Michael Cardamone, CEO and managing partner at Forum Ventures (formerly Acceleprise), demystifies the effects of public market volatility on startups. Michael gives his perspectives on the recent market downturn, and his advice for founders building B2B SaaS companies on how to manage market volatility. He also gives more details about how he looks at opportunities when he invests in startups.
Michael Cardamone, CEO and managing partner at Forum Ventures (formerly Acceleprise), demystifies the effects of public market volatility on startups. Michael gives his perspectives on the recent market downturn, and his advice for founders building B2B SaaS companies on how to manage market volatility. He also gives more details about how he looks at opportunities when he invests in startups.
In this episode, you’ll learn:
4:15 What benefits does a founder gain from working with a sector-dedicated accelerator over a generalist accelerator?
11:50 Key things for startup founders to do to weather market downturn
21:48 How can innovative startups harness the power of community?
Non-profit organization that Michael is passionate about: Big Brothers Big Sisters
Michael Cardamone is the CEO and managing partner at Forum Ventures (formerly Acceleprise). In addition, he is an angel investor in the pre-seed or seed rounds of Flexport, Naturebox, and Station; among others. Michael hustles hard for his portfolio companies, providing hands-on support and mentorship every day in person or on Slack while making key connections to dozens of customers, investors, and key partners.
Forum Ventures (formerly Acceleprise) is a B2B SaaS-focused seed fund, pre-seed accelerator program, and community with offices in San Francisco, NYC and Toronto. Forum for Founders, the accelerator program, is a flagship 15-week pre-seed program designed to give founders personalized guidance, support from a growing SaaS community, plus the capital to get their companies to the next level. Companies in Forum's portfolio include: FirstBase, Fireflies.ai, Indio, Oncue, Courier, People Data Labs, Roots Automation, Inscribe, Sote, Silq, VendorPM and CoProcure.
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Michael Cardamone: A lot of what we're doing is evaluating the founder and the market opportunity. And on the founder side, we look at, is there a good founder market fit? Why are these founders building this product and what unique insights or what do they know about this market that maybe other people don't know.
Gopi Rangan: You are listening to The Sure Shot Entrepreneur, a podcast for founders with ambitious ideas, venture capital investors and other early believers tell you relatable, insightful, and authentic stories to help you realize your vision.
Welcome to The Sure Shot Entrepreneur. My guest today is Michael Cardamone. He's the CEO and managing partner at Forum Ventures (formerly Acceleprise), which is based in New York City. He invests in B2B SaaS companies. The market has been in turmoil for the past few weeks. So, we're going to talk about his perspectives on the market, his advice for founders building B2B SaaS companies, how to manage the volatility, and more details about how he looks at opportunities when he invests in startups.
Michael, welcome to The Sure Shot Entrepreneur.
Michael Cardamone: Hey, thanks for having me.
Gopi Rangan: Michael, tell me about yourself, starting with how you entered the tech industry.
Michael Cardamone: I grew up in a family of entrepreneurs. My grandfather was an entrepreneur. My parents were entrepreneurs, but frankly didn't really know what I wanted to do when I went to college. I knew I liked science and math and ended up doing mechanical engineering. Throughout the course of that, I realized that that wasn't the path I wanted to go on.
I wanted to get into business and be an entrepreneur, ended up going to business school after undergrad, and then decided I wanted to move out to San Francisco and get into tech. I really enjoyed it seeing our family grow a small business, but wanted to work on businesses that I thought could scale and impact a much larger set of people. And I thought tech would enable that. I moved out in 2008, ended up getting really lucky, and ended up at a company called Box when it was about 25 people. I was interviewing for big tech companies and small startups and just ended up deciding I wanted to go to a startup because, frankly, they were giving me more responsibilities than I deserved at the time, and felt like I could have a bigger impact and learn a lot more a lot quicker because my role was not going to be as specific as it maybe would have been at a big tech company. I spent some time there went to another startup in the EdTech space that we grew to like $24 million in revenue. And then in 2014, I was doing a little bit of angel investing, a little bit of consulting the early-stage startups on go-to-market, and became fixated on the idea that there were all these generalist accelerators in the country like Y Combinator and Techstars and 500 startups, but there are only a few in the country at the time focused on B2B SaaS. So I decided to launch a B2B SaaS-focused accelerator. One of the ones that existed was called Acceleprise. I reached out to them to see what they were doing. See if I could learn from them. They were actually winding it down in DC, but I ended up licensing the brand and launching it in San Francisco, backed by a critical mass of people from my network who were part of that first wave of SaaS companies in the Bay Area. So a lot of like early Salesforce, early Marqeta, early Box, CEOs of Gainsight, Zuora- a lot of really good SaaS executives and CEOs.
