Matt is a Partner at Menlo Ventures, and focuses on investments in cloud infrastructure and AI-first SaaS applications. Matt has led investments in Clarifai, eShares, Harness, Heap Analytics, Scout RFP, Usermind, and Veriflow. He also serves as a board director at Drawbridge, Egnyte, SessionM, and Shazam; and as a board observer at Datastax, insidesales.com, InstartLogic, and Puppet. Previously, Matt was a general partner at Kleiner Perkins Caufield & Byers for over 15 years.
I’ve worked with quite a few of the top Silicon Valley based VCs. And over the years, I’ve learned that venture capitalists are not all created equal. As I tell the portfolio companies I work with: you don’t just need money, you need the right money. Matt Murphy of Menlo Ventures is one of those who brings not only dollars, but experience, attitude, and raw know-how.
I’ve had the pleasure of knowing Matt for a long time. I worked with him when I was CMO to one of his portfolio companies at Kleiner Perkins, and as a marketing consultant to some his early stage portfolio companies at Menlo Ventures. I’ve interviewed Matt previously, on the topic of startup failure rates and how to prevent them.
It was great to sit down with Matt again, this time to talk about startup success and venture capital. Here are the highlights from our chat.
1. What are some of the most important lessons you’ve learned about startup success?
Something that’s absolutely crucial is a clear and differentiated understanding of a market and an opportunity. That, combined with relentless focus on a product that fits that opportunity.
2. How do you determine product/market fit for an Enterprise SaaS offering?
This one is simple. A two-million dollar seed round should generate one-million dollars of annual recurring revenue (ARR). This is assuming an average selling price of $30k to $50k range. The benefit of a million in ARR is that you start to see patterns around renewals and upsales.
3. What do successful Founders do differently?
They surprise on the upside in terms of their creativity and ability to execute and figure out the opportunity as they go. They also always surround themselves with amazing people.
4. What type of founder is Menlo interested in funding?
The ones that have a view of a market opp that is unique. Sometimes they come from an adjacent area which gives them a far better view of the market. Or they have a distinctive origin story.
Always, they have vision and tenacity… Here’s the thing: startups are hard. They have to knock down walls to get there. So we always look for personal fortitude in a founder. And the capacity for self-reflection. They need to be able to do, and listen.
5. From an outsider looking in, the venture market is crowded. What is unique about Menlo Ventures?
We focus on thesis areas where we have a distinct point of view: SaaS, FinTech and Marketplaces. We operate as a team to help founders build companies.
We’re small enough that every company matters, and big enough that we have the capital and Fuel resources to help companies grow in their life cycle. We’re in that sweet spot. Also, the core team has about 20 years of venture experience which creates a harmony that is unique. The company always remains the entrepreneur’s company first and foremost.
6. Where do you see venture capital going in the next five to ten years?
I see continued expansion in the areas of seed capital, and pre-seed funds… Funding at the earliest stages of idea formation, basically. On the other end, I see mega-funds or growth capital being an alternative to IPO. I predict more fundings with faster growth, and a shift toward frontier and breakthrough areas such as Life science technology, robotics, satellites and Artificial Intelligence.
7. Do you see broader macroeconomic conditions affecting venture capital?
A pull back in the public markets is inevitable, but the venture ecosystem is well-funded. That said, we will have to be responsible at the pace which we are investing.
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A couple of reflections:
I really like that Matt put a line in the sand in terms of the financial data that supports product market fit. It’s definitely a different perspective than that I have heard interviewing Product Managers.
Matt’s line about how “the company always remains the entrepreneur’s company first and foremost” really struck me. This is the best example I’ve heard supporting my idea that not all venture dollars are created equal. It’s important for a startup to consider the philosophy of the firm and its partners, before it accepts venture capital. Alignment is critical.
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