Avery Rosin -- Lead Edge Capital

This episode focuses on Avery Rosin's role at Lead Edge Capital, a growth equity firm, and their unique investment strategies in the tech sector.

1. Lead Edge Capital leverages a unique LP base that actively participates in aiding portfolio companies.
2. The firm focuses on growth-stage companies with strong revenue, retention rates, and capital efficiency.
3. Strategic investments are tailored based on detailed criteria known as the "Lead Edge Eight."
4. Current market conditions influence investment strategies, with a cautious approach towards rapid growth and valuation.
5. Avery Rosin’s personal growth and strategic insights into investment have been shaped significantly by his early experiences and challenges.

1: Introduction

Minnie Ingersoll introduces Avery Rosin and discusses the fundamentals of Lead Edge Capital, focusing on its strategic LP base and investment focus. Avery Rosin: "Lead Edge operates as a traditional growth equity fund with a twist due to our LP base."

2: Investment Strategy

Deep dive into the investment criteria and strategies at Lead Edge, emphasizing the "Lead Edge Eight" — key metrics that guide their investment decisions. Avery Rosin: "We look for companies that not only meet our revenue thresholds but also show potential for high retention and expansion."

3: Market Dynamics

Discussion on current market conditions affecting growth-stage investments, including economic downturns and their impact on company valuations. Avery Rosin: "The investment landscape has shifted, requiring a more nuanced approach to growth and valuation."

4: Role of LPs

Exploration of how Lead Edge’s LPs contribute to the growth and success of portfolio companies, beyond just capital investment. Avery Rosin: "Our LPs are not just investors; they are strategic partners that actively engage with and support our companies."

5: Personal Insights

Avery shares insights from his personal journey in venture capital, reflecting on his experiences and growth within the industry. Avery Rosin: "My background in cold-calling shaped my approach to venture capital, emphasizing persistence and strategic engagement."

1. Networking for Growth: Engage actively with your investor base to leverage their expertise and connections.
2. Metrics Matter: Focus on meeting specific revenue and growth metrics to attract growth-stage investors.
3. Strategic Expansion: Consider how additional capital can strategically accelerate growth or enable market consolidation.
4. Efficiency is Key: Maintain capital efficiency to appeal to investors, especially in uncertain economic times.
5. Learn from Leaders: Draw insights from seasoned investors and operators within your network to refine your business strategies.

More growth rounds in 2024! Avery Rosin is writing $50-300M checks for Lead Edge Capital. He thinks PE firms are going to continue being acquisitive, companies are going to reorient around the Rule of 40 and more reasons for his optimism.

People

Avery Rosin, Minnie Ingersoll

Companies

Lead Edge Capital

Books

None

Guest Name(s):

Avery Rosin

Content Warnings:

None

Minnie Ingersoll

Hello and welcome to the LA Venture podcast. This is Minnie Ingersoll, host of the podcast and partner at ten 110 is a seed stage fund here in LA. All opinions expressed on this show by B and my guests are solely our own. If you are interested in LA Venture, go to ten one 10.net podcast where I've made a sortable list of all of the great LA VC's who've been on this show. Avery Rosen is a partner at Lead Edge Capital where he's been for over eleven years now.

He's currently helping to build out the west coast team out of Santa Barbara. Lead Edge is a growth stage fund with over 5 billion AuM and a very unique lp base of over 700 strategic individuals. Avery, good to see you. Thanks for coming on the show. Thank you.

Avery Rosen

Many great to hang out. Yeah, well, I'm, I'm super interested in what you're seeing at growth stages today, but I thought we'd start with a little bit more about lead edge. How do you describe lead edge? Whats the lead edge reputation? Absolutely.

So you could think of Lead Edge as a pretty traditional growth equity fund. We do software, Internet, tech enabled services, investing globally, and we manage about $5 billion that weve raised over the last 14 years or so. What makes us different from other investors really does stem from where weve taken our dollars from. And thats what you alluded to is we have over 700 lp's who are in our fund. And I typically say it's a bit nutty when I talk to other gps because it is a lot to engage a group and manage a group like that, but it is highly strategic.

