It’s not easy for founders trying to build a startup company. When done with the right guidance it’s proven to be a differentiating factor in building a successful company. WestWave Capital invests in pre-seed, seed, and Series A enterprise startups. They give advice to cofounders, working closely with startups to reimagine industries and advance their product strategies to build a successful company. They focus on building deep technology enterprise companies in areas such as SaaS, Security, Cloud Infrastructure, Edge Computing, Analytics, Robotics and Artificial Intelligence. Their portfolio includes innovative ventures across various domains, and they actively support their portfolio companies with operational strategy, networking, and introductions to customers and partners.
Finding his Forte
Early in his career, Warren Weiss, Founder, and Partner, of WestWave Capital, didn’t really know that he wanted to be in the software and technology business because there wasn’t much of a technology business. He majored in criminology at Western Illinois University, thinking he would pursue a career at the FBI. He learned through doing some internships, that this wasn’t the direction he wanted to go.
During that time, a friend of Warren’s developed a voice response system to prevent companies from accepting bad checks. This system allowed users to input a driver’s license or social security number via touchtone phones or point-of-sale systems, providing voice responses to verify or guarantee checks. Inspired by this experience, Warren became passionate about the software industry and eventually played a key role in selling to a public company.
Warren’s professional career was most influenced by John Imlay who ran a company called Management Science America (MSA) in Atlanta, Georgia. His motto, “People are the key”, guided his decisions. It was very early in the technology business, so there were no readily available software executives or engineers. They had to build teams from different sectors of the industry, such as service bureaus, computer hardware, and consulting industries. Warren was very fortunate to be at an inflection point in the software industry in the late seventies. There was no experienced software talent like there is today. It gave him an opportunity to grow with an industry from the very beginning. Culturally, he adopted the “People Are the Key” motto, and this formed his thinking throughout his career about the importance of culture and leadership. He believed patience, discipline, desire, teamwork, and loyalty formed the framework for recruiting and retaining the best talent. These attributes were what he looked for in the people that he wanted to work with and hire throughout his career.
Warren, as head of a regional sales organization at MSA, worked with incredibly talented pioneers in the software industry. During his eleven years there, MSA produced over 200 CEOs who spread throughout the industry, creating an extensive personal network that benefited Warren throughout his career. Later, at Continuum, he leveraged their customer base to build a successful outsourcing business, capitalizing on the emerging technology of graphical user interfaces and achieving a remarkable outcome for investors when the company was sold for over 1.5 billion dollars.
At this point, Warren’s goal was to become a CEO. He got an opportunity from Steve Jobs, who called him at home one day and said, “I think you understand the technology we built at Next, and what it can do for the software industry”. Working alongside Steve Jobs, they shut down the hardware business and built a software company with a great operating system and development environment. They ended up selling the company back to Apple which used the Next Software, operating system, and development environment, App Store, iTunes, etc. Warren was able to meet a lot of people whilst working at Next, which helped him build a great network in Silicon Valley. He had four CEO roles where he took the culture that he learned early on at MSA and used it as a model for management and leadership to build successful companies, delivering great returns to the investors.
Asera was one of the first SaaS companies in the world. They built order processing and inventory systems that became new front ends for ERP systems like Oracle and SAP. Warren spent two years doing that, and although it wasn’t a great outcome for investors, it was a great experience for him, as it helped him learn how the Venture Capital industry makes decisions to invest in startup companies. That took him all the way up to the 2002 era where he met the partners at Foundation Capital. He joined the firm, changing his career to become a venture capitalist. Using the skills, experience, and culture he had learned along the way, he has now built a long and successful venture career.
Establishing WestWave
When Warren started WestWave Capital in 2018, he was able to use a lot of the things that he had learned at Foundation Capital. At WestWave Capital, they started in the emerging manager space, investing in the enterprise, deep technology market. They invest in the earliest rounds, between $1 to $5 million dollars, becoming the first institutional investor in a startup company.
“In this very competitive industry partnering with Co-investors is an important part of our business. I wanted to start the firm from scratch with people and a team that really had the same passion I had for the enterprise market in areas such as Security, SaaS, Analytics, Edge Computing, Robotics, and AI. AI has been around for 30 years. It has recently gotten much easier with Chat GPT-like products so that consumers and employees can use the technology in the same way they use Google Search,” shares Warren.
Warren has spent the last 6 years building a team of equals at WestWave Capital. Their partnership, rooted in the principles of early-stage venture capital, focuses on long-term success. The firm helps startups find customers, key employees, and strategic partners with the goal of building great companies which provide excellent returns for investors. Warren emphasizes direct communication with entrepreneurs about exit strategies, recognizing that sometimes selling or shutting down a company is necessary due to market shifts or other challenges.
The team has now evolved into a firm that is great at finding its own unique proprietary companies to invest in, using their own personal networks.
“We have a firm with a very diverse culture that can express their different opinions, creating a much higher bar in making investment decisions. We all vote together on projects we invest in. We all set the budget for the firm. We all know each other’s compensation. Being a small firm makes it easier to understand what it takes to go from someone who is just learning to invest, to being a full general partner in the firm. It has all come together for us as we’re in our 6th year now, heading towards our third fund,” shares Warren.
A Structured Methodology for Promising Startups
Warren’s working style is structured yet flexible, benefiting from everyone’s unique approaches. His team at WestWave Capital follows a well-thought-out process for reviewing investment opportunities and conducting due diligence. They work within a framework that assesses these questions: Why should we invest in this? How are we going to make money for our limited partners and ourselves? And what are the risks?
