Mark Fernandes’ first venture capital deal at Sierra Ventures was in a Columbia, Maryland startup called Sourcefire. The network security company was headquartered in the founder’s basement, but within four years filed an IPO and eventually became the largest employer in Columbia before it was sold to Cisco for $2.7 billion in 2013.
The side story to that deal is that Sierra Ventures made five more investments along the Capital Beltway as a result of its initial connections made through Sourcefire.
Fernandes told me at the CED Tech Venture Conference, where he served on a panel last night, that the same could be true in the Triangle, where his firm has two local portfolio companies with big promise.
“Once you get embedded in the ecosystem, VCs get to know you and the players and leading entrepreneurs get to know you,” Fernandes says. In front of him, was a handwritten list of companies to visit and chat with at the annual two-day conference for entrepreneurs and investors across the Southeast.
K4Connect co-founder and CEO Scott Moody was his firm’s initial draw to the Triangle. Sierra invested in Moody’s first company, AuthenTec, based in St. Augustine’s, Fla. After its successful exit to Apple in 2012, Moody moved to Raleigh and subsequently started the connected home startup selling into senior living communities.
Sierra may not have reinvested in Moody if he was working on a music concept, Fernandes says, but the firm had enough confidence in his ability as an entrepreneur to take a bet on most next acts.
K4 was especially intriguing because of Moody’s passion and personal connection to the problem he’s solving, and the large market as more tech-savvy people age. It also fits within the Sierra thesis around healthcare and data—as important as the hardware and software plays for K4Connect are the important data points the company collects about users, informing product development.
Sierra invested in K4’s series A round in October 2015, and partner Ben Yu sits on the board.
The Zaloni connection happened entirely separately from K4Connect. Fernandes met the company’s founder and CEO Ben Sharma through a private equity firm. Zaloni was moving from a services company providing data lake infrastructure to major corporations to offering a software product—it needed venture capital, rather than private equity, to scale.
Sierra knew data warehouses were being replaced by data lakes after more than a dozen investments in data and analytics companies like data warehousing tech provider Teradata, now a public company, and database management software company Greenplum, which was acquired in 2010.
Drawn by Zaloni’s holistic approach to its solution as well as the work already done to determine product market fit, Sierra Ventures led the company’s first institutional round in March 2016, and Fernandes grabbed a seat on the board.
There are couple similarities between Moody, Sharma and other founders in the Sierra Ventures portfolio. They have a vision for how they will influence or change an industry. They know how to lead, recruit and manage talent—People want to work for them.
And finally, they can go through ups and downs and have resiliency. They have to have EQ and IQ, Fernandes says.
Sharma for example turned away revenue opportunities to stay the course toward productizing his company. And Moody wasn’t afraid to tackle an industry completely different from his last.
But Sierra supplements its founders’ skill sets and connections with its own. A unique benefit for portfolio companies is access to an active CXO Advisory Board includes executives from 70 Fortune 500 companies in Sierra’s seven verticals. Members include the CEO of Nike, CTO of Johnson & Johnson, CTO of Starbucks and CIO of Merck.
These are busy executives who Fernandes says are spending most of their days fighting fires, but come up for air about 2 percent of their time. That’s when Sierra makes connections to its portfolio companies who are innovating around problems they’re trying to solve.
Fernandes thinks of it as thought leadership—executives come to an annual invite-only CXO Summit each year to learn from portfolio companies and keynote speakers like Google CEO Eric Schmidt, LinkedIn CEO and founder Jeff Weiner or Marc Benioff, founder and CEO of Salesforce. There’s year-round interaction as well.
“What they are worried about is not the next security thing or the next best widget, but what could put me out of business,” Fernandes says.
His best example involves the insurance industry: “If you’re insurance guys, you’re wondering how do I need to adapt my business to autonomous vehicle industry?”
He didn’t share specific deals made through the CXO connection—but K4Connect has landed an investor from Sierra’s mix of corporate LPs.
Fernandes is on a search for more entrepreneurs like Moody and Sharma. And he believes the Triangle has the talent, especially on the technical side.
The only potential drawbacks are on the business side—entrepreneurial executive, sales and marketing talent is still in short supply here. And he laments a dearth of capital in the region, specifically at the series A stage. There are too few true series A investors with which a Bay Area investor could co-invest.
His advice? Start a fund. Or keep recruiting people like himself to come in.