Wednesday, February 3, 2016

Venture Capital Profile -- Kevin Diestel of Sapphire Ventures

Sapphire Ventures is a growth/expansion-stage tech investor that focuses primarily on enterprise software, as well as consumer technologies such as wearables, networks and vertical applications.  Its growth fund typically invests in companies that have a few million dollars in run-rate revenue and up, focusing on companies with product-market fit and a proven go-to-market strategy.  

The firm writes checks in the $5-25M range with plenty of follow-on capital reserved to support the portfolio.  They lead ~75% of their rounds and they take board seats to remain active in assisting their partners.  Sapphire Ventures also manages a fund investment team that invests in earlier stage funds and operates a dedicated market development team to add value to its portfolio.

Currently they have independent funds and leverage their legacy affiliation with SAP to drive value to their portfolio companies.  The firm was founded in 1996 as SAP Ventures as a lens into the startup world within and external to the Silicon Valley.  In 2011, the firm spun out of SAP and raised a dedicated fund of $350M and in 2014 rebranded to Sapphire Ventures to mirror the business model.   They have a $650M second direct fund as well as a $400M investment fund targeted at investing in earlier-stage VC funds across the United States, Europe and Israel.

While growth is an important metric they evaluate, the team is ultimately looking for the most innovative and disruptive technologies and teams.  Another key area of focus are the underlying business metrics, from cash burn to efficiency of the sales engine.  Sapphire Ventures looks for sticky customers, increasing average selling price (ASP), and increased usage/engagement with the product or services.  More importantly, they look for efficiency behind the growth to see if the company is diligently spending to maintain the growth.

Sapphire Ventures is uniquely positioned to add value through their relationship with SAP as well as some of the other largest enterprises in the world.  They can make introductions to customers in the enterprise software space, reach the CIOs of many Fortune 500 companies, and put on executive and industry specific events.  This effort is facilitated by their dedicated market development team that works directly with their portfolio companies.  Sapphire also spends a lot of time digging into SaaS and other key business metrics to help guide their portfolio companies.

They commented that the Austin ecosystem is hitting an inflection point in which fast growing companies are hitting scale and are excited to continue looking for investment opportunities throughout Texas.

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