News from Valhalla July 2011 - Volume 14

From the Partnership

Valhalla Partners

App47, one of our 2011 seed investments, has just emerged from stealth mode and is launching version 1.0 of its product, a platform for enterprises to manage their mobile apps.

We interview Chris Schroeder, App47 CEO, below.

We also welcome our latest investment, ShopXimity, to the Valhalla portfolio. ShopXimity is an early-stage company at the intersection of mobile with brick-and-mortar retail.

As always, we welcome your comments and questions. Please email to

Valhalla CEOs: Chris Schroeder

[Ed.: App47 is an exciting investment for Valhalla. We believe that smartphones and mobile apps running on smartphones will finally trigger the widespread use of mobile computing power in the business world. Starting with email and calendar, small applications running on smartphones are allowing employees to initiate wire transfers, approve new hires, view corporate data securely: in a nutshell, these apps will liberate the conduct of business from set times and places.]

Chris Schroeder
Position: Founder and CEO of App47

How did you get the idea for App47, and what convinced you it was a winner?

After selling RealOps to BMC in 2007, transitioning the team and working on the M&A team, I left BMC to pursue new adventures in the consumer market, specifically the mobile consumer market. I built several iPhone apps, published them in iTunes and set out to market and sell them, $1 at a time... I learned two things, the customer acquisition costs exceed revenue (unless you are picked up on iTunes as "App of the week") and I have a lot to learn about the consumer focused marketing.

One other area I gained a tremendous amount of experience in was mobility, specifically the platforms supporting the smart phones and tablets taking the market by storm. The "a-ha" moment was using this education in mobile and combining it with years of experience building management systems for the enterprise as the genesis for App47. Sean McDermott (CEO of RealOps) and I decided to team together once more to pursue the opportunity.

Having either worked in, built software for, or managed operations centers, we know management systems in the enterprise have a different set of features than are required in the consumer market. There is cross over, but the areas of App distribution, security, data privacy, and performance for not only the App, but back end components are some of the areas that require greater attention and features than in the consumer space. We are confident that as the Enterprise adopts the "App", they will need App47 to manage it's Application lifecycle.

You're a return entrepreneur. What did you learn from RealOps that's serving you in good stead at App47?

There is a very long list of items I learned, or were reinforced by being part of RealOps. The more significant ones are:

  • Technology is the easy part, it's the sales and marketing that win the day.
  • Get to market as fast as you can. Getting feedback on what features work and what is needed next is invaluable data that you cannot obtain trying to get the product perfect before launch.
  • After sales and marketing, timing matters, a lot.

What advice would you give to investors in picking the right seed projects to bet on?

I'm a firm believer in that there are three things to look at, in most any investment. Proven management team (execution), hot market (revenue), killer technology (delivery). You rarely have all three, but the question should be which two do you have, and how do you fill what you don't have. The flip side of that statement, if you have all three, you probably don't need money.

What will mobile apps look like in 2 years? In 10?

There a couple different facets I see changing for Apps in the next two years. 

Apps will become more immersive - we hadn't thought of a touch interface five years ago, now my five year old is swiping his way through my iPad. New gestures, sensors in the mobile device (think Xbox connect for mobility) will provide new experiences to mobile devices, and thus Apps, that we have yet to see.

They will be more connected - to date, Apps have been stand alone functional units of work, but you see more and more connectedness between apps and services. In simple terms this may be posting a tweet or FaceBook update, but Apps will start to use and integrate to other services and features. This will provide a richer feature set for Apps that are narrowly focused today.

They will transition into content creation as much as they are a content consumer today - with more immersive and greater fidelity on the mobile devices, the ability to do large content creation (more than a tweet) will become easier and more common place. This bodes well for enterprise Apps as they require more than consumption of RSS readers and YouTube.

In 10 years, there will be a new evolution of products, features and services we haven't dreamed of yet, so it's hard to predict 10 years from now. However looking back ten years ago; all that has really changed is the delivery platform. Ten or twenty years ago we had applications that provided access to data to a centralized server, depending on your age, it was called Mainframe or client server, all that has changed is the delivery platform. I don't think it's the App that will change as much as the platform will change, driving a new innovation wave of how we get "things" done.

What makes a great early-stage company? Two early-company screens we like

Naval Ravikant, a fixture of the Bay Area entrepreneur support system, gave a talk at Founder Institute's "Founder Showcase" event in San Francisco earlier this month.  Here's a good summary of his talk (together with a video of the whole thing).  Naval said – which makes a lot of sense – that of the five factors he discusses – Traction, Team, Product, Social Proof, Pitch – it's Traction that counts for the most with investors

He also said that a company with one exceptional trait was more interesting than a company with all traits pretty good:
“…investors are trying to find the exceptional outcomes, so they are looking for something exceptional about the company. Instead of trying to do everything well (traction, team, product, social proof, pitch, etc), do one thing exceptional. As a startup you have to be exceptional in at least one regard.”

