Larry Cheng

Venture Capitalists Talk About the Big Investments They Didn’t Make

How does it feel to pass up the next Facebook? Or Lyft? Investors share their stories.

Read the full article here.

By Rob Curran

Being a venture capitalist means placing bets. Sometimes you hit it big with a startup. Sometimes you lose everything.

But sometimes you never place a bet at all—and end up missing out on an idea that turns out to be a multibillion-dollar winner.

One long-established venture-capital firm, Bessemer Venture Partners, lists its multibillion-dollar misses under the heading of “the Anti-Portfolio” on its Web site, memorializing, among other things, a partner’s description of a pre-IPO Apple as “outrageously expensive.”

We asked some seasoned investors to share their stories about the big chance that got away. Why did they pass on these startups? What didn’t they see that somebody else did? And what lessons did they take away from the experience that helped them make better decisions down the line?

Larry Cheng was a junior associate at venture-capital firm Battery Ventures when he heard about “The Face Book.” 

There might just be one thing worse than missing out on a bonanza by making the wrong call on an investment: missing out after making the right call.

In 2004, Larry Cheng was an associate at venture-capital firm Battery Ventures in the suburbs of Boston. He pitched investments to a committee of superiors but never had the final say.

In March of that year, he attended a Harvard University alumni event. During his visit, he asked some students what was new on campus.

“Everybody was saying, check out ‘Thefacebook,’ it’s blowing up on campus,” says Mr. Cheng, who estimated what was then an online Harvard student directory was about four weeks old.

Years later, in a blog post, Mr. Cheng described his “aha moment.”

“They had uploaded the Harvard course catalog into the network so that with a single drop-down menu, you could sort the entire network by those taking the same class as you,” Mr. Cheng, now a managing partner at Volition Capital , wrote on his blog.

That feature allowed students to find out more about classmates, a utility whose appeal would be clear to anyone who has ever had a classroom crush.

According to Mr. Cheng’s account and his records, he contacted Mark Zuckerberg electronically and arranged to meet him at the Charles Hotel in Cambridge. Mr. Zuckerberg brought a friend, Facebook co-founder Eduardo Saverin.

The duo’s ambition was clear, according to Mr. Cheng, but what really impressed him was their focus.

“They were focused on solving a problem for one college campus, and they did it in a very good way,” Mr. Cheng says. “They limited their focus and scope, then rolled out to a few more college campuses and solved the same problem.…That would not have existed if they had just opened to the masses.”

The next meeting was over breakfast back at the Charles Hotel. Mr. Cheng could tell the two students were “unaccustomed” to the morning schedule. “They came in looking a little bleary-eyed,” he says. The students’ apparent aversion to the early hour didn’t color Mr. Cheng’s impression of them, however, as he remembered being the same way himself.

The final meeting was in Battery Ventures’ former Wellesley offices in May 2004, Mr. Cheng says. In the intervening weeks, according to Mr. Cheng, Facebook had launched at about 20 other top-tier schools.

Mr. Cheng realized Messrs. Zuckerberg and Saverin probably couldn’t afford a taxi back to campus. So he gave the pair—who now have a combined net worth of about $80 billion—a lift back to Cambridge and $40 for the ride to Wellesley. It was, unfortunately for Mr. Cheng, the only stake that changed hands.

Mr. Cheng says he sent a memo to his superiors in Battery Ventures, extolling the potential of an investment in what became Facebook. He says he heard many objections to the idea. The principal impediment was an existing bet that Battery Ventures had made on Friendster—venture-capital firms seldom back two direct competitors. Other objections included the “limited scope” of the network at that stage and the employment status of the company founders.

Ultimately, Mr. Cheng says, he failed to persuade his superiors.

“Hindsight is 20/20,” says Battery Ventures General Partner Scott Tobin, in an email. At the time, he says, Friendster was popular in the Philippines, a huge market of social-media users. “Unfortunately, that didn’t make up for air-balling one of the most successful venture investments of all time.”

Facebook didn’t respond to requests for comment on the contact between the two firms.

One of the lessons Mr. Cheng learned from his brush with Facebook was the importance of persevering with strong hunches.

“In retrospect, I should have pushed the opportunity more aggressively, even though consensus was hard to come by—not just because Facebook was a historic success but because I’ve since learned that the best investments are never obvious at the time and it is so important to follow your convictions,” he says.