These are current and former Fortune 500 executives. These are founders and entrepreneurs. These are industry advisors. And our pitch to them is don't invest unless you're willing to help our companies. Well, okay, but on that, like I want to say, what do they get out of it?

Minnie Ingersoll

But like, I'm just eager to take money from people who want to give me money, but I'm not also asking them to do work. Like do they get economics, do they get special, you know, fancy dinners? It's an awesome question. And people do say, hey, you ask people for money and their time, what's up with that? And it's interesting, you know, the truth of the matter is that this has been really a snowball effect over the last decade where it's people pulling in their networks to say, hey, you got to meet these folks.

Avery Rosen

And honestly, oftentimes it's as we are activating a company to help, like we might get a list of. Here are the top dozen prospects that I'm looking to sell to this quarter from one of our portfolio companies. We syndicate that out to the LP's. Someone raises their hand and said, hey, I'm on the board, or I used to be on the board of this company, or I know someone who's involved with this company, and I can help you get to that executive, write that warm introduction. When we get to that executive, we have to engage them.

We sort of tell them about our model and hey, we try to activate folks and they're sort of like, wow, this is interesting. Like maybe they say they invest in funds and we keep in touch with them over time. And so sometimes we've had those interactions where they say, hey, I really appreciated how you engaged me, how you followed up, how you were thoughtful with our time, how you introduced me to an interesting and high growth vendor that actually was relevant to what I was looking at. And from there, they might become an LP. So you've got these 700 LP's, it's 5 billion aum.

Minnie Ingersoll

What's your current fund? Yeah, so we're investing out of our 6th growth fund, which is just under $2 billion. We're a couple of years into that now, and we're writing checks that are 40 to 50 million on the lower end, out of this fund, all the way up to 200, 5300 million on the higher end. And so there's quite a bit of flexibility. And what I would say is flexibility has always been a part of our story.

Avery Rosen

We lead rounds, absolutely. And we do that quite a bit. But we're also pretty great at whether that's kind of minority rounds and minority growth rounds, as well as maybe things that are more control or more majority growth rounds, as well as secondaries. We've always been pretty active in secondaries, even from the early days of our firm. And that's part of the ethos hub.

We don't have ego, how we get on your cap table. We love to get involved with companies where we can help, and we lead by helping. That's always kind of been the ethos, is to say, hey, let's show you that we can add value, how we can open doors, and as a result of that, it's really leveraging the expertise of our LP's to add value and then hopefully grow those positions over time. And so we certainly have a flexible mandate in that sense. Do you think of yourself as VC or like PE?

Yeah, I would say growth sort of sits in between. Right. A lot of pens type deals are generated, the returns are generated with certain levels of financial engineering and leverage and debt. And we really focus on growth. And so our underwriting typically is around companies that are finding growth, having catalysts for growth, ways that we can help them in the late stage company building.

So it really sort of sits in between, I would say. Interesting. No, that's a good distinction. That PE is thinking like efficiencies, financial structures. You're still growing.

Minnie Ingersoll

What are you looking for? I listened to Mitchell Green and maybe it was a little old interview because there are eight criteria. That's the case and that's from the early days. That criteria set is how we break it down and say, hey, how do you fare against the lead edge? Eight criteria.

Avery Rosen

And I'm happy to walk you through it just because I figured it is interesting. You think about it, it's $10 million and above in revenue. It's growth. Typically it could be 25 50% plus in growth. Its gross margins 70% plus.

Its interesting. We think a lot about capital efficiency. We think about a metric. Thats how much capital have you burned relative to your scale today? There are a lot of companies that have burned like 8150 million dollars to get to ten or 20 million of revenue.

Thats a bit lopsided for us. We try to find companies that have burned ten or $20 million to get to ten or 20 million revenue. Now having raised that money is not the same as having burned it. But we think a lot about the capital efficiency in businesses. We look for recurring revenue businesses.

