The main theme of October’s GCV Synergize conference in New York City was VC and CVC investment collaborations, with the objective of maximising return on investment and internal innovation and, of course, building great companies. At the conference, I had the opportunity to interview Duncan McCall, co-founder and CEO of PlaceIQ, a company sitting at the intersection of geolocation, insights and commerce, to get his perspective on effective investment partnerships.
It was an incredibly informative and engaging conversation that offered a glimpse at how top founders and executives look at partnering different types of investors at different stages of a company’s life, the challenges of doing so, and how to optimise the relationships between investors and CEOs or founders.
The challenge of getting CEOs and investors on the same page is a common one. But that process had unique attributes in the case of PlaceIQ. Not only was it a new company, it was a new company attempting to do something that had not been done, or even thought of, before.
McCall pointed out: “PlaceIQ builds a gigantic relational database of people, place and things. We see how consumers interact with the real world because they are sharing opted-in and anonymised locations with mobile applications through their smartphones. It is giving us a persistent and sophisticated way to understand the real-world customer journey for more than 165 million consumers.”
The foundation of the PlaceIQ idea is the universal use and presence of the mobile device – a foundational idea that is obvious today but was not so a decade ago when McCall and his co-founders first conceived of the PlaceIQ business. It was a concept not that easily grasped in those early days by anyone, and that included potential investors.
However, a small group of early investors understood the PlaceIQ potential and were excited by the opportunity. PlaceIQ can connect the data it collects to such items as credit cards, cookies, televisions, auto ownership and many other things. It is possible to understand where people go, what brands they like. And it is possible to look at businesses and understand why people patronise certain locations, or pass them by to go somewhere else.
Essentially, it is a gigantic queryable database of behaviours that are connected through location.
It is a service that can be monetised directly to clients, through agencies, through marketing, through advertising – through a whole series of data products. Today, these data, insights and analytics offerings are used to inform a host of business decisions for well-known brands in retail, automotive, dining, consumer packaged goods and more. To me, the biggest question was how McCall had been able to develop his very raw idea into something that investors could understand and buy into.
“We were ridiculously early – mobile had not really taken off yet,” he said. “I was literally cold-emailing people, and a number of our seed investors were just cold emails.”
Even though his idea was a good bit ahead of the market, Duncan said it was important for the infant company to find investors who understood the concept of big data and geo-specific location awareness. Some potential investors expressed interest, but thought a later round would work better for them.
“Our seed stage was kind of strange,” McCall said. “We raised money in a very quiet time. We raised $1m. I signed every single check, and we hit our budget within about $6,000. We had no idea about monetisation. We spent probably six months building a technology that had real promise, and then we spent some time talking to customers.”
Just as things were coming together, perhaps nine months into the process, someone offered to buy the fledgling company. It was a very tempting offer.
Ultimately, however, an investor showed up who was able to see and understand the vision of what PlaceIQ could be. He not only furnished capital, he also provided much-needed advice and direction. That allowed Duncan and his team to reject the purchase offer, stay the course, raise the capital they needed, and get PlaceIQ up, running and profitable.
Now that PlaceIQ has moved from an idea to a profitable company, McCall said he had learned some valuable lessons about investors – what they were looking for, what they worried about, and how to create alignment with them in a productive manner to support the long-term growth of the company.
“Not all of our investors could see the full potential of mobile,” he said. “[Some of them] did not have a thesis at that point that mobile was going to be big, and it was a big learning moment for me. Here are a bunch of smart people who had seen a ton of businesses and still, still they do not really understand the pulse of where things are going.”
Duncan stressed the importance of ensuring that investors, once on board, understood that it was the CEO and his or her team, and not the investors or board members, who must ultimately make the management calls and set the company’s course.
“I think it has taken me quite a few years to get even moderately good at managing a board and investors properly,” McCall said. “Initially we had all institutional investors, who had great general business acumen but did not understand technology products and did not really understand our market particularly well. They were good guys with perspective on a number of different industries, but I realised we had to even the board out. We brought in a couple of pretty seasoned, well-known operators who understood the product market, and at that point I started to really be able to manage the board. It took a long time to get this right. To get that balance, where they are not saying ‘You should do this,’ is hard.”
Companies in the high-tech arena can create special challenges for, on the one hand, entrepreneurs who are trying to bring complex and sometimes abstract ideas to market and, on the other, investors who may understand capitalisation and business financing. For McCall, it was a crucible with a happy ending.
“We are lucky with the people who are on the core board,” he said. “I think we all found a way to work together. We respect each other’s company. We have been on this journey together, so I think by building this approach, whereby we are all in this boat together rowing, and occasionally someone gets thrown off, or throws himself off. And that is fine, but the core group members have this shared experience of PlaceIQ. They have understood it. They feel part of it. We have all matured as individuals.”
“People do come and go. Partners have changed over eight years,” he said, “but in general, we have been able to configure and manage that board in a way that has added value.”
Ian Goldstein is a business lawyer with more than 20 years of experience advising emerging growth companies in the technology and life sciences industries as well as the venture capital firms and strategic investors that finance, partner with and acquire these companies. He also advises companies and institutions that are adapting to a technology-driven world on complex financial and strategic transactions and other initiatives designed to accelerate innovation and growth. Ian’s practice is based in the growing and dynamic technology and venture market of the greater New York City region and leverages the knowledge, insights and connections of the firm’s deep roots in Silicon Valley.