Mr. Curran is a writer in Denton, Texas. Email

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A low-flying pet supplies company just sold to PetSmart in the biggest e-commerce sale ever


If you haven’t heard of Chewy, you aren’t alone. But PetSmart, the retail giant with more than 1,500 stores across the U.S., has clearly been tracking the low-flying, five-year-old pet supplies company. According to Recode, it just agreed to purchase its young rival for a stunning $3.35 billion, just slightly more than Walmart paid for last year.

This editor only heard of Chewy for the first time last fall, when talking with one of its earlier investors, Larry Cheng of the Boston-based growth equity fund Volition Capital; Volition had written Chewy its $15 million Series A check in 2013, and the company had been growing quietly like a weed, he’d told me.

By design, that began to change late last year, when Bloomberg wrote a long profile about the Dania, Fla., company and the $236 million it had subsequently raised from investors, including BlackRock and New Horizon, the venture arm of mutual fund T. Rowe Price. Until then, said its chairman, billionaire e-commerce veteran Mark Vadon, his advice to the team had been to keep a low profile to better to avoid competition.

It was something of a feat. By the time Bloomberg published its story, the company had more than 3,000 employees and more than $880 million in annual revenue.

Its apparent key to success: personalization, from writing customers hand-written thank you and holiday cards to dedicating roughly one-sixth of its employees to customer service so pet owners’ questions could be answered quickly. Free shipping on orders over $49 also helped.

Perhaps as a result, the company hadn’t yet reached profitability, Bloomberg noted, but no matter. By the time its report was published, Chewy was reportedly talking with Goldman Sachs about preparing an IPO for this year.

No doubt Walmart and Amazon were following its moves, too. Another big profile that ran in Forbes in January reported that Chewy controls 43 percent of the online sales of pet food and litter in the U.S., just behind Amazon’s 48 percent.

As it turns out, Chewy’s traction proved the most irresistible to PetSmart, for immediate strategic reasons. PetSmart was taken private for $8.7 billion in 2014 by the private equity firm BC Partners, and as part of an overhauled designed to fuel its future growth, the company has been shifting more of its business online. Chewy also has a great reputation with its customers, which is less uniformly the case for PetSmart. Indeed, in a statement today, PetSmart CEO Michael Massey said of the deal, “Chewy’s high-touch customer e-commerce service model and culture centered around a love of pets is the ideal complement to PetSmart’s store footprint and diverse offerings.”

The acquisition is expected to close by the end of PetSmart’s second fiscal quarter of 2017.

Chewy cofounder and CEO, Ryan Cohen — who dropped out of college in Montreal to become an entrepreneur — will continue to lead Chewy as an independent subsidiary of the company.

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Pet food retailer has seen fantastic growth. But can it keep up the pace?


The leading online purveyor of pet food and supplies almost never was. That’s because the founders of Broward-based originally planned to go into the online jewelry business.

“We had actually bought jewelry inventory, and we were literally days away from launching the website,” says Ryan Cohen, Chewy’s 31-year-old chief executive officer. “We bought about $150,000 worth of jewelry. So we were that close to starting to sell jewelry.”

Cohen and Michael “Blake” Day, who met in an online chat room about computer programming, had pooled their money for the jewelry venture. They decided to sell everything at 80 to 90 cents on the dollar after Cohen convinced his business partner that pets had better market potential. Cohen came to that realization while shopping for his toy poodle, Tylee.

“I always wanted to do something with pets, but I couldn’t figure out how to monetize it,” he said. “So I was going to the pet store and realized the market online was really under-penetrated. I said, ‘This jewelry idea, we’re not passionate about what we’re doing. This is a much better opportunity.’ I understand the customer — because it’s myself. So we built the company.”

Cohen and Day redirected their finances and co-founded the company. Neither holds a college degree, and at the start they lacked a business plan. But they had faith in their abilities, both having extensive experience with computers since their teens, Cohen said. They launched the company in 2011, along with Alan Attal, one of Cohen’s childhood friends from Montreal.

The privately-held company registered $26 million in sales during its first full year in business. Chewy has since grown to 3,700 employees and is projected to increase revenues to nearly $2 billion this year — nearly a 7,600 percent growth spurt in just six years.

