My Thoughts on Launching FlexPoint Capital

FlexPoint CapitalIt has been about two weeks since FlexPoint Capital announced its launch. I’ve found the launch to be invigorating. I find myself wanting to share the sense of purpose behind FlexPoint Capital with anyone willing to listen. But, I can’t possibly reach everyone I know one-on-one; hence this post.

I started FlexPoint Capital with a point of view on what it will take for FlexPoint to be successful.

Start modestly And with a BHAG

Starting modestly (and alone) is humbling and really good. For now, FlexPoint Capital is just me and a big hairy audacious goal (BHAG). As we wrote in FlexPoint’s introductory blog post, FlexPoint sets out with a clear sense of purpose and a BHAG to build a world-class growth equity firm. What does it mean to be world-class? For me, being world class means:

  • Consistently Producing Top Quartile Returns: Consistency is the key. How we produce those returns matters too. We seek lower loss ratios than venture and comparable IRRs.
  • Succeeding Beyond My Tenure: I may have founded FlexPoint Capital, but FlexPoint’s purpose is bigger and longer-lasting than I am. If the firm doesn’t excel beyond my tenure, I will consider the firm to have missed an objective.
  • Be Held in High Regard:  I launched FlexPoint with a public statement of our values. To be world-class, the entrepreneurs, capital providers, and others in our ecosystem must feel we’ve lived them.

I’m going on record as saying that all three of the accomplishments above are required to be considered world-class. Note that nowhere in this definition of success does it say that FlexPoint has a stated objective to raise $[insert fund size] by [insert date]. We do not believe that success in gathering assets is, in and of itself, a goal to be achieved. FlexPoint will not compromise achievement of the objectives above in favor of gathering assets.

pursue a Durable Investment STRATEGY anD Stay True to it

FlexPoint Capital’s investment strategy is to invest in growth-stage technology-enabled service businesses. FlexPoint’s investment thesis didn’t come to me yesterday; I’ve been honing it for years. It is a reflection my cumulative experience and input I’ve sought and received. The thesis will continue to grow and evolve as the firm does, but the core of the thesis is non-negotiable.

My prior firm went through no less than two major changes in investment focus – forced by changing market conditions – including changes in both stage and sector. Each time, gaps emerged between the firm’s skills and resources, and what was required to be successful. The firm powered through it, because it had a capable and committed team that was also malleable. But there is no denying that the changes in investment focus created significant difficulties.

I’ve come to believe that a compelling, executable and durable investment focus is required to be successful. FlexPoint’s investment focus is designed accordingly.

  • Compelling: Because technology-enabled services businesses are value-creation machines and the lower-middle market that FlexPoint serves is chronically underserved.
  • Executable: Because FlexPoint is purpose-built to execute on the strategy. All of the firm’s efforts are aligned with a single purpose. The lower-middle market that FlexPoint intends to serve is a target rich environment. Nearly every successful, large growth equity firm started in the lower-middle market. FlexPoint intends to stay true to the lower-middle market in the hopes of doing it well forever.
  • Durable: Because the term, “technology enabled service“, describes a value-delivery model, not a vertical market or sector. Sector’s wax and wane; and when they do the attractiveness of investing in them changes dramatically. FlexPoint’s focus on a value-delivery model, rather than a sector, mitigates this risk. There will always be attractive technology-enabled service investment opportunities, because they are found in nearly every sector of our economy that is a consumer of technology.

 Start with Non-Negotiable Values

Every organization has values, whether stated or not. FlexPoint has taken the approach of publicly stating its values from the start. FlexPoint’s team is responsible for delivering on the values, which is why Our Values are found at the bottom of our team page. One of three elements of our definition of success hinges on whether the entrepreneurs we back and the investors who support us believe we have lived up to our values.

FlexPoint’s values are non-negotiable; they are enduring. If you ever feel we’re not living up to our values, we expect to hear from you.

Put Systems in Place to develop an information advantage

FlexPoint already has implemented tools and technologies that many more well-established firms don’t yet have. We have already implemented a CRM. We already have a CRM-linked deal-log. Our CRM is integrated into our communications infrastructure and email marketing platform. Our decision to implement these tools and technologies should tell you two things about FlexPoint’s approach: 1) We’re consumers of the very types of technology-enabled services in which we’re passionate investors; and 2) We recognize that putting this information infrastructure in place starts the process of developing the firm’s knowledge assets.

FlexPoint’s BHAG is to build a world-class firm. World-class firms develop an informational advantage over their peers. Technology and information are the enablers for FlexPoint to develop a knowledge advantage.

Closing

The support and words of encouragement I’ve received since announcing the launch of FlexPoint are humbling and heartwarming. I receive them as confirmation that I am pursuing a path that is authentic to who I am and compelling. Of FlexPoint’s path, I know only the point of departure and the destination; to be a world-class growth equity firm. All of the points in between are wonderfully unknowable aspects of the journey. I’m excited to learn what unfolds. Regardless of where the path leads, I’m personally committed to the FlexPoint’s purpose.

Our Purpose: Support the next generation of technology-enabled services market leaders with growth equity capital.

My Thoughts on Launching FlexPoint Capital

Negative Churn

melting-ice-psd (1)In a board meeting yesterday, we had a brief discussion around “negative churn”. Negative churn is a catchy phrase and apparently a hot-topic in some SaaS circles. I like some of the concepts and disciplines that an understanding of negative churn implies, but I also think it is an unnecessary concept that actually makes it more difficult to understand the inner workings of an MRR based SaaS business. Some background…

What is Negative Churn?

