• Quick Chat with Jed Katz of Javelin Venture Partners

    Jed KatzJavelin Venture Partners emerged on the scene roughly six years ago, with a $75 million fund. Led by Noah Doyle and Jed Katz, the entrepreneurs, investors, and business school friends haven’t veered far from their starting team or their original mandate, either. We recently caught up with Katz to talk about it. Our chat has been edited for length.

    You started the firm with Noah and added a new general partner a few years ago without dramatically increasing your fund size. Was that your plan all along?

    We were always open to a third partner but brought one on a bit quicker than we’d expected, mostly because Alex Gurevich turned out to be such a great addition to the team. Our funds have all remained in the $100 million to $125 million range, though we’re now on Fund III, so there’s more capital per partner to manage.

    There seem to be two types of Series As right now — smaller ones and huge ones. For a smaller Series A — the types Javelin likes — what are you looking for broadly?

    We believe in a smooth fundraising cadence for companies, where enough Series A capital is raised to make real progress, hit important milestones, expand the team with A players, and demonstrate the potential for explosive growth, but not so much capital that you have to get virtually everything right to grow into an already high valuation in order to raise that next round.  Some of the very best companies took some time and made a few pivots to find their fast-growth path and could have easily died along the way if their early valuations were too high.

    We typically invest between $3 million and $5 million in our Series A rounds in companies that we feel have great founders, highly scalable and capital efficient models, sustainable competitive advantages, an ability to get to $100 million in revenue in a reasonable amount of time and that are creating substantial strategic value beyond just their revenue stream.  We also look for things where our operational backgrounds can lead to meaningful help in building the business.

    Is there a temptation to dabble into seed while having a mid-sized fund?

    Every day. There are so many great concepts being developed, it can be damn tempting to invest in a bunch of them.  This has to be the greatest period ever for being an angel investor. We have a rule of thumb when it comes to our seed investments, though.  We only do if it we’re very confident – even at this early stage – that we want to do the A round too, and we save reserves accordingly.  We hate the signaling issue for entrepreneurs when their VC seed investors don’t do the A rounds, so we really try to avoid that.  Also, even seed deals take a lot of our time since we tend to be very involved partners, so we end up only doing a few seed deals a year.

    For your companies which raise follow-on rounds, are you finding it easy to invest with pro-rata or super pro-rata?

    Yes, that’s never been a problem.  Even in the later stage rounds, we will sometimes do an [special-purpose vehicle] to maintain our stake.

    If you could change one thing about today’s seed ecosystem as a Series A investor, what would it be and why?

    Some of the seed valuations, or the caps on the notes, are simply way too high, and they get the entrepreneurs — and their employees — into both a terrible mindset and a very dangerous fundraising cadence, turning off potential investors that may have been their perfect partner.  A lot has been written about that problem, and we see it firsthand almost every week.  With that said, I’m certainly glad that there’s so much seed financing right now. That creates great deal flow for us, and it helps get the companies further along so that we have much more signal when we dig in.

    Connie

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  • Spikes Security Raises $11 Million to Stuff Your Browser Elsewhere

    browser_thumbBranden Spikes didn’t set out to become an entrepreneur. Straight out of high school, he jumped instead into work as a security consultant, eventually working at Elon Musk’s first company, Zip2, then at PayPal, then SpaceX, where, as the Musk’s fourth employee and CIO, Spikes was tasked with keeping the computers of “extremely brilliant Ph.D.’s with access to sensitive IP” from being hacked.

    Spikes also needed to ensure his boss had unfettered access to the Web while operating in a safe environment. (“You can imagine Elon Musk trying to get online and having problems. I’d have found myself fired if I messed that one up,” says Spikes with a laugh.)

    Spikes’s big idea — one he decided to spin into a standalone business in 2012 — is a technology that runs browser software on a separate server, catching nasty bits of malicious code that could otherwise make their way onto users’ laptops. The technology then streams a video of the browser to users’ computers so seamlessly that they don’t know the software is running elsewhere.

    The concept, called browser isolation, isn’t entirely new, and Spikes’s company, Spikes Security, isn’t the only one to offer it. In addition to going up against Authentic8, a Mountain View, Ca.-based startup backed by Foundry Group, two of Spikes’s biggest competitors are Citrix and Microsoft.

    The other companies’ execution leaves much to be desired, though, say Spikes, who calls browser isolation “pretty technically challenging and, if not done properly, really problematic and burdensome for the IT people deploying it and the actual people browsing the web.”

    A growing number of customers appears to agree with Spikes. Spikes Security already has more than two dozen large enterprises as clients, some of which are running the software through Spike Security’s data center, some of which are opting to run the software in their own data centers for privacy reasons. All are “helping us stretch the product and develop the technology at the right pace,” says Spikes.

    Investors like the vision of the 27-person, Los Gatos, Ca.-based company, too. In fact, the startup — which had originally raised $2 million from Javelin Venture Partners, Spikes himself, and other angel investors – is today announcing $11 million in new funding from Javelin, Benhamou Global Ventures, and Lakewood & Company.

    Spikes says the money will go a long way toward helping the company meet growing demand — which is but one of numerous challenges he’s learning to tackle as a first-time entrepreneur.

    In fact, Spikes says he now understands his former boss much better. “For many years, I was puzzled by Elon’s actions and decisions and disagreements, about why $5,000 for this or that purchase wasn’t wise, or why hiring this guy would have been a mistake or why firing this person was a good idea. Now, I find I understand them a lot more.”

    Connie

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