According to 1010Data, rules the online sales of pet food, with nearly 51 percent of the online market, including 40.5 percent in direct sales and 10.2 percent in subscription sales. The nearest competitor isn’t even close. cornered nearly 35 percent of the market, with 23.5 percent in direct sales, 7.6 percent in subscriptions and 3.6 percent at retail. By comparison, has less than 1 percent of the online market share.

Cohen has aggressively pursued the No. 1 position for online sales, but what he really wants is more of the overall market for pet food and supplies. According to the American Pet Products Association, pet owners in the United States spent an estimated $62.75 billion on their animals last year, with $24.01 billion on food and $14.98 billion in supplies and over-the-counter medicine, making their target market roughly $40 billion. At $2 billion in sales, Chewy would command roughly 5 percent of the market.

“So if you look at where we are today in the business,” Cohen said, “we’re still scratching the surface in terms of the total addressable market. We want to be No. 1. We’re No. 1 online. We want to be the largest pet retailer in the world.”

That’s an admirable goal, but Chewy might need to diversify its sales approach to attain it, advised Steve Kirn, a lecturer in retail management at the University of Florida’s Warrington College of Business. Kirn pointed out that brick-and-mortar companies such as Petco and PetSmart dominate the field with more than half the overall market, even though their online presence is minimal, with 3.1 percent for and 2.2 percent for, respectively.

“The people who are going to be winners are the omni-channel or multi-channel people who can satisfy you in a store, online, mobile, maybe even with a mail-order catalog,” Kirn said, explaining that brick-and-mortar stores offer services that online stores cannot match, such as grooming and training. There’s also the social aspect of shopping. Kirn even lets his border collie, Myka, partake of the experience.

“When we go to the pet store, our dog really likes to go along with us, and she sniffs around at all the toys and maybe she’ll land on one that she really likes,” he said. “We give her a little bit of a role in picking it out. This dog is a border collie, and she has a very clear point of view about things. We’ve ordered some things online, but generally we’ll go to PetSmart or Petco.”

Online shopping is a convenience, but the majority of sales still take place in the stores, he pointed out. While online sales are increasing as much as 20 percent per year, depending upon the category, as much as 90 percent of all purchases are still made in bricks and mortar stores, Kirn said. He also pointed out the inherent risks of growing too big too quickly.

“It’s very hard to sustain over time this type of frenetic growth,” he said. Others have tried and failed, he cautioned. Case in point is, which famously featured a sock puppet singing off-key to K.C. and the Sunshine Band’s “Please Don’t Go.” The TV ad aired during the 2000 Super Bowl and drove home the point that people could spend more time with their pets if they ordered their supplies online. The company went out of business in November 2000, just 268 days after going public.

Chewy has at least one advantage over It saves on production costs by producing all its commercials and You Tube videos in-house.

When asked about the biggest potential pitfall Chewy faces, Kirn narrowed it down to money. “Making money,” he said. “Expanding so fast and acquiring debt, even with the sales that they have, they probably are not generating enough to support all the infrastructure for the business that they have to do. So, they’re going to be borrowing money. So, their borrowing costs will go up. And that’s why they’ll have to grow the business really fast, to be able to meet their obligations on their notes.”

Cohen recognizes that the company needs to grow to provide his customers with fast and efficient service. Before the company ramped up by first renting, and then purchasing warehouses for distribution, Cohen says the company hired another company to handle that side of the business. Now Chewy is making the capital investment to ultimately reduce that cost by doing everything in-house. A network of warehouses in key parts of the country will enable the company to reduce both transport costs and delivery time. The company currently provides overnight delivery for more than 60 percent of its customers. The goal, he said, is to increase that to 80 percent by early next year.

Delivery, which is currently handled by FedEx ground, could prove an expensive proposition, especially to provide for those living in far-flung places, including one remote Texas town that a customer described as, “Honey, I live so far out in the woods there’s not even a Chipotle.” Kirn asked, “Do the economies of doing this home delivery work out? It tends to work out in densely populated areas because it’s more efficient. You don’t have to go driving all over creation to deliver stuff. Places like New York or Chicago or Miami have the kind of population density where I think it can work out. But if you truly want to be a national service, delivering to everyone, you’ve got a problem.”

Cohen is aware of the many stumbling blocks strewn in the way of his dream. To date, the company has yet to register a profit, using investor money to support the increase in staff and capital improvements. The company currently serves more than 2 million customers nationwide, with the highest concentration of customers in the densest populations such as California and New York. His team is constantly scaling the business model to generate revenues that exceed costs.