Negative Churn is an increase in revenue which occurs when the change in revenue within an installed base of customers is net positive from one period to the next. Negative Churn implies that the revenue gained from existing customers who purchase more over time exceeds revenue lost from existing…

Negative Churn

My Journey Into Meditation

RESTORE_000014185704ResizedA few weeks ago I wrote about how much I love coffee but that I had to give it up because it was starting to affect my ability to focus. I’m happy to report I’m still off the juice. Giving up coffee has helped to slow down my mind and body; no more raciness. But I’ve noted some remnant busyness in my mind that I’ve been itching to shake off. It sort of feels like I’m peeling an onion, working through the layers and getting closer to the core. Last week, I peeled another layer by starting a personal journey into meditation practice. Week 1 is in the rear view mirror and I’m seeing notable benefit already.

Meditation isn’t entirely new…

My Journey Into Meditation

The 40s: Decade of Self Awareness?

The movie This is 40 is a satirical look at the life of a husband and wife who are turning 40 years of age. They have challenges with their kids, their businesses/jobs, financial security and personal relationships. All manner of comedy ensues. It is said that the humor is the good natured side of the truth.  Although This is 40 is a caricature, it isn’t far off either. I’ve certainly seen a number of friends go through difficult times of late.

That said, while the 40s certainly present some challenges, I’ve come the conclusion that the 40s are an opportunity to develop self-awareness. My sense is that the accumulating pressures of career, family and of balancing the two crescendo during the 40s. That crescendo…

The 40s: Decade of Self Awareness?

Be Mindful of Strategic Effects

Yesterday, I was catching up with a friend and fellow youth soccer coach. He happens to be a public stock research analyst. Although we were talking soccer, not business, we ended our conversation musing over the stock market’s Monday decline, which now appears to have extended into Tuesday.

His read; it’s all about oil. For those that haven’t been paying attention, oil prices have dropped precipitously. There are a number of factors at play including weak demand in emerging nations, and the emergence of alternative fuels. But for the most part, this issue is oversupply. Did you know that the United States is now the World’s largest oil producer? Surprising right!

In most cases, a decline in oil prices (particularly a supply…

Be Mindful of Strategic Effects

Throw Out Your 2015 Strategy and Budget Right Now

The arrival of a new year (and the beginning of a new one) brings a flurry of cognitive churning. As individuals, we 1/ reflect on the year passed, 2/ ritualistically write and read predictions for the next year, and 3/ make resolutions and set goals that are intended to inspire us to greatness during the next twelve months.

I’ve come to see this all as distinctly human but also quite strange. 1/ We can’t do anything about what happened in the past, and many of our “reflections” end up being revisionist history. 2/ The predictions we make – at least the most interesting of them – are almost invariably wrong, but we make them anyway as a way to either “exert control” on our world or to show others how smart we…

Throw Out Your 2015 Strategy and Budget Right Now

Depressive Realism as a Force for Change

I generally enter and exit the period between Christmas and New Year in a state of depressive realism. I’m not talking about depression in a clinical sense. Rather, I’m talking about a mood or state of mind that borders on depressed.

This isn’t a new phenomenon for me. I’ve come to expect it. It occurs because I step away from work (as much as is possible), reflect on the past year and contemplate the next. I’ve come to the conclusion that I wasn’t build with the reality distortion module that most humans possess which evolution designed to cause us to believe we are better than we . As a result, my self-assessments and perspective on the reality around…

Depressive Realism as a Force for Change

Kindred Disciplines: Growth Equity and Growth Hacking


growth equity and growth hackingGrowth hacking is now a mainstream term in tech circles, particularly those that are consumer-focused. Growth hacking definitions abound, but generally emphasize a data driven, creative and flexibly opportunistic approach to customer acquisition. Many would argue that growth hacking is simply a new term for an old concept – marketing. While the functions, tools and skills require for growth hacking may be essentially the same as “marketing”, the psychology and mission of growth hacking feel totally different to me. When I hear “marketing”, I think soft, fuzzy, ambiguous, and cost center. When I hear “growth hacking”, I think maniacal focus on growth, scrappy, data driven, tech/tool savvy, and…

Kindred Disciplines: Growth Equity and Growth Hacking

I love coffee. I had to stop drinking coffee.

Devil latte.

Three months. That is how long its been since I had a coffee. I didn’t have to give it up; but I needed to.

I love coffee. Warm, frothy, aromatic, tasty, comforting, caffeinating… That last part is where my divorce from coffee begins. I used to be able to drink the stuff all day long with no discernible impact. For years, I’ve had two shots in the morning and two shots in the afternoon. But something changed. I got in a rut. If I didn’t have my afternoon coffee, I crashed. No big deal; have an afternoon coffee and all would be well. That worked until the afternoon coffee started making jittery.

I couldn’t focus. I felt…

I love coffee. I had to stop drinking coffee.

Vulnerability and Entrepreneurship

I was browsing through the new Tattered Cover store in the recently renovated Union Station in Denver a few weeks back and found myself standing in the Business Psychology section of the store. For some reason, I have a habit of finding that section without trying – gravity seems to pull me there. In any event, I started thumbing through a book by Brene Brown, named Daring Greatly. The subtitle of Daring Greatly reads: “How the courage to be vulnerable transforms the way we live, love, parent and lead.” There aren’t many books that stand-out to me as having altered my world view; Daring Greatly definitely did.

I had not heard of Brene Brown’s work before I picked up the book…

Vulnerability and Entrepreneurship