Todd Chaffee, general partner at Institutional Venture Partners, spoke about the recent $20 million investment in Lindon-based business intelligence company Domo, his impressions of Josh James, founder and CEO of Domo, and the nature of enterprise business in an interview with the Deseret News.
Todd has led investments in many tech companies, including James' Omniture, which sold to Adobe Systems Inc. for $2.8 billion.
The following are portions of that interview.
Todd Chaffee: Josh James is up there in the Bill Gates, Larry Ellison, Mark Zuckerburg category. Whenever you get an opportunity to invest with someone like that, you do it.
Deseret News: Why is he in that classification?
TC: He’s incredibly bright, super passionate, brilliant, competitive, fun, a great leader. He’s got all the attributes to look for in a great entrepreneur as a VC.
Those of us who have been around for a while know it's all about management. You find really great managers and you can back them and you’ll generally do pretty well.
DN: What investment round were you in at Omniture?
TC: We did a public investment. We actually do public investments as well. It was a pretty good return. We had 214 percent IRR (internal rate of return) on our investment.
DN: Some people claim that entrepreneurs that hit successful, as Josh did, can’t always hit another one successful. What is your opinion on that?
TC: There is that theory if they aren't hungry. But, Josh is hungry. Josh wants to build a Fortune 500 company. From our perspective, the fact that he had a $2 billion exit (at Omniture), that’s the floor. Anything below that is going to be a failure for Josh.
DN: Was the fact that Josh is at the helm your biggest factor in making a decision, or was this a decision made about the business intelligence space?
TC: We go thorough our normal process of deciding how big the market is. The answer is, huge. Business intelligence, workforce collaboration and social enterprise — those markets are more than a $10 billion market now. Obviously you got a super strong management team led by Josh. You have to create a robust management team and proven business model. The fast business model has been proven by other companies, and Josh knows how to do it. He's done it before.
DN: What’s your time horizon for the investment?
TC: Normally our model is to make 3-5 times our money in 3-5 years, which equates to a 40 percent IRR. I think this is more like a 5-10 year hold. This will be one where Josh really wants to build a Fortune 500 company, and I think he’s going to do it. This is one where you put in the money and ride it for a long haul.
DN: From an investor’s perspective, what are the biggest hurdles are for the company to grow at that rate?
TC: Enterprise businesses are different than consumer businesses. The ramp can’t be that steep cause you have to make the sale. You can still have a steep ramp, it just won’t look like these rocket ships that we’ve seen in our portfolio.
DN: You tried to get into the first round of funding, but Domo closed it. How much valuation did you lose?
TC: Not much. I’ve got to give benchmark credit. We were talking to Josh and they outbid us. It was a smart move by those guys. But the reality is, we came in six months later and it’s not that big of a step up. I think we’ll be fine.
DN: Are you hoping they close the doors for a while so that grows a lot? What are your thoughts on the equity stakes?
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