The atmosphere in the venture investment community is a strange one right now. After years of pouring money into startups at often shockingly high valuations, sentiment has cooled.
Investors still want to see revenue growth (as they always have and always will), but today they want that growth to be coupled with a common-sense business model that’s generating plenty of cash and is marching toward profitability.
Show them that, and they will line up to invest in your company, John Schroeder, founder and CEO of MapR tells Business Insider.
That’s what happened to him.
MapR just announced that it raised another $50 million in investment, bringing its total raised to $194 million. MapR wouldn’t disclose the company’s new valuation (which is sometimes a sign that the terms for a new investment weren’t as great as they were in previous rounds). But he says that finding investors was relatively easy.
He simply showed up at his current VC’s meet-ups with its limited partner institutional investors, gave them details about MapR’s financials, and the term sheets came to him.
“Most of the companies founded around 2007 to 2010, they got pulled into these bad business models of support and services and they burn tons and tons of cash,” Schroeder says. “We’re growing [revenue] at 100%. We’ve got a few quarters until we’re cash flow positive, but our cash burn is really low. That’s the combination investors want to see.”
Selling software, not services
MapR’s product helps companies run big data apps, but it’s a rare bird among startups that sells to businesses these days for another reason: It sells actual software instead of a cloud service.
Software is still a high margin business. A company can install MapR into their own data centres or onto a cloud like Amazon or Microsoft. Some 90% of its revenues come from software licenses, he says.
MapR’s claim to fame is one software app that does it all: stores the data, analyses it, and runs apps against it. For instance, MapR is popular with ad tech companies because it can store the ads, and run 100 billion ad auctions a day and do the analysis on ad performance, Schroeder says.
But MapR wasn’t always an investor favourite.
The company started out as a direct competitor to Cloudera in the world of Hadoop, another popular big data technology. And Cloudera was once a beauty queen among investors. By 2014, Cloudera had raised over $1 billion from VCs.
“That was the hardest thing about running MapR. I started it about seven years ago and other players in the market were spending at some ridiculous clip at the market,” he says.
While he was focused on building his product, his competitors were “spending huge amounts. They were over investing in sales and marketing and that doesn’t have a lasting value.”
But with the tables turned, and investors looking for companies with strong financials, MapR is back in vogue.
“The investors are hungry. They have to put money money to work and they’re not being given very many high quality opportunities. And they have gotten burned from the grow-at-all costs, cash burning companies,” he said.
The lead investor for this $50 million round was Future Fund, a fund from the Australian Government which does growth investments for pension plans and other government assets. Existing investors Google Capital, Lightspeed Venture Partners, Mayfield Fund, New Enterprise Associates, Qualcomm Ventures, and Redpoint Ventures also participated.
MapR last raised funds in 2014, when it raised $110 million led by Google Capital, also at an undisclosed valuation.