the world’s largest online workplace — and chose to become part of the Polaris partnership among many opportunities presented to him from top Silicon Valley firms.

He’s  proven himself to be a respected and well-known entrepreneur, operating executive, and thought leader in SaaS technology, marketplace-building, and the evolving workplace.

He’ll apply his knowledge to help our portfolio companies, source and lead investments and further build out our tech investing practice in Silicon Valley.



I’ve been fortunate to have known Gary for nearly 20 years, since he worked on my team at Pure Atria/Rational and led our Corporate Sales efforts.  Gary was an integral part of Rational’s success, and was always one of those guys that one knew was destined for big things — and one that I knew I wanted to someday work with again.

Since that time, he’s gone on to build an incredible career and an incredible company at oDesk.  He led a team that has not only built exceptional shareholder value — including through its recent merger with Elance  — but importantly, a company culture that known for its collaborative teamwork and quality of work environment.

He’s proven it possible to thoughtfully build and lead a company with billions of dollars of value — and build it in a manner that inspires special people to love working with each other.

oDesk is known not only as the world’s largest workplace marketplace, but also a truly special company composed of truly special people.

Gary, as I did 14 years ago, is embarking on his “second career” as an investor, after having spent the first part of his career as an entrepreneur and operating executive.

I know Gary will be super-successful with Polaris.

He’s is passionate about many of the things we and our Polaris Repeat Entrepreneurs are passionate about. He and my partners share many of the same fundamental values and beliefs.

Gary, at his core, is a Coach, Mentor and Builder.

He is a “people person” who has great talents for recruiting, selecting, guiding and developing special talent.

Beyond his work at oDesk, he’s a prolific speaker, widely-followed blogger, and superb people collector who has given much of his time to the entrepreneurial ecosystem around the Silicon Valley, San Francisco and the Stanford communities.

Gary is a mentor to entrepreneurs and students alike, and frequently speaks to groups about the challenges growing businesses face. As an example, in 2013 alone, he gave more than 40 talks to universities, incubators and other organizations fostering entrepreneurship.

Gary’s built a reputation as a thought leader on the future of work, how best to hire and manage teams, and on the rise of the “freelance economy.” He has spoken at the Inc. Leadership Conference, The Economist’s Ideas Economy Panel, SXSW , TechCrunch 50, GigaOM Net:Work, and at HBS — which teaches a case study on oDesk.

His commentary has appeared in a variety of publications including LinkedIn, Forbes, and TechCrunch.  And he’s appeared on TV and radio outlets, including CNBC, BBC, Bloomberg Television, NPR, and the Fox Business Network.

He’ll be a great partner to our companies, to his Polaris partners, and to special entrepreneurs he works with and invests in.

He’ll help extend our California technology footprint — beyond our current 16 tech portfolio companies — add to our super-strong SaaS footprint of 37 companies nationally.  And, very importantly, lead our expertise around marketplace businesses.

He’ll work closely with us as we continue to seek out,  invest in and support transformative business models, technologies and teams alike.

He’ll be a great Partner to us all.

Phytel, IBM & Population Health Management

population summary

Earlier this afternoon, IBM announced their intention to acquire @polarisvc portfolio company Phytel, the leader in Provider-led Populations Health management.

Phytel provides health care organizations with population health technology to deliver timely, coordinated care to their patients. The company’s registry uses evidence-based chronic and preventive care protocols to identify and notify patients due for care, while tracking compliance and measuring quality and financial results.

The company has built themselves to become “Best in KLAS” — according to that vendor research organization — the #1 Population Health SaaS company.

It’s been a privilege to have been their Board partner for the past four years.

The acquisition, once completed, will bolster IBM’s efforts to apply advanced analytics and cognitive computing to help primary care providers, large hospital systems and physician networks improve healthcare quality and effect healthier patient outcomes. The acquisition is subject to regulatory review and is anticipated to close later this year.

This announcement is significant for a number of reasons:

  • First and foremost, a very important company was built by CEO Steve Schelhammer and his team.  Steve is an incredible partner and Polaris repeat entrepreneur.  All of the accolades Steve and his team has and will receive are well-deserved.
  • The acquisition is testament to the convergence of robust Population Health Data, Actionable Analytics and thoughtfully-designed workflow-centric SaaS Healthcare solutions.  Improving patient outcomes, maximizing care team effectiveness and managing risk of Providers and Payors alike have all been enabled by the marriage of data, technology, and domain expertise.
  • In the world of payment reform, Phytel’s data registry of patients and physicians is central to the benchmarking of both outcomes and clinical performance.  Phytel solutions in the areas of Patient Outreach, Population Analytics, Care Management, Patient Engagement and Care Transition have been both transformative as well as integral to a healthcare climate changing at breakneck speed.

Analytics which enable Value-Based Care.

Phytel will become a key part of IBM Watson Health, a dedicated business unit built around establishing Watson Health Cloud, also launched today.  Designed to provide a secure, open platform for physicians, researchers, insurers and companies focused on health and wellness solutions, the HIPAA-enabled Cloud will enable secure access to individualized insights.  And a more complete picture of the many factors that can affect people’s health.

IBM’s announcement at HIMSS today brings with it incredibly-exciting potential.

Phytel’s exceptional customer franchise of Health Care Organizations, its data assets and its industry expertise make it an extraordinary complement to the cognitive and predictive possibilities of IBM’s Watson Analytics and Cloud strategies.

We couldn’t be more pleased for the customers of Phytel and IBM. For Patients and Providers. And for Phytel’s employees and its leadership.