This article was originally published on BuiltIn Chicago here, and written by Doug Pitorak.
Early- and mid-stage digital tech startups now have another possible source of financing.
MATH Venture Partners, a venture capital fund created by managing directors Mark Achler and Troy Henikoff, announced today the close of a $28 million fund.
Achler said the fund will be used to contribute to seed and Series A funding rounds of digital tech companies. He said they will “look anywhere,” though he noted their bias for Chicago-based companies. Since securing the first close of this fund in Oct. 2014, MATH Venture Partners has invested in 14 companies. Half of them are Chicago-based, Achler said.
There is no lead investor, Achler said, adding that a number of private investors contributed to the fund.
The fund is independent of Techstars Chicago, of which Henikoff is the managing director, though Achler said they have invested in three companies that have come through the Techstars Chicago program and in companies that participated in other Techstars programs.
So, what do they look for in startups?
Achler said MATH Venture Partners’ interests are industry agnostic, a claim evidenced by some of its recent investments.
In Dec. 2014, MATH Venture Partners contributed to a $12.5 million Series A investment in NowSecure, a leading provider of mobile security technology. Early this year, MATH Venture Partners participated in an $18 million Series A round for Apervita, a global health analytics and data community. And just a few weeks ago, they were part of the $3.2 million Series A financing in ThinkCERCA, an EdTech company that offers an online literacy program for teachers and their students.
Achler said he and Henikoff do look for certain indicators of success — and a startup’s concern with customer acquisition is a big one.
“So we believe very strongly that most entrepreneurs are really smart, and they have great domain expertise and they can identify problems. Often times — not every time — they can solve a problem,” Achler said. “But where most entrepreneurs have trouble is actually in customer acquisition, and we like to invest in companies that in their core DNA understand and appreciate sales and customer acquisition. However they define customer acquisition, we like to invest in companies that understand it.”
In a separate interview, Henikoff echoed Achler’s thoughts on customer acquisition, adding that “nobody ever goes out of business because they have too many customers.”
Beyond companies that have an understanding of customer acquisition, Henikoff said he and Achler have a preference for “better mousetrap” startups — those that are not creating a brand new invention, but rather are improving upon an existing service.
“It’s really hard and expensive to teach people a new behavior,” Henikoff said. “If you do, it’s really valuable, but we’re not a big fund. We can’t take those kinds of risks, so we’re looking where people are taking existing consumer or business behavior and making it easier, taking friction out of the system.”
He mentioned Redbox, of which Achler was SVP of strategy, innovation and new business from 2009-2013, as an example of a “better mousetrap”. The service, Henikoff said, simplified renting movies, a behavior he said Blockbuster spent millions teaching people to do.
Chicago is as vibrant as ever
Furthermore, Achler and Henikoff said the Chicago digital tech scene is strong.
Indeed, with $1.6 billion in funding and $7 billion in exits, Chicago digital tech startups had their best year ever in 2014.
Now, with the first fund officially closed after MATH Venture Partners was announced in May of last year, Achler and Henikoff can continue their work. And though they will look anywhere, they will undoubtedly keep a close watch on Chicago-based companies.
”We’re very pleased and we’re very excited about how vibrant the tech community is here in Chicago,” Achler said. "I’ve been doing this for 30 years, and I have never seen the community as strong and as vibrant.”