William Leonard

Hey everyone, my name is William Leonard and I am your co-host of the Atlanta Startup podcast. And today we’ve got a fantastic conversation featuring the entirety of Valor Ventures general partnership and myself and our team is here together to have a strong conversation about the trends we’re most excited about and the SE startup VC ecosystem in 2022. So, tune in, take notes and enjoy the insights you’ll hear from Lisa Calhoun, Robin Bienfait, Gary Peat, Renee Montgomery, and myself as we have a roundtable discussion about what gets us most excited in 2022.

Lisa Calhoun

Hey, this is Lisa Calhoun, General Partner at Valor Ventures. We’re excited to pull our investment team together to talk about trends we’re seeing in 2022. It’s an incredible year but first, before we jump all in, I want to make sure you get a chance to meet the investment team. I’m going to pass the ball to my colleague and General Partner, Gary Peat to give a quick introduction about himself.

Gary Peat  

Good afternoon. Thanks for joining us, everyone. My background is 20 years General Partner investing in seed stage, just like barely half that careers have been investing in the Southeast United States. I’m just doing what I love. Glad to be a part of the team.

Lisa Calhoun  

I’m also excited to welcome General Partner at Valor, Robin Bienfait.

Robin Bienfait

Everybody, good afternoon. I’m Robin Bienfait. I’ve been in the corporate world actually acquiring technology for most of my career. I love this side of the table because it allows me to invest and see innovation first, and give my lens to the corporate space and enterprise.

Lisa Calhoun 

You know, Robin, so many of our partners know your illustrious background. But for those who don’t, would you mind sharing with them the companies you have done acquisitions for?

Robin Bienfait

I was with AT&T for a large part of my career and actually ran AT&T’s global network as an officer of the company and Chief Compliance Officer for Environment Health and Safety, ran Bell Laboratories. For AT&T, I think I have around 15 patents that went to BlackBerry, ran their publicly-traded company as their CIO, but also handled all their product security. I had the product security team, which is not typical for a CIO. I have a patent with BlackBerry as well on wireless technology. I was the CTO for software. When you work for a company like that that is growing so fast, you wear many hats as an executive. I transitioned from BlackBerry because Samsung kept calling me on the phone and I was the Chief Enterprise Innovation Officer for Samsung and built Samsung’s business services from zero to 15 billion now.

Lisa Calhoun 

With a B, everyone. Renee, how about our newest General Partner joined Valor in late 2021. I am so excited to get her to take on trends, Renee Montgomery, please share a little bit more about yourself.

Renee Montgomery

Yeah, what’s up, everybody? Look, I’m excited to join. You’ve already heard I’m joining the group and the team. That’s exciting for me because with a basketball background, I’m used to being a part of teams and I’ve been a part of a couple of championship teams and I know the energy and spirit that it feels so I’m excited to join Valor because I get that same feeling. And then things that get me excited are meeting new founders, getting startups to that next stage, and watching things build and grow because that’s the world that I came from, building great teams, building good teamwork, good energy. I’m excited, Lisa, to join the squad.

Lisa Calhoun

I am, too and we’re gonna have so much fun investing through 2022. Also on the investment team, William Leonard, who is the face of Valor to literally hundreds of startups every year. William, let people know a little bit more about you,

William Leonard

Everyone, a pleasure to see you all. My name is William Leonard. I’m an investor here at Valor. I’ve spent my early career in early-stage, venture capital, and here at Valor and leading our sourcing efforts. Oftentimes the first point of contact the founders have with our team, and also co-hosts of the Atlanta Startup Podcast. We’d love for you to check us out on Apple, Spotify, or your preferred listening platform.

Lisa Calhoun

Thanks, William. Now to understand the themes that we think are most relevant for VC investors in 2022 and things we’re really excited about, it’s interesting to take a look back at where we’re coming from. Gary had a couple of thoughts to share but I just wanted to take a look at Gary, how would you articulate themes we should be thinking about going into 2022? Based on what we’ve inherited from the last year, what we’ve seen in public markets, what does this say to you as someone who’s been a General Partner for 20 years investing in the south?