We look for companies with high retention rates. And so typically that's a sign of people love your product and they can't live without it. Obviously we'd love to see great net expansion as well. And so maybe ultimately net revenue retention above 100% kind of thing would be awesome. Actually different benchmarks.

I would say for certain types of segments of the market you might want to see 130% plus for other maybe more SMB focused, maybe it's more like 110% is the best. We think a lot about net dollar retention and expansion. I like knowing your metrics. It's interesting. I figured I'd give you a sense of how to benchmark it.

And so recurring revenue, diversified customers, profitability or breakeven. I think I covered most of them in there. But the point is we sort of look and say okay, we call all these companies, how do they rank between on these lead edge eight? And we typically invest in five to eight of those criteria. No, they're all interesting criteria.

Minnie Ingersoll

When you're looking for companies that are profitable, I think is what you said, or break even. How do you think about that versus growth? Its totally the right question. And those are the two that I would say is typically the biggest trade off. If were investing in a business thats growing 80%, 100%, over 100%, the expectation is theyre likely burning, finding the company thats very capital efficient, maybe profitable and growing that fast.

Avery Rosen

Typically those are the eight criteria set that are pretty hard to find and certainly hard to go and lead rounds in because they might not need money. What I would say its typically a trade off. Probably are familiar and hear people talk about the rule of 40 and orienting around taking your growth rates plus or EBITDA margins and adding those together. And so companies that are above 40, it makes for a good business. The way I would think about it is we think about incremental investment, whether thats in sales and marketing, whether thats in capital burning in the next year, what is that going to generate from a new ARR from a business growth perspective and sort of understanding, okay, the business might be burning today, but they are adding efficiently.

They get paid back on that in a reasonable timeframe. And especially for businesses that are extremely sticky, right where the no customers are going to leave and they get really adopted and embedded, you might be able to invest quite a bit in getting those customers online because you'll expect to have them for many years to come and be able to grow with them. What is your thought on like, I'm a profitable business. I've got good net revenue retention. Why should I take money in general?

I think you're totally right. And many of those companies might not need to take money and they could just sort of compound and grow and maybe make nice distributions to the owners and all the rest of it. I think when we are engaging with those companies, it's typically around tailoring what they're looking for in a future chapter. And maybe it's a next chapter to inflect growth upwards. Maybe it's the point of, hey, I never really invested in growth channels or sales and marketing reps or partnerships which might take longer to pay back, or companies have reached some real scale and they're saying, hey, I could be a consolidator of other businesses, I can do some m and a, I could gear up to go public someday.

There's other sort of ambition. And so I would certainly say, yeah, growth capital and even outside capital in general is not necessarily for everyone, but oftentimes we're thinking about what is the company actually want, and how can we tailor our support of them and our health to that? So were you doing cold calling when you started? Got my start cold calling for lead edge. And it's.

The funny story on that is my first cold calling job was selling Cutco knives. I don't know if you're. I know this because I listened to you on a Cutco podcast. That's right. So that's how I got my start.

I was, you know, I was 18. They came to my graduation and said, hey, vector marketing, go give it a try. And I was very successful in that summer before college, I went selling knives in people's homes. And when Mitchell heard that, he said, hey, if you can do that, you could probably sell my firm to entrepreneurs. And so that was the foot in the door.

And then, yeah, it was absolutely chasing people down. Folklore. On the summer of 2014, I had 40 emails and voicemails in Doug Song's inbox. He was the CEO of duo security at the time and kept pounding the phones and tried to break through there. And we have much better processes now that if they're great companies, you don't have to reach out 40 times before getting some more senior help.

But at the time, I was just hustling and chasing people down. And that's really the ethos of the firm, is to find ways to be a part of great companies and find ways to break through. So the story is that there were 40 voicemails from you and Doug's voicemail. I think he probably set up some filter of all the investor related emails go to this folder. But, yeah, that summer, I was gearing up, reaching out every couple of days.