“It is a business where the barriers to entry are relatively low, but in order to be successful, the execution is really more difficult and complex,” Cohen acknowledged. “Anyone can go and build a Walmart, but it’s hard to do. It can be done. The blueprint is there, but it’s hard to actually execute and to get to that scale to be as successful as they are.”

It’s difficult to sustain, let alone grow, Kirn said. “Walmart did about half a trillion dollars in sales last year,” he said. “So, if they wanted to grow the business by 5 percent in one year, they would have to grow by $25 billion. They would have to grow by a company the size of Macy’s just to get a 5 percent growth.”

Chewy has grown so rapidly that it needed several infusions of cash to support its infrastructure. Investors appear willing to assist. The company supplied a list: Volition CapitalT. Rowe Price New Horizons FundBlackRockAllen & Co., VerlinvestGreenspring and Mark Vadon.

“We’ve raised five rounds of financing — $236 million over five different rounds from five different investors — between 2013 and now,” Cohen said. “In the beginning, it was difficult to raise, but as we’ve scaled, we have a track record of success. It’s made it easier, and today it’s much easier to finance the business than when we were a lot smaller.”

On Feb. 1, Wells Fargo Capital Finance became the latest investor, announcing an agreement to lend $90 million over the next five years to Chewy, Inc. The loan will assist the company as it continues its expansion.

Chewy currently operates three distribution centers — including a 567,000-square-foot warehouse in Reno and two similar-sized facilities, one just outside of Hershey, Pennsylvania, and the other in Indiana. By this time next year, Cohen says, his company plans to have doubled its distribution centers. Plans call for opening a warehouse in Dallas and another in northeastern Pennsylvania this year. In February 2018, the firm is also opening a 611,000-square-foot warehouse in Ocala.

That’s roughly four hours from Chewy’s headquarters in Dania Beach. Cohen calls himself a snowbird who fled the Canadian winters for Florida, where he has family. He established Chewy in the office complex that houses the Design Center of the Americas. Designers looking for the latest in luxury furnishings may do a double-take as members of the Chewy staff stroll in with their pets in tow. Aside from the usual complement of cats and dogs, the Chewy pet family includes the occasional ferret, parrot, lizard, snake and sugar glider (which resembles a flying squirrel with a striped face and big brown eyes). Samantha Rassner even brings her wolf to work. Known simply as The Wolf, the cream-colored tundra wolf with a mohawk, is so gentle that he even lets strangers pet him.

Rassner, the company’s vice president of software development, credits The Wolf with landing her a job at Chewy. Before joining Chewy some 16 months ago, Rassner said, she ran a local startup focused on home and marine automation. While looking for additional talent at a tech meet-up, she met the Chewy recruiters, who also were looking to hire. “I walked up and was like, I love you guys; I just wanted to talk to you and to say thank you for everything that you do,” she said. “I’m a huge customer, a huge fan.” The Wolf was with her and so they started talking about him and how she rescued him and nursed him back to health after his original owner had left him for dead, tied to a stake in an open field. That chance encounter led to a job interview with the three friends who were with the company from the start: CEO Cohen, Chief Technology Officer Day, and Chief Operating Officer Attal.

“It was definitely key, that meant-to-be match,” Rassner said. “When I went in the next day I didn’t bring The Wolf with me, but I was talking with Alan and Ryan and Blake and told them all about The Wolf and they were, ‘Bring him in. Why didn’t you bring him?’ So, there was never a question of if I could bring him in. It was just how soon I could get him in there.”

Rassner said she joined Chewy with the express mandate to turn the company into a full-fledged software development company. Under her watch, she estimates the department has more than quadrupled in size, with some 50 software developers that oversee warehouse management, e-commerce and mobile apps.

In January, the team expanded into Boston, where Chewy leased a 20,000-square-foot space for software developers, designers and recruiters. Boston is also home to one of Chewy’s earliest backers, Volition Capital, which reportedly pumped $15 million into the company in late 2013.

Larry Cheng, managing partner at Volition, sits on Chewy’s board of directors, as do Mark Vadon and Kevin Hofmann. Vadon, one of Forbes’ newest-named billionaires, is an online retailing guru who is a founder of online retailers Blue Nile and Zulily. Hofmann serves as chief marketing officer for Home Depot and president of its online business. Building on the success of other company models, Cohen said, “We’ve hired folks from many different companies, including Petsmart, Amazon, and Whole Foods.”