Gary Peat  

It says to me, one, that software has become much larger as a part of the economy than any of us ever expected 20 years ago. And now the majority of liquidity events that have happened are actually software companies, facts, and ideals. You have a newly minted prop record number of newly minted public companies that are SaaS businesses that need to grow. And now that they’re public, they’re going to grow both organically and inorganically. We’ve got a lot more candidates by SaaS companies at high public company multiples, and they need to buy growth. We are, I think, benefiting rather directly from that trend.

Lisa Calhoun

I definitely want to open this up. Any comments or thoughts on that? I know when I hear that, I think about very true. I mean, I completely agree. I also believe that most even pretty savvy investors are under the impression that there’s record capital investing in venture right now. How could it be a hot acquisition market in 2022 if everything is exorbitantly expensive?

Gary Peat  

Well, that’s a terrific point. More than 60% of early-stage and growth VC went in what’s known as mega-rounds, rounds of 100 million or more. And so, unfortunately, a small handful 10% of the firms that raise early-stage capital, took 60% of the money, leaving smaller and smaller rounds for the rest of the people. It’s sort of an unprecedented circumstance, and not one that can persist forever. But the valuations of companies that aren’t doing mega-rounds, don’t have their valuation puffed up by a bunch of cash on their balance sheet in the post-money from financing to financing. There we see quite rational failures at the seed stage, we’re seeing some single-digit valuations, whereas the averages are skewed above that.

Lisa Calhoun

We’re regularly putting out term sheets and single-digit valuations to top founders. I mean, they don’t always get accepted but we’re definitely seeing, especially in the south, that opportunity to be that essential provider of first-round professional capital. William, I want to bring you into this little bit, you’re talking to literally dozens of founders, sometimes outbound calling, but also attending a lot of events. What do you feel the energy is like at the very early stage at the seed round? How is that being impacted by all of the public exits and exits via IPO?

William Leonard

I think within this region, there’s a lot of excitement at the early stage. Obviously, as we’ve seen as a team, founders are raising a lot of capital at pretty high valuations. But I think this region is special because the founders know that it doesn’t make exorbitant amounts of capital to grow a business and to really sustain it and build it in an efficient manner. The founders here are really seeking the capital in a smart way, I say whether or not raising too much money, that puts themselves in a position, potentially for a down round at the next round. Because that’s something that is a very real prospect that could happen. And I think the founders here in this region are highly aware of that, and Valor, we’re aware of that as well. I think there’s a lot of excitement, but a lot of awareness as well. 

Lisa Calhoun

One of the things about the South that I really appreciate is that it’s not Silicon Valley done again, founders here have learned from the experience of founders in the Valley and other ecosystems, definitely students of the game. I feel like the early-stage market here plays out a little bit more different because we’re standing on stories and experiences of previous generations of venture capital. Bottom line, I believe the trend, we’re all pretty bullish about in Valor is that all of the upstream liquidity in tech provided by IPOs is going to bring acquires downstream in the high growth SaaS companies with some serious critical mass. Gary, how do you feel that that relates to some of Valor’s portfolio this year ahead? And Robin, when you think about what a company is looking for in an acquisition, I’m sure we have founders who would love to know your perspective on the kind of metrics they have to hit to start entering that, getting LOIs, and starting to get interesting offers?

