Unveiling Costanoa Venture Capital

Where Cloud meets Data

We have been hard at work building Costanoa Venture Capital behind the scenes, and we are excited to tell you more about the firm and our unique approach. We’ll use this forum to talk more about insights we’ve gained from working with our portfolio companies and key themes we’re interested in exploring.

I invite you all to join me in this discussion overtime on this blog and follow me on Twitter at @gsands and the firm at @costanoavc.

First the facts

Costanoa Fund I is a $100M early stage investor in cloud-based services solving real problems for businesses and consumers by leveraging data and analytics. We believe the explosion of the data produced — due in large part by the Internet, mobile devices, and increasingly, by machines — and the development of extremely powerful analytical platforms has created a data revolution. Applications of what we call “Applied Big Data” often (but not always) have business customers. In fact, many of the things we really like are at the intersection of business and consumer markets.

We expect to lead early stage rounds with $500,000 to $3M checks. We are an active and value- added investor. We are small enough to make early stage investments and yet have the capital base to support companies over time.

Who we are

Right now, I am sole Managing Director at Costanoa, which streamlines both decision-making and partner meetings. I founded the firm after 13 years as an investor at Sutter Hill Ventures, where I led early stage investments in companies like Merced Systems, QuinStreet, Feedburner, AllBusiness, and Youku. My personal interests have always been working on innovative solutions to important problems, figuring out how to create rapid and sustainable growth, and working shoulder to shoulder with the best people I can find.

Before Sutter Hill, I was the first hire at Netscape Communications, following its founding engineering team. I was the company’s first product manager, wrote the initial business plan, gave the company its name, and created the SuiteSpot business unit, which grew from zero to $150M in revenue. I also served as manager of business development at Cisco, where I architected a global channel management plan. You can read more of my detailed bio here, but most importantly, I founded this firm because of my long-standing love of entrepreneurs and start-ups. With the launch of Costanoa, I am excited to build such a start-up of my own.

I started this journey in early 2012, wanting to address this emerging market opportunity and to reinvent the early stage venture capital business in a way that works with my interests, skills and values. After extensive discussions with entrepreneurs, investors and venture colleagues, the result was Costanoa Venture Capital. The firm’s name originates from the Costanoans (also known as the Ohlones) who were the original settlers of Silicon Valley.

The founding principles of the firm are:

• Making “right-sized” investments in early stage companies and yet being able to support them as they grow
• Building a firm of value-added investors who love working with companies and can help in initial market entry, achieving product market fit and going through the sales learning curve
• Investing in great entrepreneurs solving real problems and building real companies

What We’re After

• In core sectors like Software as a Service (Saas), we find that consumer interfaces and distribution strategies (e.g. freemium) create interesting opportunities even for Enterprise-focused companies. Our recent investment inRisk I/O is a great example of a freemium product for Enterprise Security. Adding both a social layer into applications enables different levels of collaboration around specific business problems or processes — harnessing the power of extended enterprise in a completely different way.
• We’re actively exploring what we’re calling “Applied Big Data,” where companies aggregate, curate and originate proprietary data AND drive it into high value applications. DemandBase does this for B2B marketers, Guardian Analytics for fraud prevention and Inflection for consumer access to public records. We’ll explore Applied Big Data is subsequent posts, but we think there is a lot of opportunity there.
• We’re also active in marketing and monetization, which are largely SaaS applications focused on enabling publishers, e-commerce companies and online marketers. These are technologies that focus on creating tremendous value out of previously underutilized assets. For example, LinkSmart helps online publishers manage their internal link structure, and our recent investment iniSocket enables advertisers and publishers to deliver on the vision of Programmatic Premium.

I think we are fortunate to come to market at a time when many are just beginning to see the opportunity where Cloud meets Data. It’s therefore an exciting time.

Our unique investment thesis allowed us to raise a $100M first early-stage fund from both traditional, institutional Limited Partners and a group of Silicon Valley entrepreneurs and CEOs. We are appreciative of the support of my prior firm, Sutter Hill Ventures, who participated as a sponsoring LP. And we have been able to include positions from some great companies, where I previously led investments: Return Path, Inflection, Datalogix, Intacct, Guardian Analytics, DemandBase and LinkSmart.

I cannot express how happy we are to shift focus back to making investments, building the Costanoa Community, and helping entrepreneurs (as opposed to our own fundraising). We aim to find more great young companies — and build a venture firm and ecosystem that serves them well. We want to be there with entrepreneurs when they take chances, make mistakes, learn, improve, and ultimately succeed. We’ll be engaged in the same exercise — learning and (eventually) succeeding right along side them.