Working in Venture Capital as an Alpha-style investor involves seeking high-impact opportunities akin to baseball analogies such as home runs or grand slams. If a company lacks product-market fit, either an early sale exit or closure of the company is crucial. Assessing portfolio companies, their market value, financing needs, and leadership (especially CEOs) is essential. Beyond financial investment, WestWave Capital actively supports their investments by facilitating customer acquisition, strategic partnerships, talent recruitment, and additional funding rounds. Collaborating with the right investors, board members, and advisors is key to a company’s success.
As a company grows, the CEO often needs to replace key executives who may not be suited for all stages of the business. Similar to changing tires on a car, personnel adjustments are necessary. While founding CEOs may struggle to lead a company all the way to an IPO, it’s crucial to prioritize shareholders’ interests. If needed, WestWave Capital proactively brings in new talent to facilitate growth.
As an established Venture Capital firm, WestWave Capital has many portfolio companies to work with. Staying connected with portfolio companies, their customers and employees is important to the success of the company. Customer satisfaction matters, especially in an era where alternatives abound. Continuously improving products ensures customer retention.
Looking at Trends & Innovations
WestWave Capital focuses on new markets, including Robotics and AI software companies. They invest in new companies where they have a deep investing thesis in each of these categories. From evaluating one thousand new companies annually, they narrow down to about twelve investments. Over the past six years, they’ve invested in approximately one new company per month. Markets like Climate, Crypto, Consumer, and Healthcare don’t align with their investing thesis. In a new market like Multi-Cloud Management, Warren was an investor in Cliqr Technologies, which pioneered Multi-Cloud Management, enabling you to move any application to any cloud. The investment he made in Cliqr Technologies was successful, despite skepticism from Venture Capital Investors that Amazon would be the only Cloud company in the industry. He recognized the need for many cloud computing options. WestWave Capital’s approach spans the entire cloud stack, from middleware to security, and Artificial Intelligence, enabling digitization in new trillion-dollar industries. Solutions built atop multi-cloud environments, like WestWave Capital portfolio companies Solo.io and Spectro Cloud, increase revenue growth, and yield substantial returns to investors.
“If an investment meets one of our theses, and we decide to do due diligence, we will then do references on the team, talk to customers, do a deep technical dive on the product, research competitors in the industry, and talk with any existing key investors. Next, we formalize our work into an investor summary to make the final decision. We will then have a unanimous vote by the partnership to approve the investment,” shares Warren.
Mentoring Entrepreneurs
Warren believes that successful entrepreneurs possess a unique blend of positive outlook, curiosity, and a desire to build a great company. They need to prioritize critical areas such as financial business models, product-market fit, sales cycle and a complete go-to-market strategy. For entrepreneurs, he advises that interacting with larger customers will lead to building a better product. Investments from Venture capital firms can be very expensive as they will require a large ownership stake in the company. It’s important for companies to hit their revenue milestones so that it will be worth taking a Venture Capital investment. In the early years of a new company, it’s important to grow revenue at 100% per year. As a company grows larger, it’s important to have a plan to be profitable. A company must always understand it can never run out of cash. Companies must plan on hitting their revenue milestones so they can arrange new financings 6-12 month ahead of when they will need more cash. Before seeking additional funding, entrepreneurs need to have product market fit, a proven sales cycle and happy customers. Otherwise, securing more capital becomes challenging.
“We help our portfolio companies understand the journey of raising several rounds of funding from different types of venture capital firms. It’s like horses in a horse race. There are seed firms, series A firms, B firms, C firms, growth firms, and mezzanine firms, and they all want different things. Different levels of revenue and different levels of proof. The management team needs to work together, to process and understand these important goals for raising money from these different series of investors,” says Warren.
He suggests that for early-stage companies, being analytically driven and tracking key performance indicators (KPIs) is crucial. These KPIs will allow you to make rapid adjustments to changes to your business. Startups, unburdened by existing customers, can innovate more freely. However, once a customer base is established, innovation becomes slower. Entrepreneurs must evaluate whether they truly deserve funding or if selling the company to a larger entity is a better path. Before accepting an investment, an entrepreneur needs to do thorough due diligence on potential investors to ensure they are picking the right venture firm and partner for their business.
“Entrepreneurs are talented individuals, and as a seasoned investor you must earn their trust to help them to solve hard problems. We guide them through short- and long-term priorities. Operational control over financials is crucial. Often, founders come from product and engineering backgrounds, not sales or marketing. CEOs must excel in strategy, execution, and leadership to succeed,” shares Warren.
Future Landscape
Even though it’s always hard to predict the venture landscape, Warren feels that it’s one of the fun and exciting things about it. However, there are a lot of venture capital firms today and it’s hard to envision that all will be successful. Warren has been through several periods where the number of VC firms increase and then decrease. He thinks it’s important to take investments from venture firms and partners who will be around for a long time.
“We see this as probably the greatest time in history to be a venture capitalist in the technology business. The world is in for massive changes in how everything operates at every level of our society. Many of those hopefully will be for the betterment of society. Left unchecked, we know there are already concerns about AI and what that could do, but if we think 50 or 100 years ahead, we’ll look back at today and say we were barbarians. For example, looking at crystallized medicine, air travel, health, how we commuted around, and how we lived our lives. Every aspect of life will be challenged by every generation. I believe technology could play the most critical role in doing good for society,” concludes Warren.