Gary Peat  

One of the things I would say and please add Robin, the fact is that they’ve got really serious growth expectations, whether it’s back that bought something or an IPO, traditional method, there are great growth expectations in those stocks, or there wouldn’t justify going public at all. They’re at high multiples. And so what that does is that increases the expectation that the entrepreneurs would have if you’re a 20 million run rate business, and all of a sudden, you have more people that can pay a very high value to acquire your company earlier than you might have. And they have to have growth at all costs. Because of their multiple comes down, you’ve seen some of the problems in the popular press when that goes down. I think on balance, there’s just going to be anybody at 20 to 50 million run rate growing 25 to 50% or more, I think you’re going to get a whole crop of new people pounding on your door, sooner than you’re thinking about exiting, you’re going to be talking to people about it.

Robin Bienfait

From my perspective, I look at it from a different lens in that, for 2020, the pressure on all the corporates and businesses that are out and trying to make their numbers and improve, and people have heard me say this before, innovation left the corporation five or six years ago. Innovation is happening in our entrepreneurs and in our new founders. And the hard thing for all of us is there’s such a drive for talent and the fight for talent is causing another pressure that’s got to come about and then you’ve got the corporate sector having to worry about their goals towards ESG. At the same time, they’re trying to create new revenue channels, along with all the other challenges that they have. The big gaps that a lot of corporates have, and still have those mainly in the regulatory space are the ones where they’re challenged by all this data they have but they don’t know how to monetize that data. Having an entrepreneur that has figured out how to bring that data and give insights to the data or monetize the data that a certain vertical might have is a tremendous value. And of course, that enterprise is going to be shopping for that person or solution. And it’s a software solution in trying to capture it before it becomes too expensive to purchase or acquire and gets acquired by somebody else. There’s always this on the look for that innovation outside of the corporation that they can maybe, I don’t want to say get the least cost or cheap, I did that kind of hunting a lot. I was always a secret shopper. People would see me come to a meeting and something like, “Why is Robin there?” Well, I was secretly shopping for something that we had a gap on. I sit and I work with a lot of the financial institutions and insurance institutions and the gap that they have in monetizing their data is huge. Any analytics or trends there. The other gap that the corporates and businesses are still fighting is how to reduce all their risks. They migrate to a digitized format or digital strategy. They’ve got to move from their old environments into new environments, being able to migrate that data in a way that is still consumable and usable into a new format. A new environment is a tremendous challenge for them. But they’ve got to de-risk it all the time. Anything that helps them bring down or peel down that risk with all the new cyber threats in the digital world is also an extreme trend for 2022.

Lisa Calhoun

Spoken like someone with a lot of experience. Well, I want to shift the conversation to something that is on the minds of really everyone investing or considering investing in venture capital, where should I be investing? Every geography has its unique points and plenty of people say invest in, for example, China, Southeast Asia, Central America, and Valor to you. I think we have a really strong perspective on where smart, savvy investors are looking next to place their capital. And that answer for us is the South, the US South region. I want to go around the room and hear from everyone on some of their favorite attributes around the geography that is the US South. Because this is going to be an absolutely lit venture capital investing journey over the next year here and with the founders who are building here.

Robin Bienfait

I think we have very scrappy south. I came from the south and grew up in South Georgia. We’re very scrappy people. I think what you’re going to find is, we’ve been entrepreneurial for as long as I can think, and in that space, the talent from all of our great tech schools, medical schools, and the teams of people that are rolling out in this space. I think we’re primed because we have the best inclusive and diverse pool of people you can find anywhere in the United States, or maybe even in the world.

Renee Montgomery

You know, to piggyback off of that, something else that the South is doing that is great for all industries is that there’s an influx of people coming into the south, but not only an influx of people heading south, but tech businesses are heading here as well. And across all industries, the South has so many things that are appealing other than the West price points, how to start your businesses, again, the masses coming you have an audience and a group. So for me, I’ve noticed that just the tech companies that are migrating to the south, you have huge large ones, Google, Invesco, all of them, they’re all coming now to the south to build here. And that’s for a reason they wouldn’t be coming if there wasn’t a reason for them to be here.