Bill Gurley, GP at Benchmark Capital comments in this article about what qualities cause the markets to assign different valuations to two companies with the same revenues, and even the same rates of growth. For Gurley, it comes down to "quality" of revenue.  He discusses quality in ten areas:

  1. Sustainable competitive advantage
  2. Network effects
  3. Visibility/Predicability of results (aka SaaS)
  4. High switching costs
  5. Great gross margins
  6. Increasing marginal profitability
  7. Lack of customer concentration
  8. Low(er) partner dependencies
  9. Low CAC
  10. (Last, but not least): Growth
Both worth a look.

Valhalla Partners 3rd Annual Video Summit

Valhalla's third annual Video Summit was held in New York this year, in concert with the flagship launch of the Elevate Video Advertising Summit, a conference organized by Will Richmond of VideoNuze and Marc Sternberg of Rising Tide Media (previously President of AlwaysOn).

Valhalla's more intimate Summit, as in previous years, was an opportunity for a group of about 30 executives to have a more informal and extended discussion of some of the same topics. Joining Art Marks, Kiran Hebbar, and Dan Gordon from Valhalla's digital-media team were executives from Valhalla portfolio companies TidalTV and Avail-TVN, as well as Video Summit veterans from Starz Media, Dish Network, Comcast Interactive Capital, Google, Scripps, WPP, GroupM, SymphonyIRI, Greycroft, Wharton School, and others.

Similar questions dominated the discussion at both forums:

  1. When is TV content moving to the Web, and what business models will make it possible?
  2. If Pay TV goes away and all video is ad-sponsored, what will happen to the quality and quantity of content?
  3. When will TV ad dollars shift to online video and other digital channels?
A video interview with TidalTV CEO Scott Ferber, who was at both events

DC-area Product Innovators' Meetup July 14

Valhallans Kiran Hebar and Kevin Greene will host our third meeting of local Product Innovators on July 14th at the Teqcorner LLC in McLean, VA.

The first two meetings in Tysons Corner and Arlington earlier this year were a great learning experience for us. We gathered a group of "product visionaries" and had some terrific discussions. The group asked for some structured demo time, so at the Arlington meeting in April, five companies (Big Universe, nExercise, Ringio, Workforce Growth, and Oculis Labs) demoed to a group of seasoned product professionals to gain access to quality product feedback, ideas and best practices.

We encourage any product innovators from the DC metroplex (or beyond) to join us. RSVP for the July 14 gathering at the Product Innovators' Meetup page or via email to Kiran or Kevin.

Portfolio News

New Investments

ShopXimity, Inc.

ShopXimity, Inc., Boston, MA

On May 10, Valhalla Partners, together with US Venture Partners, participated in a $4.6 million Series A investment in ShopXimity.

Shopximity is a mobile application at the intersection of mobile, retail, local and advertising. The company was founded by Simeon Simeonov, an entrepreneur and former entrepreneur-in-residence at General Catalyst, a venture capital firm.

Follow-on Investments

KZO Innovations, Inc.

kzo logoKZO Innovations, Reston, VA

On May 25, 2011 KZO Innovations closed a $0.5 million Series A-1 round led by Valhalla Partners. Valhalla's share of the investment was $250,000.

KZO Innovations is an R&D and software development company pioneering and delivering innovative streaming video solutions. KZO's fusion of digital video expertise, advanced technology development and business process management enables the company to provide customers with unprecedented innovation and ROI-based effectiveness in the rapidly evolving global market for technology enabled knowledge, training, education, analytics and communications.

Q & A

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Please click here to submit feedback. We will undertake to respond to every submission, and to print those of general interest in this section. The partnership is happy to address topics such as hot technologies, exit strategies, or due diligence. We look forward to hearing from you.

The Valhalla Team

Investment Staff

Charles Curran
General Partner
Harry D'Andrea
General Partner
Dan Gordon
Director of Research
Kevin Greene
Kiran Hebbar
General Partner
Hooks Johnston
General Partner
Art Marks
Managing General Partner
Gene Riechers
Senior Advisor

Administrative Staff

Claudia Bartz
Executive Assistant,
Office Manager
Sara Endicott
Executive Assistant
Bibiana Speroni
Executive Assistant,
Finance and Research

We want, as much as we can, to open up our newsletter to questions, opinions, and suggestions from our readers. The great magic of our newest medium for communication is its interactivity.

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