I was either leaving him a voicemail or sending him an email. Was able to do the kind of the bank shot to get a warm introduction via my partners and via the board members. So, fortunately, we were able to partner with them the subsequent start of the year and be an awesome company to work with over the years. But that's a little bit of the beginning. Do all growth equity firms now, are they primarily outbound?

Minnie Ingersoll

Do you guys do anything different with outbound? It's a great question because I think there were, you know, the firms that were earliest to do it were probably like Summit and TA, and that was any type of style of business. My partners were some of the first cold calling and illicit best infrared venture partners back 18 years ago. My other partner, Dime, was over at Insight Partners, and there's great firms that do outbound it. So what I would say is we've certainly built processes and technology that help support our team in those efforts.

Avery Rosen

But really it's not a volume play as much as it's a kind of bespoke outreach to companies where we're interested in, where we think we have LP's who can help, then we're happy to start with the help. So you can see that. And that's probably one of the key things that was a bit different about us that was always energizing for me as we were pursuing companies that were interesting is actually seeing that value happen. Yeah. So keep going with this.

Minnie Ingersoll

Let's say you meet one of these companies that has, I think you said like five, six of the eight criteria. You're getting excited. How are you? I think you told me you help elucidate me on sort of working backwards on how you're thinking about your investment and how the company is going to need to grow to get you the returns you need. I think that's totally right.

Avery Rosen

I'm happy to get into that. I guess maybe the one thing I'll mention is how to think about the growth stage. Right. And so the growth stage is an element of product market fit. And typically it could be product market fit at 5 million, product market fit at 10 million ARR maybe 10 million above.

I think probably you've pretty much proven, hey, there's customers, people who will pay for it. Right. The next element of growth stage I would say is having a growth engine that's starting to be built out and where you know which levers to pull to continue to grow. Thats what I think is maybe a little bit different at some of these inflection points where some companies are just experimenting with heres how I will grow. Whereas oftentimes companies at the growth stage will say, hey, if I make this investment in headcount, lets say for salespeople or I make this investment in marketing or partnerships, I know what I can get from it.

Or I have a new product that launched and were getting this level of attach rate. Lets put more fuel on that fire to get to what you were saying. And I do think about at the growth stage, thinking about the work backwards math, thats what needs to happen for you to generate your return. As much as these companies could have some great momentum, they could be de risked in certain capacities from the earliest stage of finding product market fit. In the search for that, theres also the hey, how big can this be?

How big is this market opportunity? What are some of the precedent transactions? What are some of the companies that are relevant to be looking at and then working backwards to say, hey, if I want to make a two to five x return in two to seven years, what needs to happen? And maybe what's the multiple when they're at that scale, growing at that speed? Obviously when the numbers are a bit smaller, you might be able to grow even faster and add a lot more at scale.

Maintaining high growth at scale, obviously is a little bit tougher. So do the multiples usually go up or down from where you invest? I think that the way to think about it at the growth stage is typically you're not underwriting multiple expansion in a definitive sense. You might be saying, hey, there are reasons why this business will get a higher multiple once there is certain scaling of whether it's gross margins or profit margins or business growth even. There's reasons why companies can re rate to higher multiples and have a higher business quality.

That could be part of the underwriting on the way in. But just saying, hey, we bought it at six times and it's going to trade it 20 times. That can't necessarily be that. Part of what you have to think about at the growth stage is if you are paying a high price on the entry and expect maybe multiples to come down, what is the sort of growth and strategy that's going to bridge the gap and also generate your return? And when you're doing, you said you also buy secondary.

Minnie Ingersoll

Like you don't care how you get on the cap table, you just want to do it. What I've seen in secondary is probably pretty limited, but I sometimes see growth investors coming in, they want to deploy 50 million. The company only wants to raise 30 million, and so they sell an extra 20 in secondary. But just help me understand the secondary markets today and when they come into. Play, it's a good question.