Lisa Calhoun

And Rivian, just locating a billion-dollar plant just a few miles from our office headquarters. Airbnb putting a regional headquarters here, Amazon, Microsoft, you can’t keep up. It’s happening so fast and that really adds to the local, homegrown team of unicorns. That herd is insane. Really excited to see companies like Stord, FullStory, Flock Safety, Calendly, Salesloft, that herd of local leaders that have passed the unicorn mark is also growing a little bit too fast to even keep up.

Robin Bienfait

Our creativity from diversity and inclusion is what puts us on the map for that. And they’re gonna see more and more of it.

William Leonard

I agree. I think there’s an interesting topic that we haven’t really touched on yet.  I think it’s Web3, right? When you think about the most talked about things on VC, Twitter, or really, in any tech publication last year, it was almost inevitable to read or write something without mentioning Web3. It really started out as kind of a nascent community but I think over the course of last year, it evolved into what I label as a burgeoning ecosystem with geographically centralized activity. Maybe some of the listeners on the podcast who don’t have a good grasp of Web3, it really refers to the internet that is owned by its builders, creators, and users. Through the use of tokens and decentralized technology like NFTs, crypto, and the metaverse, you’re aiming to eliminate the big middleman on the internet. And so in 2021, I think the South, specifically Miami asserted itself as the regional or maybe even global Web3 headquarters. When I see a strong concentration of venture dollars flowing to this particular segment, in a particular region, I think it opens up the door for other cities within the southeast to upstart their own momentum. I’ll get to why I think the regional uprising is inevitable in 2022 in a second, but I think it’s important to give some context, and I think the widespread adoption of Web3 is still a few years off but when you think about the historical context of Web 1.0, and Web 2.0, really getting to mass adoption, it takes about a billion users to get there. What I think is going to help us get to that figure is the southeast. You think about some of the regional characteristics that you all were just mentioning. It’s one of the most diverse, one of the most populous, and in my opinion, one of the most tech-forward regions in the country. We’ve seen significant venture dollars flow to this region, year after year. You were just mentioning some of the strong enterprises here that are established and some of the ones that are moving here as well. I think we’re still in the early innings of really ushering in this new technology and this new wave of innovation of Web3 to the region but I’m so bullish on the southeast and Web3 adoption here.

Lisa Calhoun

I’m gonna piggyback off that. It was Gary who said to me recently that innovation used to take a backseat to location. We funded in venture capital a lot of deals that were very focused on places like the valley. But now innovation is in the front seat, and location is in the backseat and Gary, I wondered if you could dive a little more into that for us because it really seems to go along with what William is saying around decentralization as a big theme in software and things like that.

Gary Peat  

Web 3.0. to me, pulls you in a certain direction. It’s just the third technology stack change in the internet, it’s the next door in computers. But what I love about the current technology stack already is you have a number of people that were geographically inaccessible. One of the dilemmas of building companies in the south and southeast is when you really start to scale, you realize the advantage places like New England and the Silicon Valley have, and you start to open offices, they’re just trying to scale really fast. Well, all of a sudden, we’ve built the tools to manage talent, to be now fully remote enabled not just the selling organization, it’s always been remote. We’re starting to access talent that we couldn’t talk to as managers of businesses before. They don’t have to talk about moving to the south from their beloved Mountain View, California, but they can access innovation anywhere now, with their executive management skill.

Renee Montgomery

It’s funny, you mentioned that Gary because the location has shifted in all industries. And to that point, like a personal story of mine is that when the pandemic hit, I started calling and working for companies that were based in Los Angeles. I’m a host for a company that is based in Los Angeles, that never happened before. That was the first time they hired but because of the technology and how location is not a factor anymore, I can host the show from right here in Atlanta where their studio is in LA. And to that point, I would say all of these creator economies or sports performance companies, that’s where it’s at right now. Location doesn’t matter. Even again, using myself as an example, I’m calling NBA games in the metaverse and to William’s point about Web3, different things of that nature, I’m calling an LA game here from Atlanta, and I’m calling different things in the metaverse because it’s creator controlled. It’s a creator-controlled economy, a creator-controlled web. And so now innovation has just taken so many different forms, that location doesn’t matter at all. That’s what I’m most interested in seeing. What are those sports companies? What are those creator economy companies like that’s what I’m interested in seeing, the trends as we talk about trends, that’s the trend that I’m really interested in seeing moving forward.