Fast forward now, seven and a half years, we still run our pre-seed accelerator program. We're on our fourth accelerator fund. We've worked with 200 plus companies that have gone on to raise probably $500 million-plus and follow-on funding and counting pretty quickly. About two years ago, we launched our first seed fund, which allows us to invest more money in some of the companies coming out of our own accelerator, but also flexibility to invest in seed rounds outside the accelerator as well. We've also rebranded about nine months ago from Acceleprise to Forum Ventures. That's a bit more on my background and what we're up to.
Gopi Rangan: This is very exciting. You are part of Box in the early days. So you've seen the landscape evolve over the years. I see your point that when generalist accelerators started, they became very popular, but most of them were not a good fit for B2B SaaS companies - enterprise-focused companies. I can see the need for an accelerator like Acceleprise. How is Forum Ventures different from other venture firms?
Michael Cardamone: On the accelerator side, being focused on B2B SaaS allows us to be very focused on go-to-market. If you're a generalist accelerator, you have all different types of businesses and you could bring in great people to work with the companies. But if they don't have direct experience, that's relative to your business, it's not as helpful even if they were wildly successful in something else. We feel like having that focus enables us to be very focused around go-to-market specifically for B2B SaaS companies. And so we've got people on the team who have expertise in product-led growth and demand gen and content marketing and inside sales and enterprise sales. Everything from SMB up to enterprise, we're very in the weeds around go-to-market. And then we keep the cohort size really small, so we can be an extension of your founding team and be really in the weeds, helping with both that go-to-market piece, but also fundraising for pre-seed and seed round.
Post the accelerator, our seed fund also owns and operates this accelerator, which we think gives us a pretty big advantage for a lot of reasons over other small emerging manager seed funds.
Gopi Rangan: Oh, this is very interesting. I can see how the story for Acceleprise has evolved. Now you have both the accelerator and the fund. What do you look for when you make investments in startups? What kind of companies is a good fit for Forum?
Michael Cardamone: Well, I'll talk about themes and categories first, and then I'll talk more specifically about what we look for in a specific company or a founder or founders.
From a themes perspective, we're pretty broad within B2B. We do a lot of vertical SaaS. We do a lot of applied AI, next-gen software where they're leveraging AI and machine learning to build more efficient versions of what already exists from a first-generation SaaS product.
We do a lot in supply chain logistics. Within vertical SaaS, we do FinTech and health tech, and a lot of other verticals. And then we do a pretty good amount around future of work, which is pretty broad, but, you know, just thinking about like, okay, there's been this big shift to remote or hybrid work. What needs to happen, what needs to exist in order to facilitate that, how does that evolve over time and where are there opportunities? Those are some of the categories we look at.
We're getting involved super early, especially at the pre-seed accelerator level, but even at the seed fund it's often pre a lot of data around customers and revenue, and obviously, they have customers or talking to customers, but a lot of what we're doing is evaluating the founder and the market opportunity.
And on the founder side, we look at, is there a good founder market fit? Why are these founders building this product? What unique insights or what do they know about this market that maybe other people don't know? Can they, with clarity and conviction, talk about how their market's evolving over the next five to 10 years and how they can win in that evolving market? And really understand that in a way that we think is incredibly compelling, because being able to do that is what's going to allow them to be really good at recruiting great people around them, which is a necessity to be able to build a big business, and it will enable them to raise capital, which will be helpful from a fundraising standpoint and therefore resources to hire that great team and everything. A lot of it is the understanding that.