Avery Rosen

And I do think the dynamic you described is a relevant one, because to get you to a $50 million check, there might be 20 million from the secondary, and it could be a variety of levers these days, right? It could be an employee tender offering, right? Where you're saying, hey, our employees want to know the value of their stock and that they can generate returns and get liquidity for it. Can you just explain tender offers to me a little bit like, how is tender different than second? But what's different with a tender is that you're going to the whole shareholder base and with parameters, let's say, hey, here's the price per share that is getting bought, here's how much of your stake you can sell there's various things about it, right.

Minnie Ingersoll

So it's just like a more public secondary purchase where you'll go to anyone. It's just more structured, if you will. It includes more people. It's not sort of one off AI buy for one shareholder and do a swap. It's a little bit more of an offer where it's more organized.

Avery Rosen

You know, you make the market and ultimately there could be multiple buyers, it could be multiple sellers, but it's just a little bit more formal. Or weve had folks who sold out really old funds that have been around a long time and theyve had extended, extended, and now theyre saying, hey, lets wind this down. And so sometimes theres sales from that. So theres a whole range of types of secondaries. What I would say about our strategy versus maybe other pure secondary buyers is that were typically very focused on the company itself and underwriting.

This is a company that were excited about that we want exposure to and not necessarily buying a basket of a dozen or 100 or whatever it may be based on how they come together. So when you're doing this, you're leading around and you, Avery, are taking a board seat. What do you think makes a good board member? I would say I certainly like the boards that I work with and those folks I've seen make strong impacts. But part of me entering at the growth stage is I didn't have to see them help them navigate that.

Can we get to product market fit? Can we get our next big partnership? Can we get our next round of investor? At that point, they're already sort of some level of engine that's built. It's about the late stage company building.

I wouldn't want to misspeak about experiences that I've had about board members. I do think there are certain board members that might parachute into a business during the board meeting or during their updates and then sort of say, here, this is what you should do, and point to that and sort of be very prescriptive on the actual blocking and tackling. And oftentimes that might be tougher for entrepreneurs who live and breathe their business to take that sort of feedback. And so I think board members who ask thoughtful questions and who help illuminate, hey, you're thinking about this, but have you thought about, you know, this, or have you spoken to someone who has this relevant experience and maybe I can introduce, you know, that I do think it's valuable, but I think being like, super prescriptive and just, you know, saying this is the right way to do things, often is tough. Now, there are great operators who've been there and have seen a lot of things, and they can be probably more prescriptive.

But, you know, I would say oftentimes that's, that's not always the case. Yeah. So at the growth stage today, what are you seeing? Like, are just as many deals getting done? Are there just as many companies raising our valuations lower?

Minnie Ingersoll

Have they come back up? Whats the state of things? Trey? Its definitely a dynamic time in the market. I would say definitely deal counts are down.

Avery Rosen

Right. And I think 2023 was a much lower year compared to even 2022 because I had the sort of first half where it was still pretty exuberant and then certainly down from 21 and 20 when there was a ton of deal making and it felt like every company was raising every six months. Right. The dynamic youve seen play out over the last year and a half or so is really that companies have had the cash to make it work and figure out, hey, okay, I'm reorienting towards more efficient growth. Now, many of those companies had enough of a cash balance where they didn't need to think about raising or they ultimately have done in the last couple of years, maybe a bit of an extension.

I think maybe those companies now, at least the ones that are starting to pick their head up and say, hey, I actually might be ready for a growth round. And I think it's starting to happen more this year, and I think it will happen more in the second half of this year as well, is that those companies have said, hey, even in this environment where there's more scrutiny on, let's say, software spending or seats or growth, we found ways to efficiently grow. One of the things you said there, which is like software spend being down, like their customers are spending less, is that still a true statement? And where do you think spend is the most up or the most down, and where is that going? The part of the spend dynamic was driven by, per se, business models.