Chewy is also following the model of superior customer service pioneered online retailer Zappos. Chewy set a goal of answering the phone within five seconds — and with a live person — who is knowledgeable about the entire line of products the company offers its customers.

“From the beginning,” Cohen said, “we came in saying that we want to provide pet parents with the most amazing customer experience. Period.” His aim is to build a bond based on trust, where customers recognize that Chewy personnel know their products and are not looking so much to make a sale as to satisfy the needs of the customer. “Being able to establish that trust is an amazing thing, because pet parents, like myself, are very vocal, and if we could do a good job at building that trust, then they will stay loyal.”

For Kelli Durkin, vice president of customer service, sometimes building that trust involves sending a card at Christmas or on a pet’s birthday, or even a small portrait of the family pet. Sometimes, it involves simply listening to a caller. A flat-screen monitor in the center of the call center on the third floor of the DCOTA building electronically tracks all incoming calls and their duration, with no time limit on the calls. The call center is open around the clock, and on any given day, as many as 12,000 calls come in.

Those handling the customer calls are encouraged to get creative in their efforts to awe the customer.

“The goal is with every interaction there’s a ‘wow’ experience,” Durkin said. “So, that customer should hang up the phone and go, ‘Did that really just happen?’”

Chewy surprised one customer with a computer keyboard after he called to place his order, explaining that he only did so because his keyboard was broken. Another customer, whose house had just burned down, kept talking about how the bedsheets they had just purchased for their children had burned in the fire. They were theme sheets from the Disney movie “Frozen.” The customer service operator handling the call, surprised the customer by replacing the bedsheets as a way to comfort his daughters.

Durkin wanted to send a burrito to the Texan who lived in such a remote area outside the orbit of a Chipotle. Instead, she sent a gift card for the restaurant, with a note that said, “Next time you’re in the big city, get yourself a burrito on Chewy.” “He loved it, and I’m sure he’s still a customer,” as is the 73-year-old woman who Durkin said called to say, “I just received flowers to my home because my dog passed away. This is the second time in my life that I’ve ever received flowers, and I need to thank someone.”

It’s that kind of interaction with his customers that Cohen seeks. His goal is to build a company that is intimate enough to cherish its individual customers and large enough to make a profit while saturating the market. “We wanted to create a business that could be a household name,” he said, and he’s well on his way.

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Ryan Cohen, CEO and founder of Chewy, told The Boston Globe that the online pet supplies retailer already has a small team working out of a temporary office, and it will eventually move into a 20,000-square-foot space. The company is initially looking to make hires in recruiting, design and software development. One of its early local hires is former DataXu Director of Engineering Mike Surilov.

"Boston is an amazing technology hub and startup hub, with dozens of universities," Cohen told the Globe, adding that he chose the city after looking at "all of the major U.S. cities."

Beyond that, Chewy's other local connection is Volition Capital, a Boston-based growth equity firm focusing on mostly bootstrapped ventures that became Chewy's first investor with a $15 million round. Formed by the former Fidelity Ventures leadership team, Volition last summer raised a $250 million fund, its third and largest yet.

A Seattle Tech Company Plans to Hire 140 in Boston

"We’re fundamentally challenging the notion that you have to take on more risk to have outsize returns," Larry Cheng, Volition's managing partner, told me at the time, speaking about the firm's strategy of seeking fast-growing companies that have raised little to no venture capital.

Cohen didn't have any luck with VC firms when Chewy was in its early days, according to the recently published feature in Forbes. After failing to even get past the reception desks of six VC firms, Cohen eventually met Cheng, who was impressed with Chewy's growth metrics and eventually had Volition invest its $15 million. Other investors followed, including T. Rowe Price and BlackRock, bringing Chewy's total funding to more than $200 million.

Cohen told Forbes that Chewy is now on track for $900 million in revenue for 2016 and more than $1.5 billion for 2017. Headquartered in Dania Beach, Fla., the company has approximately 4,000 employees.

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Volition Capital Raises Its Largest Fund Yet, Seeks Bootstrapped Tech Cos.


If you're a fast-growing, mostly bootstrapped tech company, you may be in luck if you're ready to accelerate. Volition Capital, the Boston growth equity firm formed by the former Fidelity Ventures leadership team, announced on Tuesday that it has raised a new $250 million fund, its third and largest yet.