And then is there a track record of execution, whether that's within the existing business or just in the past and their career. We look a lot around just the founder. Do we think this is the right founder? Will they be able to recruit great people around them? Will they be able to fundraise? Will they be able to execute? Those are some of the things we look at from the founder's perspective. We also look a lot around just the market opportunity market dynamics. Is this a small but growing market? And if that's the case, do we buy the thesis that it's going to continue to grow to a point where that company can build a venture scale business in that market? And then we look at who else is in the market. How far along are they? How well funded are they? So we look a lot around market dynamics as well, but those are some of the higher-level things that we're looking at. I can get into more detail.
Gopi Rangan: It's a comprehensive set of things that you described your entire evaluation process, but can you give an example of a company that you invested in? How was the early interaction? What opinions did you form about them? How did they convince you?
Michael Cardamone: Yeah, it's a good question. So we have a company called Firstbase that we initially reached out to them pre-COVID. The CEO, based in the UK, was talking about this shift in mentality around do you really need to be in an office full time? He thought he was going to be the shift to like hybrid and remote work even before COVID hit.
Gopi Rangan: You have some visionary founders. They knew what was going to happen in the future.
Michael Cardamone: We thought so too. We felt like increasingly people wanted more flexibility around how and where they work in the millennials and gen Z generation. We felt like that trend was starting to happen. And so we ended up reaching out to them because we saw them talking about it on Twitter. He was building a platform that basically enables companies to offer very top-of-the-line work-from-home setups and then manage all of those assets and depreciate them appropriately on your financials and all that kind of stuff. We believed the thesis. We felt like that was going to happen in the market. Obviously, we got lucky in that COVID happened, then it accelerated that by probably five years, but we felt like that trend was already starting to happen a bit. And we felt like he had really high conviction and a lot of clarity around how he thought it was going to play out. In a few of interactions we had with them he was just really good at communicating, good at executing, good at following up with us, very succinct around what he shared and when and the progress he was making.
He came into the accelerator. We worked closely with him and it was apparent to us over those four months that he was a special founder. Then obviously COVID happened and their pipeline exploded with people trying to figure all of this out. And so we ended up investing again in the seed round out of our seed fund. They've been growing quickly ever since Andreessen did the EA and they continue to grow really strongly.
Gopi Rangan: What a story! They develop this idea before knowing how COVID would impact work from home remote work situations and the market accelerated the process for the company. This is amazing.
Michael Cardamone: Yeah. Certainly, got fortunate there, but I think what was interesting was just how convicted he was on that trend happening even before COVID. And we agreed with him, but I think he just had so much clarity and so much conviction around the fact that it was going to happen. I think it just happened a lot quicker than he thought it was going to happen.
Gopi Rangan: You've invested in 70 plus companies in the last year, both from your accelerator and through your seed fund. The example that you gave, is that typical of how you interact with entrepreneurs, especially in the early days?
Michael Cardamone: In that case, we outbound into that founder. Through our pre-seed accelerator program, we have three core channels just like most funds would have, we get inbound applications. We do some outbound in areas that we have particular interest. And then we get a lot of companies referred to us from our network because a by-product of having built this for seven and a half years as we now have a community with 500 plus founders in it who are out in various different ecosystems all over North America and even some international. We've got all these mentors who come in for the program who are all heads of business units, founders, CEOs of high-growth, SaaS companies. A lot of them are also angel investors. So, we've built this pretty big, robust community that we then get a lot of referrals through. We get a ton of cold inbounds as well through applications. We have a whole process to evaluate at that higher volume. And then on the seed fund, it's the same thing. We get cold inbounds, we get referrals, we also outbound to companies. And then we also follow on some of our accelerator companies.
Gopi Rangan: I'm going to switch to the difficult part of our conversation to talk about the market. The past few weeks, it's been very volatile, especially for B2B SaaS businesses in the public market. Some of them have slashed in value by 50%. We don't know if we have hit the bottom yet or not. What does this mean for startups and founders?