Right. If you're a software company that sells based on a number of sales people a company has, or the number of people that folks have as engineers or in it, there was some right sizing of those accounts. And so it felt like 23 was a year where most budgets were pretty flat. There was a lot of scrutiny there. One of the areas where I do spend time investing is in cybersecurity and in it, and that is one that's been pretty resilient.

I would say, though, there are often times, is consolidation between vendors, and people might have tools that do parallel things and they might consolidate to one platform. What I would say is that in some of the CIO's that we engage from our lp base and otherwise that level of spend should grow a bit more this year, particularly in cyber. And so is that consolidation like in cyber? I mean, sometimes that's good because you're getting exits, but sometimes that's bad, as in, you know, you want to know that this is a big standalone business when you're investing. How do you evaluate that?

Minnie Ingersoll

Like in cyber or otherwise? It's the right question, particularly just cyber, oftentimes is a very acquisitive category, right. And you have people who could make great features or great elements of a product that ultimately roll into some of the larger platforms. And that happens over and over. And so as a growth stage investor, some of the underwriting needs to be, hey, can this be a large standalone business and can I be the one who consolidates other elements of workflow or is really valuable to my customers?

Avery Rosen

And so I oftentimes look for cyber products where people live in, right. It's a little bit more workflow oriented. It's actually something where they're engaging with daily that actually really ties to their business and that I think drives some of the stickiness and allows you just have the right to layer in other products to those same customers. And so that's a natural dynamic with some of the cyber investments we've done over the years where they're able to have a natural expansionary motion because they have bigger suites or bigger products or other things that they can do for those customers. What else do you see for exits?

Minnie Ingersoll

Like people aren't ipoing, you're doing later stage rounds. No one's IPo'd. So who is doing the acquiring? Given that Google Meta are not able to do big acquisitions, there's certainly more scrutiny around that. And I think it's interesting because obviously now we have a few s, one s that are filed now and there's maybe starting to be some momentum there.

Avery Rosen

But I think you're right. Typically above a certain scale, it is harder for the big tech folks to be buying things you're seeing. And we already alluded to cyber, but some of these acquisitions maybe in, let's say, the 300 million to a billion dollar range are still happening. And companies like Palo Alto have been very acquisitive, check point and z scaler as well. And so I think you'll see more of that.

I would say the other related buyers are certainly selling to private equity firms and that's been more of a buyer of businesses and whether those are take privates from the public markets where you've seen quite a bit of that, but also companies that, hey, I wanted to go build up ip ready company, but ultimately realize, hey, I should probably be orienting around the rule of 40 that we were talking about and thinking about efficient growth and thinking about maybe I'm a platform that can be a consolidator of other businesses that have adjacent capabilities and those are oftentimes better in the homes of private equity firms. Yeah, I've never totally understood why PE firms do so well with companies, because they do seem, you know, let's just take a growth stage company with smart venture capital or growth equity investors around the table. And I think, as I understand from this conversation you talked about, like, they have different financial instruments that they'll bring to bear, the PE firms will, and they'll reorient the company around different goals, as I understand it. But I still totally understand why PE can sort of change the trajectory so dramatically. It's a great comment and I think the way to think about it most simply is around the orientation of the business.

And so you might have a company that only thought, hey, to grow I need to hire people and hire more sales reps and open more markets and do other things to grow. And if you were to think about a company that might spend 40 60% of their revenue on sales and marketing, well, what happens if they spend 20% of revenue on sales and marketing, or even less than that? And if they're coming growing 35% and you're able to cut from 50% of spend to 20% of spend being on sales and marketing and only grow 5% less? That is really the leverage in because a lot of that flows through the bottom line. What are you seeing?

Minnie Ingersoll

What's sort of the interplay right now between the public markets and the late stage private companies, and how you think about the differences and the interplay? What I would say is the pre ipo markets, the latest stage sort of growth rounds without many ipos happening, it's really hard to get a calibration of like, here's where I can invest. But I also would say there are examples of, hey, here are companies with 100 million, $200 million of revenue, maybe their growth has certainly come down a lot more now that they're a public company and with the larger numbers and they're not trading at huge multiples. Right. You might hear about companies in the private markets that trade at much higher multiples than the average sort of NTM or even arrangement style multiple is about six times, right?

