Love is in the air for SMBtech at The SMB Syndicate! ❤️
In this edition we announce a NEW ADDITION to the SMB Syndicate team, cover new investments from our crew and recent fundings in the ecosystem and share wise words from our friends at Slauson & Co.
👋🏾 Welcome Back! What to Expect in This Month's Newsletter
We hope your 2023 is off to a great start! We’re excited to continue to bring you SMB news this year from our viewpoint as investors who keep a close eye on the space and how it’s moving as we look to invest in early stage founders.
This month we’re excited to share an article written by our friend and fellow early stage investor in SMB tech, Austin Clements, founder and managing partner of Slauson and Co. an LA based investment firm.
📜 What's New With the Crew?
First and foremost, we’re excited to welcome Chelcie Taylor to the SMB Syndicate team! Chelcie is an investor at GGV Capital, a global multi-stage investment firm, that is also very bullish on SMBTech (portfolio includes companies like: Slice, Brightwheel, Novo, Odeko, Electric & many more). Each year GGV brings together investors to select the SMBTech 50 (the 2023 list will be announced in April) and host several thought leadership events focused on SMB-focused companies.
Sadly, Sydney Thomas will be stepping away from the SMB Syndicate for now, but we’re hopeful that we can continue to highlight her great work as an investor and thought leader in VC as she goes on to launch her new fund Impressionism Capital!
Jen is excited to announce her investment in Prado, a customizable e-commerce platform for food entrepreneurs. The company empowers meal prep companies to create seamless ordering and subscription experiences for their customers while accurately planning for and managing inventory. Shout out to Austin Clements for the intro!
Tessa is continuing to build her firm, Capitalize VC. She graduated from the VC Include fund accelerator in November and recently announced that BofA became an LP in the fund!
📰 SMB News Roundup
Procter & Gamble acquires haircare brand Mielle Organics to increase access to hair products and services for Black women globally.
Bill.com acquires financial automation platform Finmark to expand access to financial planning and cash flow insights for SMBs.
GGV Capital forecasts an optimistic outlook for SMBs in their recent 2023 VC predictions roundup.
The recent job report numbers show evidence of resiliency in the SMB market despite macroeconomic challenges.
The Weekend Fund released its second market map dedicated to mapping out the growing SMBTech ecosystem.
Instacart announces a plan to launch a product tailored at small businesses to offer curated selection of supplies for SMB business owners.
Guardz, a cybersecurity software for SMBs, raised $10M in seed funding from Hanaco Venture Capital.
✍🏾 Deep Diligence
This edition, we’re guest featuring a poignant article written by our friends at Slauson & Co last summer. Given the current state of the world, we find this piece more timely than ever.
SMB Tech is Key to Economic Inclusion
At Slauson & Co., we believe that entrepreneurship is the most powerful vehicle to close the wealth gap in the United States. It’s a belief that’s supported by facts. The median net worth for Black business owners was 12 times higher than for Black non-business owners. Latinx entrepreneurs, a demographic that has become the fastest growing segment of small businesses in the U.S., have a median net worth five times that of the overall Latinx population.
Small business ownership continues to diversify, with 9.2 million minority-owned small businesses and 11.7 million women-owned small businesses across the United States and counting. Each new business represents someone’s idea to better serve a customer need, coupled with the ambition to bring that idea to fruition.
Last month we outlined our Investment Philosophy, which described our areas of focus as a venture capital firm. The first category we identified is technologies that support small and medium businesses. SMB tech has the potential to transform the economic landscape in this country, yet it remains a drastically underfunded category.
This gives us the opportunity to back founders building platforms that support the next generation of small business owners. We invest in the tools and services that equip small business owners with what they need to compete and capture the full value of their talent.
The Untapped Opportunity
For decades, venture capital firms have shied away from tech that targets small businesses, even as enterprise SaaS has become commonplace in most venture portfolios. VCs imagined the economics for targeting SMBs to be upside down — long sales cycles combined with low contract values. The established playbook for enterprise SaaS simply wouldn’t work for SMBs.
On that last point we agree. We’ve found that SMB Tech has more in common with consumer investing than enterprise. The purchase decisions are made by the primary user, so a strong brand and elevated user experience plays a more influential role. This one insight alone would help most investors view these opportunities through a more appropriate lens. But there are also a few other traits we look for in an SMB tech investment:
Product led growth instead of an inside sales team
Short sales cycles through higher volume acquisition channels
Smaller contracts (if any contract at all) or low entry price
High retention / low churn
Happy customers who become evangelists
Successful tech companies targeted to small business owners, like Shopify, MindBody, Xero, Square and ServiceTitan, show that SMB tech is a ripe investment opportunity with huge potential.
The Slauson & Co. Approach to SMB Tech
At Slauson, we’re not really interested in platforms that service large enterprises. SMB tech has been our core B2B focus since the beginning. As a result of this, we’ve developed a portfolio of founders that support one another and find brilliant ways to collaborate to better serve their small business customers and even each other.
For example, our portfolio company, Penelope, a streamlined retirement savings platform for small businesses, has recently brought on another portfolio company Finli as an anchor client. Finli is a payment management system for small businesses, so these two companies also work together on strategic partnerships.
Some Slauson & Co. investments in SMB tech focuses on a specific vertical, like Prado, an e-commerce and logistics platform for food and beverage entrepreneurs, or DocSpace, an all-in-one operations platform for medical professionals to build and grow their private practice.
Other portcos are building tools that apply across various industries. Companies like Complyant, a digital tax assistant for small and medium sized businesses or Subcity, an online platform that identifies and secures tax-credit and incentives for small businesses. There’s also Amp, a platform that helps small businesses secure alternative financing. Their products impact all types of entrepreneurs.
We’ve talked about the wealth of opportunities behind SMB tech for years, but we aren’t the only ones taking notice. GGV Capital produces the annual SMB Tech Summit as well as the SMBTech Index, while Lightspeed Venture Partners offers a SMB Software Benchmarking Guide. There’s also the SMB Syndicate newsletter written by Jennifer Richard, Sydney Thomas, and Tessa Flippin. We hope to work with more investors with their eye on the category.
The way we see it, when it comes to the future of small businesses, there are two potential paths which lead to two very different outcomes for our country: one where we as consumers end up getting all of our services and products from just a handful of massive corporations and the other outcome, where small and medium size businesses are able to compete and serve the nuances of the communities they are targeting.
Let’s take the latter path.
When we invest in SMB Tech, we give small businesses the opportunity to create and deliver more nuanced products and services that support the communities they know best. We know there are founders out there passionate about creating paths to entrepreneurship for those historically left out of the game. And we want to hear from you.
Join us: MeetUs@Slauson.co
📅 Upcoming Events
In 2023, we will use this section to highlight events that tailor to the SMBTech community! If you’re hosting a SMB-focused event for Founders or investors, please drop us a note in the comments.
Thanks for reading!
Jen, Tessa & Chelcie