Michael Cardamone: Yeah, it'll be really interesting to see how it plays out. Public SaaS company multiples have been coming down for a while now, like a couple of months. And so even a couple of months ago, we were starting to pay attention to that and try to think through how that was impacting our companies. And then obviously in the last couple of weeks, the market feels like it's been a bit of a free fall, both crypto and the public markets have taken a beating here, but it'll be interesting. Typically what we've seen is there's a delayed reaction in the private markets. Obviously the most impacted will be the private pre-IPO, late-stage rounds because those are getting done at really high multiples with the intention that the next step is they're going to go public. That landscape looks a lot different now. And so those investors in those companies are going to be the most impacted and then it will slowly potentially trickle down to growth companies and then maybe to early-stage a little bit, like, I think there'll be a small correction in pricing at the early stage, but not major unless this sustains for a really long time, like a year plus. But what's interesting is $128 billion was raised in 2021 by venture firms. That doesn't even include all the crossover hedge funds that don't have a specific private fund. It doesn't include all the family offices scrambling to get into late-stage deals. So there's just so much capital that has been raised that basically has a two to three-year deployment window.
Most of it is going into series A and later. So, later stages than where we are. There's, obviously, a lot that has been raised in pre-seed and seed as well, but relatively speaking, most of those dollars are going to go into later-stage deals. So if you're a good company and growing quickly, there's still going to be ample capital for you to raise, in my opinion, because that money has to get deployed somewhere. It's going to get deployed over the next two to three years and it's already been raised. So. I don't think there's going to be as major of a correction as we've seen in other downturns in some of those late seed rounds. If your company is doing really well and like the fundamentals are good, I think the bar is going to get a little bit higher, but for the companies that can raise, there's going to be tons of demand, which means it's going to be a competitive round, which means prices will stay relatively high compared to what you're seeing in the public markets.
And then I think the later stage you get and the closer you get to pre-IPO, the more those prices will get corrected to be more in line with where public multiples are. It's a great time to be an early-stage investor because now there's all this capital downstream. If you're investing in good companies, there's going to be capital for them because there's more supply of capital than demand. And a lot of these cases, there are secondary opportunities and liquidity options all along the way as the company is growing, which didn't really exist all that much for seed investors five years ago, or at least it wasn't nearly as efficient of a secondary market as there used to be.
The reality is we're investing in companies that take five to seven years to get big. So, even if there's a downturn now if they're building something that is really needed in the market. People will buy it and they might just have to be a little bit more capital-efficient now and not hire as quickly. But if you survive through this, you're then building the company into what will inevitably be the swing back up in the market. What really matters for us as a fund manager and as a company is what are those multiples look like in seven years. We tend to think there's a downturn now, just the way the cycles tend to work in the economy, it will be back up. Obviously, that's impossible to predict for sure, but what we've said to our founders is 2021 was probably as good a year to raise capital as ever. So if there were opportunities to raise capital, we encouraged our companies to do that. And then we just want them to be cognizant of not hiring too fast, not burning too quickly, and then just being really certain that there is a need to have and not nice stuff.
Gopi Rangan: I sense a lot of optimism in your comments. So let me play this out. There are three possible scenarios.
The first one is the fact that so many VC firms have raised a lot of money and we've had a strong growth trend over the past few years. And because there is a lot of demand for investments in private companies, that trend will continue. Maybe there's a small blip now, because of the changes that are happening in the public market, but by the time it reaches the private market and everything was smoothed out. That's one scenario.
The second scenario is this downturn extends for a longer period of time, many more months, but even there it's in the public market and it may affect some valuations in the private market eventually, it may slow down a little bit, but yet the fact that there's a lot of capital waiting to be deployed in startups in private companies is still true. So that will continue on. There's still optimism there.
In the worst situation. When this downturn extends for a long period of time and it creates more rippling effects in the economy, then there are issues that we need to be worried about.
I see there's a lot of optimism in your voice, but there's also a lot of practical aspects that give us that hope that things will be maybe a little different, but not a lot for the most part. Entrepreneurs, just keep looking at the long-term and they don't need to worry about the short-term shocks that happen in the public market.
Michael Cardamone: Generally I think it depends on: how well capitalized are you as a fund or as a company? If you have a lot of capital, I think you're in a really good position because even in an extended downturn, more talent becomes available because some companies have to lay people off and there's going to be talent available that maybe otherwise wouldn't have been available. As long as you're prudent around managing your burn and runway, you can weather the storm with some benefits of, maybe there's additional talent available that wouldn't have otherwise been.