Avery Rosen

And maybe the medians were like five times and that's creeping back up a little bit, but still kind of approaching the historical averages. And so when you think about getting on the scale and saying what is the company actually worth? You do have to project out to like, what would I be worth in the public markets? When you think about the different kind of quartiles of public companies in the range of three times to 13 times kind of ARR multiples, it's definitely illuminating. So that will affect what the kind of late stage growth routes are able to be priced at.

Minnie Ingersoll

You know, I mean, I know this is 100 years ago, but like companies used to go public when their valuations were like a billion dollars, like 1 billion or something. Why don't companies do that now? And like, what do you advise your companies as they get close to scale? It's really interesting and I think it just depends partly. We will see how these next number of ipos happen and unfold.

Avery Rosen

And some of the first ones to go out are the ones that are of some real scale. They're the ones that maybe are 500, 600, 700 million of ARR. And so they should be pretty highly valued, I would think. But we'll have a real sense part of what happens when you're in a billion dollar IPo valuation or even below that. Oftentimes there's a whole ecosystem around going public and the coverage that happened with it and the types of investors who are able to purchase your stock.

When there's not that much float, when there's not that many shares trading, you can't necessarily bring in a ton of new investors. I've heard that before. You need coverage. It didn't naturally follow. For me, coverage is good because you need float, which allows you to have more people interested.

Minnie Ingersoll

Is that just the basic way it works? There's a variety of ways to think about it. But as you think about communication with investors, when your cap table is very small and it's just the folks locally or the people on your board, you're able to keep in touch with them on regular cadences or in board meetings. And oftentimes I think there's a bit of a graduation from private companies that are used to. I'm doing it my way and I'm communicating what I want to share and to just a small group, to actually saying here, why of all the opportunities and all the companies out there that I'd want to own in technology or in any sector, why choose yours and why engage with yours?

Avery Rosen

And you mentioned sort of the coverage and the other people who support that ecosystem, I think it's spending time with the shareholders, it's going to the related events, it's getting to know the people who are actually owning the stock. It matters. That's interesting because it's not like you, your IR person telling the story as directly, maybe because it now has all these analysts and others who almost tell the story on your behalf. It's a good point. Part of the coverage is if you are able to be in the story or in the narrative or in the related trends or in the, you know, if your category is of interest, that might give you some natural attention.

But if it's hard to even discover your business or hear about your business or to think that your trends are part of growing sectors or whatever it may be, it might be harder to achieve new investors. And so I think that's part of why it all kind of feeds into itself. Yeah. I also want to make sure I ask you about vertical SaaS. You do vertical SaaS yourself?

Sure. Do you think about it kind of the same as what you said about cyber, which is if you've got the workflows, you're more embedded, or how are you evaluating what makes a good vertical SaaS company? I think you're totally right. I really do like investing in workflow software, particularly ones that are focused on verticals. I think you're able to be pretty embedded into those workflows.

You're able to maybe even be collaboration and facilitate that workflow between various team members, which was probably the key thing I'm typically looking for in investment, that customers love using it and that it's inherently sticky. People want to use it more over time. But then I think with vertical market software you're really able to have earned that trust to hopefully then be able to layer in those additional products. And I think that's a key piece of the puzzle to say, hey, we do this for you really well. Here's our next part of your process.

Here's our offering for that. Do you want to adopt it and then be able to see that sort of multi product attach rate over time? What do you think vertical SaaS investors get wrong? So I would say it's gotten, you know, maybe over the last decade, it's certainly become an area where there's a lot more focus. I think over that decade, part of the thinking is, hey, this is a really narrow market, limited market, not many people to sell to incumbents that are already sort of vended or sold through this category.

