Shasta Ventures, a venture capital firm that has raised more than a half-dozen funds in its life, announced a new program this morning designed to help its portfolio companies scale to $10 million of annual recurring revenue (ARR) from $1 million ARR or less.
The project, a collection of workshops, in-person help and more, called Ignite, is designed to assist companies make it over the early-stage revenue hump. From nascent income generation to $10 million ARR is a difficult stretch that has claimed the momentum of a host of software companies.
Shasta leads rounds at seed, Series A and Series B, according to its known investing history.
Once a startup reaches $10 million ARR, conventional wisdom goes, it’s a far more stable bet both for investors and its founding team. But before that threshold, while there’s lots of material out there on how to build initial scale at a software as a service (SaaS) business, it’s scattered around the internet and often contradictory. Shasta wants to provide a more structured set of learnings for its portfolio companies to help them reach eight-figure ARR, boosting life expectancy for the startup and the chance of cash-on-cash returns for its LPs.
TechCrunch spoke with Shasta to get a handle on the program, which fits neatly in the trend of venture firms doing more than provide cash to their investments; gone are the days when a check and an investing history can drive a deal’s completion. These days VCs have to do more.
Ignite
Shasta agrees with that sentiment. In conversation with TechCrunch, Jason Pressman, a managing director at the firm, said that as venture capital firms have grown in size, “you’ve seen specialization and you’ve seen additional resources being added to firms.” He continued, saying that Shasta felt that “in order to remain competitive and be relevant for the entrepreneur, [it] wanted to do something that was really differentiated.”
That’s where Ignite comes into the picture. Who is it for? Enterprise software startups, a cohort fitting into Shasta’s decision to “focus [itself] about a year ago entirely on enterprise,” according to the managing director. That’s not a huge change, however. Pressman noted during the conversation that Shasta generally invested about 75% of its deals into startups focused on selling to other companies before.
That figure, now theoretically 100%, puts Ignite in the center of Shasta’s future.
In Pressman’s view, Ignite is “a portfolio success platform that has currently a dozen operating executives on our payroll that help companies grow and scale.” It brings together four things: Sixteen “half-day workshops,” according to a blog post seen by TechCrunch before publication, along with “hands-on mentoring,” a digital space for founders to chat amongst themselves and with Shasta folks, and something called a “launch assistance program.”
Most of Ignite is pretty easy to understand. Workshops to teach discrete blocks of enterprise SaaS company construction, direct help from folks who have scaled enterprise SaaS startups and a place to ask questions and generally share tips. All very reasonable. But what is launch assistance?
According to Shasta Ignite General Manager Michael Lock, this part of the program is a mix of helping companies with positioning, converting their venture deck into website materials, assistance with early PR help and, sometimes, relaunching them as needed. Ignite is aimed at pretty early companies, so the help is probably welcome.
Finally, the program isn’t designed to handle one or two companies at a time. The venture firm thinks it can take on its entire portfolio at once, so the program (with its part-time mentors to help power its workshops), won’t be rate-limited to just existing, or merely new investments.
It will be interesting to see, in time, if Shasta’s investments following the launch of Ignite have a higher Series graduation rate, and, eventually, a better exit percentage.
So what?
There’s a theme hidden in the above that’s worth pulling out. Ignite is a play to help Shasta double-down on enterprise startups, which means B2B SaaS most of the time. One level down from that fact is the rising trend of the startup world itself moving toward enterprise-focused startups.
This is partially why you hear so much about SaaS on Twitter. It’s a rising category of venture investment and founder energy, something that is belied by the fact that now, more enterprise seed deals than consumer seed deals are happening. That’s a first in at least the last decade.
Shasta’s Ignite effort, then, will serve to orient the firm toward purely enterprise work, fitting with where its own market is already going. I consider this minor retooling of the company’s investment focus and the Ignite effort indicative that SaaS continues to take over more of the venture landscape.
Huge valuations, strong IPOs and enormous exits don’t hurt, and investors pay attention to where the money is flowing. With that in mind, I’d expect Ignite to not be the last of its type.