And then the reality is, like I said, just so much has been raised by venture firms that has to be deployed over the next two to three years. if you're doing well and growing, You're going to be able to raise capital because it has to be deployed.
I think some of the things that could impact early stage in an extended downturn, generally fewer people will probably take the risk of starting a company. So, maybe there's just a net decrease in the number of compelling startups that are being started. But I think there's just so many companies and so many opportunities being started all the time that if you have capital and you have somewhat of a brand as a fund and like a big community to lean on and draw from, I feel like you'll still be able to find good deals and do well as an early-stage investor.
Obviously, you need to be cognizant of what's happening in the market. You need to make sure you have a product that's not just nice to have because those will be cut if budgets started drying up at bigger companies. And I think you need to make sure you don't have too much customer concentration. You need to make sure you're not only selling into like other venture-backed companies that you have no control over how fast they're burning and what's going to happen to them in an extended downturn. But yeah, I think generally I still think there's going to be a lot of capital available at the early to mid stages of company building. And I think the most impacted from this is going to be the later stages and pre-IPO stages.
Gopi Rangan: What is your advice for founders now that we've unpacked the market situation? What do founders need to do?
Michael Cardamone: I think just being careful not to hire too quickly, making sure you have 12, 18 months of runway and can weather maybe slower revenue growth or some turn if that were to happen across your costs rates. Take a hard look at your customer base and make sure there's not too much customer concentration in any one customer or a handful of customers, really getting way ahead of renewals and making sure your product is something that is really sticky and something that they can't live without. So, you have an understanding of and get ahead of potential churn down the road. So those are all the things that we're talking to some of our companies about. And then think, when's the right time to fundraise? Should you add capital? A lot of that depends on some of the answers to some of the things I mentioned before, around how risky do you think your customer base is and the health of your customer base, and then how much runway do you have? So we're looking at that on a case-by-case basis.
Gopi Rangan: Oh, this is valuable practical advice. Thank you for sharing. What's your thought on raising a bridge right now just to make sure the company is safe? This happened in February, March 2020 when the panic of COVID hit. So many companies decided to raise a bridge just to make sure that they are okay for the next six months to a year. Are we reaching that point where it makes sense for founders to raise a small bridge?
Michael Cardamone: I think it could if they don't have a lot of runway, like if they have less than six to nine months of runway, then I think it could make sense. If you've got a year of runway and it just means slowing down hiring a little bit, to make sure you have that window to execute in, I don't think you need to necessarily panic and take on that extra dilution. You can always reassess in three, four months, if the economy is still really turning down here. So I think it just depends on the hiring plan, burn, and runway for the company.
Gopi Rangan: I love it. I haven't seen founders reaching out to me so far hitting the panic button yet. So I think we haven't reached the same kind of situation that we had two years ago when COVID started.
Michael Cardamone: COVID was such a new thing and it created so much uncertainty. It created a lot more panic in the market. This is more economically driven. Inflation is high. They're going to raise interest rates like hedge funds are selling positions off. it feels a little bit different for founders than I think COVID did, which I think was just created a ton of uncertainty around customers and the market. No one knew what to expect, how long it would last, like all that kind of stuff. I think this is a little bit different.
Gopi Rangan: Yeah. And the impact is also localized to tech startups and public companies in the SaaS business. Michael, at Forum, you work with corporate partners and help them with innovation. A lot of your work with the startups gives you deep insights into where innovation is happening and these founders building solutions that could potentially disrupt parts of the industry or create new industries. How do you collaborate with corporations and how does that help your founders?
Michael Cardamone: We've seen with the founders and mentors and LPs that we have the power of community. Part of that is us providing value to the community, but a lot of building a great and successful community is the community members providing value to each other as well.
So we thought to ourselves like, okay, we engage with corporates all the time both to share companies and ideas with them that could be interesting or to solve problems within their own companies. But we also felt like folks who are doing corporate innovation at big companies, had a desire to learn from each other as well. We decided to kind of build a private membership community around corporate innovation folks that we call the innovation forum. And so know, we have a bunch of members from all different kinds of companies across all different industries who are all working on innovation, corporate venture, basically the points of contacts who are engaging with the startup community on behalf of their companies to drive customer engagements, potentially strategic investments, all that kind of stuff. And then we do a lot of events for them. We do round table discussions on a lot of topics. We work with them to identify what are the pain points across different aspects of your business? And do we have companies in either our portfolio or in our broader network, that could be a potential fit to solve those problems for you? And so we work closely with this community to connect them into the rest of our, you know, some of them are also angel investors, some of them want to be advisors to the company. And so we work on building this community and this membership base, and then we connect them into the other parts of our community and we find there's just a lot of exchange of value there.
