An engineer turned venture capitalist, Andy Vitus of Scale Venture Partners invests in companies transforming the data center. Andy has worked with companies such as CircleCI, DataStax, JFrog, Matillion, PubNub, Realm, Treasure Data, Unbabel, Unifi, and Stormpath.
Davis Baer: What’s your background, and what are you working on?
Andy Vitus: I’m actually an engineer by training. I have a Masters in Electrical Engineering from Stanford and a Bachelor’s Degree in Electrical Engineering from the University of Cape Town in South Africa (where I grew up). I was working on neural networks and computer vision in the 90’s, detecting stolen diamonds in x-ray images.
After Stanford, I decided that I wanted to be a part of the innovation and creation happening around me in Silicon Valley. So, I went to work as an engineer for Electronics for Imaging, designing embedded print server platforms and video compression circuits. I spent about six or seven years in engineering and did a brief stint as a financial analyst before joining venture.
I’ve been a Partner at Scale Venture Partners for about 15 years. My investment focus has always been on next-generation data center technologies. I started in semiconductors then moved to hardware, and have been investing in software and microservices for most of the last decade. I’m really bullish on horizontal technologies helping improve the software development and delivery lifecycle.
What types of companies do you invest in?
I’m interested in next-generation enterprise software and data center technologies, with a particular focus on microservices, machine learning (again!) and the DevOps process.
In terms of company stage, I typically invest at the Series A or B. At Scale Venture Partners, we invest in early-in-revenue enterprise software companies looking to scale. This typically happens around the Series B stage, but can also come as early as the Series A and extend into the Series C, depending on the company. Essentially, we’re looking for companies that have a product in the market, are seeing early revenue, and are really looking to scale their operations to accelerate their growth and become an enduring brand.
So, if what I’ve just described sounds like you… drop me a line!
What motivated you to become a venture capitalist?
I didn’t set out to become a venture capitalist. I was very happy working as engineer — it was an exciting time to be in tech in Silicon Valley. I also worked a bit as a financial analyst and discovered that I enjoyed the investing side of things, too. I had a few friends tell me, “If you like tech and investing, you should really check out venture.” Being from South Africa, I’d never really thought about it. But then the guy sitting next to me at work got approached by a headhunter for a VC firm. And he told the headhunter that he should talk to me. The more I learned about venture, the more I began thinking that I should give it a try. It ended up being a great fit. I’ve really enjoyed it.
When I joined Scale Venture Partners 15 years ago, I was a bit of an outlier in the VC world. Back then, almost everyone in venture had finance backgrounds and seemed to have wanted to be in it from the start. There were very few engineers in venture. But it’s changed a bit as several successful founders (especially those from the dot-com era) have become investors, and as more venture firms realize that they need technical expertise.
What do you look for when you’re making an investment?
I wrote a blog post a few years back with my scorecard for evaluating potential portfolio companies. It’s still very true to my investment thesis today.
In essence, I’ve found there are a few key characteristics of successful developer-oriented SaaS companies:
- They target broad, horizontal functionality. In other words, they solve a problem felt by every single company. If every software application or DevOps team needs your technology, you have a much bigger addressable market opportunity. JFrog, for example, provides a universal repository manager that’s helping companies (everyone from Spotify and Netflix to Toyota and Invisalign) accelerate their entire DevOps process. Similarly, Unbabel’s translation service helps companies scale their global operations to better reach and service customers around the world.
- 2. They’re mission-critical. Technologies that address complexities in processes that are required to work flawlessly all the time are a sure way to win and keep customers. Every company needs to process online payments and they need that infrastructure to be reliable — it’s no wonder that developers love Stripe.
- 3. They have instant global scale. When you have to support traffic from thousands of enterprises, the scale can quickly become enormous. If you haven’t designed your infrastructure to handle massive, global scale from the outset, it’s going to be difficult to support your customers over time. PubNub, for example, built a global real-time network that can deliver missions of messages per second, with almost no perceptible latency.
- 4. They’re solving “unsexy” problems. Companies that seem boring often have less competition and are therefore highly profitable in the long run. Splunk started by helping developers make sense of log files, while Matillion helps companies move data from all their applications into public cloud data warehouses. Both of these companies have created technologies that address pain points that every developer team faces, and because they’re also complex and unglamorous, developer teams are usually happy to have someone else help them out.
What’s your advice for startups looking to get funded?
In addition to the qualities I just mentioned, I would add that companies should focus on building a great product that customers love. There’s a perception that fast product development and product excellence are at odds with each other. I’ve found that if you have a fantastic product that engenders love from your customers — a polished, differentiated product that’s well-designed and meets customer needs — you’ll perform well on metrics like sales efficiency over the long run.
What’s the biggest mistake entrepreneurs make?
Related to my point above, I would say that it’s falling into the trap of releasing a product — under the guise of the “lean startup” model — before it’s completely ready. I’m not a fan of throwing out a half-baked concept and calling it an MVP just to see if it sticks. That’s missing the point of the product being viable!
Releasing a product too early also shows a lack of respect for customers. The most successful companies are ones that are customer-first, who take the time to understand their customers and build something that they really love. You can bet those companies aren’t releasing products or new iterations that are broken. Refining your product while it’s out on the market only serves to damage your brand. Take pride in your product — pick one problem and then build a best-in-class solution.
If you weren’t a VC, what would you be doing?
If I weren’t an investor, I’d be an engineer. Even today, I’m a hobbyist engineer — I still love coding, testing and trialing different technologies.
As I mentioned earlier, I started in machine learning at Stanford 24 years ago. It’s funny to see things like AI and computer vision becoming so popular again. Back then there was a lot of hype around those technologies, but they didn’t live up to the promise. We’re seeing a lot of breakthroughs now, which is exciting. And I believe that this time they truly will be transformative.