And oftentimes the thing that you might miss about that is that, hey, by doing what you do and doing it well and then maybe consolidating other elements of the workflow, such as payments. Payments has been a big lever to layer in with Oracle software, you're able to actually grow your market and grow your opportunity in a way that's really, really meaningful. But I think that's probably the most interesting element of vertical market software investing, is saying, hey, what other parts of the platform or the workflow do we have a right to win in and right to serve in what have been. Some learnings, like how have you, Avery, evolved as an investor? I appreciate the question.

And I would say, look, one of the key areas I would say I've grown is I'm someone who's really drawn in by customer love. When a customer is raving about a platform, I get really excited about it. I think that's a great validation of that. The thing that you might get stuck in is you do have to think through those next layers of evolution. I think those additional layers of probing to understand, hey, not only do you love what they do for you today, but will you buy more from them over time?

And do they actually have that right to serve in, whether it's payments or whether it's some other element of the platform, and to say, hey, well, we thought we'd get this level of attachment, but actually they already use another vendor for that and they're pretty happy with that vendor, too. Even some customers don't always think through that next Eri and the next chapters of when push comes to shove and someone says, okay, you have five vendors doing things that are adjacent which stay. You have to be a part of that who stays category. And so I think that's a really important piece of the puzzle, too. Yeah, I like that.

Minnie Ingersoll

Let's talk about you for a second. You're in Santa Barbara now, so part of the Southern California ecosystem, but you're from LA, you went to Harvard Westlake. Went to Harvard Westlake, and I'm third generation from LA. Did you like Harvard Westlake? Harvard Westlake I love.

Avery Rosen

I really did. Is it the same or has it changed? I would say certain things about it probably are pretty similar. Like, I think one of the things that's definitely changed is these campuses have gotten renovated and they're beautiful. I was on both of them, but there's definitely been upgrades in both respects.

It still is a very competitive environment. And I would typically, folks ask me about Harvard west. Like I say, you kind of have to be self motivated and a self starter. Right. If you're just feeling like, oh, I got to keep up with everyone else and I got to take the hardest classes and do all these extracurriculars, it can feel really intense for me.

I had a lot of different interests. I did sports, I did performing arts. I took those AP classes and those advanced physics and math classes and really were drawn to those. And so I really enjoyed my time there. I like to ask people how your friends would describe you, but I'm going to add, yours can be more complicated.

Minnie Ingersoll

So, like, how would your friends describe you? And is it the same as they would have said in high school? What they'd say now? I'm sure they would say, I talk fast, which you probably in this conversation, I lead with a lot of energy and I think, yeah, you probably could hear that as well. I get passionate about things that I care about.

Avery Rosen

I try to be a leader. I'm very active with Israel. I'm on the board of Birthright Israel's foundation. I actually did early stage venture capital in Israel, which also what got me my start in investing. And so I'm a leader in paying it forward for other young jews to be able to go to Israel and see the truth about it and be able to see the innovative culture there and all the amazing outlines to it.

Minnie Ingersoll

Great. Avery, it's been really good to get to know you. Should we all be sending companies your way as they mature? Or you're like, no, we're all outbound. No, I'd love to.

Avery Rosen

Obviously, I'd love to hear about great companies. I typically, most of the investments we're doing are about $10 million and above in revenue. Maybe they're 20 5100. They're probably later stage. I do like to meet them when they're in the five to $10 million ARR range.

That's kind of that inflection point stage. But I love to try to get to know them, try to help in advance. Oftentimes it's very hard when someone lifts their heads up and says, I need a term sheet in two weeks, and that's oftentimes a sprint. And we do those, too. But I like to get to know folks and like to try to help upfront.

So welcome the chance to meet high growth companies and once where our network can add value. Well, it's great to see you in the Southern California ecosystem and really building out the Southern California presence. And it's amazing growth, and I really appreciated the chance to get to know you and lead edge better. Thank you, Minnie. I really appreciate it.

A lot of fun to chat with.