Lisa Calhoun

I want to pick up on that. Creator economy is something we are bullish about. It’s one of those triple-digit growth spaces we’ll be investing a lot in through 2022. We’re also going to be investing a lot in digital health and continue to invest in that FinTech cyber, continue to invest in that incredible legacy of FinTech and security that comes out of Atlanta. And also, of course, investing in all of the things that you can’t even predict that might come out of Atlanta because one of the things that I don’t like about sector investments is it can limit the creativity of the investment team. If it’s B2B, and it’s SaaS, we are really bullish about seeing it being built here in the south where we have the access to talent, legacy networks, and incredible customer bases. Around trends. I’d love to just touch base one more time with each one of you. One thing that you think savvy investors are going to want to know about 2022 and venture capital. I’d like to go in a little bit of a reverse order from our introductions. I’m going to ping it to William and then let’s wrap it up for everybody and lead with your best prediction or information about 2022 based on your rather deep experience investing as a seed lead.

William Leonard

Lisa, thank you. I think the dispersion of Web3 innovation is going to spread throughout this region, due to education, funding, and ultimately FOMO as well. I think some of the household names are going to start diving into the world of crypto and when I say household names, I mean enterprises. They’re going to start looking into crypto, NFTs, metaverses, any digital assets that are going to help unlock a new segment of customers and users for their business. If you’re building in Web3 here in the region, one, I would love to learn more about your business and your startup, what you’re working on and two, maybe even have you in the Atlanta Startup Podcast to share more about your journey, your story, and journey as an entrepreneur.

Renee Montgomery

I like that William and I have different views because everyone knows I have a sports background. Hello, Atlanta, we’re here. I’m really interested in sports performance companies. I’m interested in seeing those creator economies because not only is the sports world always going to be a business that if you can figure out ways for athletes to be their highest performer, if you have companies that help with performance, of course, I’m interested but also that creator economy. I think that that’s something that that’s going to be a trend, as William just talked about with Web3, and creators controlling a lot more, what does that economy look like? What does that creator economy look like? What are you building over there? Those are things that I’m looking forward to the trends of 2022, exciting stuff happening definitely here in the A.

Robin Bienfait

And being in the A and staying in A, I actually still love data. And I think everybody thinks of location location, I think of how do you monetize data. I look for any kind of innovation that monetizes data. Data can come from creators, NFTs, any of that, but really having your security story and your cyber capability out front. Because that doesn’t ever go away. I’m kind of a horizontal looking across the industry for those types of aspects. Let me know what you’ve got. I’d love to hear about it.

Gary Peat  

Fantastic, Robin. That was very interesting. I’m really focused on the simple fact that we have and grossly underestimated how much good software we need. But the trend that I think you’re gonna see is that nobody really wants to adopt more software. And so now, differentiation is going to come not in your feature list, but in how easy your product is and what the user experience is like to engage with that product long term. And if you don’t up your game, you’re just going to get left behind.

Lisa Calhoun

Awesome, thanks, everyone. It is exciting to be investing with you. This is an amazing team. We are at an amazing point in time. I can’t wait to see what the rest of 2022 will bring.

William Leonard

Hey everyone, thanks for tuning in. We really hope you enjoyed this conversation today about VC trends in 2022 that our team is most excited about. And if you did enjoy it, you can dive in a lot deeper through our blog and my ongoing series about data around VC trends in the southeast us and so, check it out online at valor.vc. Thanks, everyone. We appreciate your listenership and hope you have an amazing rest of your day.