From a founder's perspective, it's great because it gives them someone to bounce ideas off. It gives them potential customer introductions, gives them potential angel investors, potential advisors. And from us as a fund, it's incredibly valuable because it allows us to support our portfolio by can customer intros and everything. It's also incredibly helpful from a diligencing companies.
Recently we were looking at a health tech company and we have someone from a mid-sized health system. We were able to share the company with them and get their perspective and feedback as a potentially large customer. That was incredibly helpful in diligencing that deal. And then also just getting ideas. If we talk to people in our innovation forum around areas that they're interested in and that their companies want to be spending money on, we can then go use that information to source companies that could be a fit that we might want to invest in.
So, it's a great addition to our broader kind of community strategy around just building this really helpful and robust community, enabling and connecting founders of all different stages and other SaaS executives and then corporate innovation folks in the innovation forum.
Gopi Rangan: Coming from a founder's perspective, working with large corporations is a real pain. Navigating the bureaucracy of a large organization, getting stuck in POC hell, even the simple NDA process takes weeks. And that's a huge price that startups pay. It's not easy to work with large corporations. Yeah. Can you give an example of a success story that actually worked well from your portfolio - where a startup found a way to build a partnership with a large corporation, and that also turned into a positive for the corporate partner?
Michael Cardamone: Yeah, that's a great question. So just as an example, which just happened recently, as I mentioned, we leveraged a connection in our network on the corporate innovation side with a health system to help us diligence a company. We ended up deciding to invest in the company based partially on the diligence and information and feedback we got from that health system. And then that health system is also now was so intrigued by the company. They've now put them into their process to look at it as a potential customer and they could be a major customer, like a seven-figure a year customer for this company.
That will take a little while. Though sales cycles are always a little bit longer, we're close with that group. We'll help navigate the company through now that we've invested. And I think there's a very high probability they end up getting a very sizeable customer out of that, which came through an introduction through our diligence process, as we were looking at the investment.
Gopi Rangan: Oh, that's a great outcome, indeed, for both sides, especially for the founders. It would have taken a much longer and much more tedious process for them to land a good solid customer. These kinds of partnerships make a huge impact on the company, especially when the startup is small. This is very exciting. I want to switch to the next part of our conversation and ask you about your community involvement. Is there a nonprofit organization you are passionate about? Which one?
Michael Cardamone: One that I think is I love the model and I've donated to a bunch of times is Big Brothers Big Sisters. One of my best friends growing up was a big brother to someone out in the Bay Area seven or eight years or nine years, a long time. Seeing the impact he had on his little brother was incredible and really inspiring. I've always viewed that as that one-to-one genuine connection and like really being involved in their life as they grow up. I just feel like it's just such an amazing model and an amazing way to have such a great impact. And I've donated to them a number of times and probably will continue to.
Gopi Rangan: I see that at Forum, you offer big brother relationships from large corporations to small startups, and that helps both sides. It's a great match that has a transformative impact, especially on the startup. And you have the same approach. Then you want to promote more of those type of connections between big brothers and small brothers that has a transformational impact on people. So thanks a lot for being an active player in the community.
And I really appreciate sharing many practical examples of how you work with startups, what you look for in entrepreneurs, and your advice to founders, especially now when we're in the middle of this volatile situation in the public market. Thank you very much for sharing your nuggets.
Michael Cardamone: Yeah, of course. I really appreciate you having me on. This was great.
Gopi Rangan: Thank you for listening to The Sure Shot Entrepreneur. I hope you enjoyed listening to real-life stories about early believers, supporting ambitious entrepreneurs. Please subscribe to the podcast and post a review. Your comments will help other entrepreneurs find this podcast. I look forward to catching you at the next episode.