Recently in January, Storm was fortunate enough to invest in Gather, an Atlanta based company focused on event management SaaS. I say fortunate because we are always grateful when we find a team and opportunity that matches what Storm is looking for as a fund.
Gather is a great example of vertical SaaS and carries the attributes that we think represent a large opportunity. Norwest put together a blog on The Rise of Vertical – Specific SaaS Vendors and Redpoint as well on some of the Vertical SaaS Tradeoffs. We would agree that vertical SaaS is one of the most interesting areas today.
Prior to Gather, we knew nothing about the event management market. As a result, we looked for some initial product market fit in a business that we felt was ready to scale with a sales engine that was working plus a process we thought was repeatable. We also looked for a product that could deliver more value over time into that same customer base. For us, investing in a SaaS business without customers is hard and I think just about impossible in an unfamiliar market.
Investment: Storm invested $1.9m into Gather which is a mini-seed deal by Silicon Valley comparisons. In Atlanta, a dollar goes a long way. The team has built a very efficient sales model which does not consume a lot of fuel – at least not today – with a plan to more than triple revenue this year. Battery Ventures put together a nice analysis of the importance of high growth early on with their Triple, Triple Double – T2D3 post.
Market: There are more than 350,000 restaurants and more than 100,000 event venues just in the US. While the aggregate target venues is a large number, it must be and is critical as we need sell to many thousand locations in order to get to scale given the price points for the solution. Today, Gather is just shy of 2000 venues. There are other challenges to the market as well which include the restaurant and venue business is tough and many of these businesses simply don’t survive long term. As a result that brings with it natural churn – which is the worst kind of churn since there is nothing you can really do with the business to prevent it. Every SaaS company has some of some of this – as a result of M&A for example – but in this market it is more pronounced.
Team: The team wandered in the wilderness for some time before they really figured out the business. I didn’t get a chance to meet them until the business was working. While obviously not a requirement, I am always impressed when you see founders that just won’t give up when they are in the ring and things are really tough. The founders at GuideSpark have a similar story. In the early stages, it can be tempting to throw in the towel as there is not nearly as much to hold on to (like revenue) in order to keep going and reveals the grit and resolve of many founders. In early 2012, Gather started with what turned out to be a series of very large pivots from a Yelp like service to a site called Tablenow which was a “Hotel Tonight” for restaurants. They even endured investor meetings that included dove hunting (maybe a Southern thing). Tablenow was unable to anticipate inventory accurately so they resorted to a sort of “Wizard of Oz” strategy. This strategy was that within the app, when users would select an area they wanted, the team would manually in real time find inventory and book the restaurant. Obviously, this didn’t scale and they quickly backed into a concept called Supper Series which was a kind of curated dining event – and was the first time they really started making any money. Most importantly through the experience, they built relationships with their first customers. This experience made both the opportunity around private events and the need for a Gather solution very clear.
This experience also showed us domain experience. For me, this is not only important but a part of other investments that I have made. It’s hard for me to believe you have the right team, no matter how smart, if you don’t know the industry. Gather arguably learned the hard way after spending several hard years trying to solve problems. Ultimately, they found product market fit.
Location: Unlike many silicon Valley investors, Storm is 100% okay investing outside of the Bay Area especially for a business like Gather. I don’t subscribe to the belief that companies have to be in Silicon Valley. There weren’t a lot of business or technology partner dependencies that would make Silicon Valley a more logical choice. An argument could be made that it’s even more beneficial to build Gather in Atlanta for many reasons. Atlanta has come a long way as a technology community. The team and I discussed early on that I couldn’t commit to being in Atlanta often in a way I could if the team was local to me in the Bay Area. We would need to do a lot of work over the phone. In fact, while I have met the team in person and been to Atlanta now several times, they’ve never been to our office in Silicon Valley. Never. The partnership meeting was done via Google hangout. The distance will be a challenge but we are going to make it work.
This is a business that needs to be built efficiently. There are lots of positive aspects to the high volume sales model as well. The sales cadence is very different compared to most enterprise SaaS companies. Almost every opportunity at Gather is won or lost within the quarter. An account executive can hit a quota and be fully productive by month two. That is pretty rare in our group of SaaS companies.
SaaS continues its march further and further into more and more industries and markets. We are working hard to find these new opportunities. Check back with me in 18 months and we’ll see how the business is progressing at Gather. The future seems bright.