Original article was published by Ben Metcalfe on Artificial Intelligence on Medium
Technology is becoming ever more complex and sophisticated. More complex and sophisticated to develop and more complex and sophisticated to understand and invest in it.
One way I like to explain this trend is to look at the recent IPO market. In the past, it was easy for most people to understand what IPO’ing tech companies like Google, Facebook, Uber, or Twitter did. But today, watch pundits like Jim Cramer on Mad Money try to explain to mom-n-pop retail investors at home what wildly successful Snowflake and JFrog actually do. Those are two examples of companies founded 8–10 years ago, now imagine all of the exciting tech-heavy future IPO companies that are still in the private markets and even more that have not even been founded or invested in yet.
LPs want exposure to these kinds of game-changing, disruptive businesses but need to work with VCs who have the necessary technical experience to diligence these startups, understand the markets they operate in, and ultimately identify the winners. It is vital to be able to distinguish science experiments from the next exciting market opportunity.
The venture community will need to focus on new skills and abilities to identify, attract, and support these most compelling startups and founders. Those who approach software venture capital investing as money management of just another asset class will be left behind. I believe this will cause a renaissance in the world of Venture Capital.
As we enter this period, I’m excited to announce Monochrome Capital.
Monochrome invests in early-stage software and AI-driven startups that are solving the toughest business challenges. We’ll provide seed-stage capital to b2b startups building significant technical moats to real-world challenges.
There are two important trends that lead me to found Monochrome now — human capital cost reduction and a reassessment of what it means to be a value-add VC.
COVID has had a terrible impact on all of us. However, COVID has also accelerated years of digital transformation into just a few months. Remote work has finally gone mainstream, and while I don’t believe the days of the office are totally numbered, this shakes out one of the biggest frustrators of early-stage startups: the cost and availability of talent.
In the “Web 2.0” era, the rise of cloud providers such as AWS reduced one of the two biggest costs of running a startup: technical infrastructure. Human capital has remained the other one. While I believe it is important to pay people fairly and equitably, we are witnessing a democratization of talent where the future founders and employees of successful startups do not all need to be in expensive cities like San Francisco, and talented entrepreneurs and their teams are moving to other locations with a lower cost of living and lower economic burden on their employers.
Something really interesting is also happening in venture capital right now — almost a ‘back to basics’ return to the pure essence of venture capital. As established firms grew large in size they were forced to develop ‘platforms’ to justify the management fees of their large AUMs and to create a form of differentiation. In this new era, I question the continued value of expensive platform divisions that provide hiring, HR, or data services to their portfolio companies.
Instead, I am excited to see the rise of the founder-investor who has walked the same path, developed a strong network and can act as the founder’s consiglieri on their own journey. In the era of COVID where so much is being disrupted but personal relationships are ever more valued, I have seen this become far more valuable than anything a large and less-personable VC firm can offer.
With Monochrome’s particular focus on investing in sophisticated, complex technology I’m especially excited by this trend. I have found in prior investments that my own technical and operator experience has fostered a kinship with technical founders as I help them realize the full potential of their vision.
I’ve founded Monochrome to reimagine what early-stage venture capital for technical startups actually looks like. What entrepreneurs with capital investing in other entrepreneurs looks like.
I draw upon over 20 years of unique experience as a software engineer, a director of engineering, a product manager, a developer evangelist, a founder of a unicorn enterprise startup, and most recently as a B2B enterprise software investor at a successful San Francisco venture firm.
I started my career at the BBC as a software engineer and project lead, moved to the US in 2006 and later co-founded WP Engine. WP Engine started as a small idea — Heroku for WordPress — but we identified a larger market and evolved the business to focus on marketers looking to provide high quality digital experiences. 10 years later, WP Engine has raised over $290M, acquired several companies in the ecosystem. Today, it powers over 1.1 million websites for over 100,000 SME and enterprise customers across 150 countries.
After WP Engine, I was invited by Travis Kalanick to create and lead Uber’s product innovation team for public policy — engineers, product managers, and designers using data to help forward legislative matters. Projects run by my team enabled Uber to launch into Nevada and remain open in key states such as California and New York. We also built social good projects such as tools to enable deaf and hard-of-hearing drivers to work on the platform.
Most recently I have proudly served as Principle at Ridge Ventures, where I led several deals including Samasource and Rafay. Samasource provides an AI labeling platform to more than 25% of the Fortune 50 — including Google, Microsoft, GM, Walmart and many other notable technology and automotive OEM’s. Rafay is helping the enterprise with large or complicated containerized workloads maximize their investment in Kubernetes by providing a unique single pane of glass across their entire infrastructure.