Larry Cheng, Volition's managing partner, told BostInno that the new fund was "significantly oversubscribed" and that all of the firm's previous institutional investors have returned. He said a lot of that has to do with the fact that Volition's focus on fast-growing, capital-efficient companies that have reached annual run rates of at least $5 million with little to no venture capital.

An average portfolio company for Volition has raised less than $2 million, Cheng said, and more than half of its 20 past and present portfolio companies have raised zero venture capital, showing you don't always need a lot of outside funding —and dilution of a founder's ownership in her company as a result —  to grow impressive companies.

Return have been strong so far, Cheng said, though he declined to provide any specific figures.

"We’re fundamentally challenging the notion that you have to take on more risk to have outsize returns," Cheng said. Volition has had nine exits so far, including MindShift Technologies, which Best Buy acquired for $167 million in 2011 and later sold to Ricoh; Verid, which EMC acquired in 2007; and StyleSight, which was acquired by WGSN in 2013.

Volition expects to cut checks in the range of $10 million to $20 million for a total of 10 to 13 investments from this fund, Cheng said, and the funding is used for growth capital, acquisition capital and shareholder liquidity. The firm focuses on companies working on software and software-as-a-service,  enterprise and consumer internet applications, mobile technologies and technology-enabled products. Two of its current portfolio companies include open source software management company Black Duck and cross-channel marketing intelligence software provider VisualIQ.

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Volition Capital has rounded up $250 million for its third fund


Volition Capital, a Boston-based growth equity firm, just closed its third fund with $250 million in capital commitments. It’s a sizable step up from the firm’s previous fund, which closed with $170 million in 2013.

You can understand why its investors might be enthusiastic about the six-year-old firm, which says it just added a dozen new backers to its roster. It focuses on software, enterprise and consumer internet applications, tech-enabled services, and mobile companies that are already seeing annual revenue of between $5 million and $25 million, and annual revenue growth of between 25 percent and 100 percent. Those happen to be companies that financial buyers in particular like right now.

We talked with Larry Cheng, one of the firm’s four managing partners, to learn a bit more.

TC: Volition was formed when all of Fidelity Ventures, save two partners, decided to leave the fold and form an independent firm. What have been your biggest exits since doing that?

LC:  Our biggest exits have been iPipeline’s sale to Thoma Bravo, and PingID, sold to Vista Equity Partners.

[Ed: iPipeline is an insurance software firm that was founded in 1995; it sold to Thoma Bravo, a private equity firm, in August of last year. Terms of the deal were not disclosed. PingID, a firm that was founded in 2002 and manages employees’ digital identities, was acquired by the private equity firm Vista Equity Partners in June. Again, terms weren’t disclosed, though The Information has reported that the price was $600 million. PingID was founded in 2002.]

TC: What are some of your newest consumer and enterprise bets?

LC:  We’ve backed the pet specialty retailer and the online personalized men’s clothing retailer Bombfell in the consumer e-commerce space. In the SaaS world, some of our newest investments are [customer intelligence startup] Pramata, [customer communications management software company] Prinova, and Assent Compliance [ a company whose software helps organizations with their compliance strategies].

TC: Is there anything that interests Volition now that it wasn’t focused on several years ago in terms of sector?

LC: We’ve done more e-commerce investing over the last few years than we did several years ago.

TC: Do you have any concerns about this still-sluggish IPO market or do you expect most of your exits to come through acquisitions anyway?

LC: Most exits come through M&A.  Financial buyers are as aggressive if not more aggressive than strategic buyers, though I’m not sure if that is sustainable.

TC: Why is that? I think a lot of people are still confused about why these private equity firms are suddenly snatching up so many software companies.

LC: Boy, that’s a longer conversation.  Access to debt is critical to some of these financial transactions.  Whereas strategic buyers can gain value through “synergized” operations, financial buyers can gain value through the impact of debt and leverage on the transaction, so that’s impacting things.

Additionally, a lot of these financial buyers like to acquire software companies because they are strongly recurring, and if your goal changes from revenue growth to driving EBITDA, there’s usually a lot of inefficiency that they can take out of the business.

TC: You said you’re not sure if this trend is sustainable. What do you see happening?

LC: What will end it?  I don’t know, but it’s a good trend for those of us who are investing at the smaller end of the market because they’ve become a great exit path for us.

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