CreativeCo — a growth equity studio
We’re launching CreativeCo:
CreativeCo is a growth equity studio. We invest capital and capabilities in early-growth stage business cloud companies.
Our investment size will range from $250,000 to $750,000, and we’ll typically be co-investing alongside other investors in Seed and Series A financings.
In addition to investing capital, our studio team of designers and engineers will play an active and value-added operational role in our portfolio. With our studio team, we have the unique ability to accelerate a company’s product roadmap and help to achieve product competitive advantage.
Why we’re building a growth equity studio:
First, it’s what we’ve wanted to do for a long time now. Since 2009, we’ve operated Castle Digital Partners as a product design and engineering team for hire, and during this period we invested in 20 early-stage companies by trading our income for equity. The two key take-aways from these ten years were: 1) our product team can create significant value; and 2) to be a successful long-term investor, sweat-equity is not ideal — we needed a true investment fund. Accordingly, CreativeCo is our next iteration, building on our experiences.
Second, domain-focused founders are launching new software and tech-enabled services companies at an increasing pace, driving a growing supply of attractive “business-cloud” companies. This startup boom is happening all across the US fueling a new list of emerging tech communities. We’ve found that domain experts operating outside of the Bay Area, NYC and Boston are not only seeking capital — they are also frequently looking for operational help with their technology platforms. At the end of the day, these companies are only as good as their product, and building great products is not easy for operators that are more experienced with selling and marketing into their industry than building technology.
That leads to the third point. Today a business cloud company must rely on its product to compete. First mover advantage is now very rare, and end-users are so tech-savvy today that great sales and marketing can no longer mask a low quality product. With recurring revenue growth and customer retention as drivers of enterprise value, product is the last-standing long-term competitive differentiation for a company. Given this competitive environment, we will be allocating proven product designers and engineers into our portfolio to help achieve “product competitive advantage” in our companies. Investing not only capital — but also the capabilities of our studio team is a core component of our growth equity studio investment strategy.
The last point underlying the growth equity studio concept is the overall trend in growth equity and private equity investing in software. In the last ten years two things have happened: 1) the capital requirements for starting and growing a software company have dropped to the point where it’s possible to bootstrap growth; and 2) private equity investors have taken a very strong interest in B2B software. These two factors combined have created a financing path that is an alternative to traditional venture capital, a path defined by capital efficiency and growth equity / PE capital. Our objective at CreativeCo is to fill the gap as an “early” investor in this growth equity, capital efficient universe of companies, which we believe will produce solid returns for our investors as this PE/software trend continues to build.
The idea of a studio and a fund operating in parallel is not new. Betaworks in New York, High Alpha in Indianapolis, and Pioneer Square Labs in Seattle are all examples of successful venture studios running powerful and differentiated investment platforms with capital and capabilities. CreativeCo is bringing a similar studio-fund operating structure to our target investment category; the early-growth equity company. That’s why we’re calling CreativeCo a growth equity studio.
Our investment parameters:
CreativeCo Fund I will have the following investment parameters:
- Business cloud company (B2B SaaS or tech-enabled service) with revenue.
- Capital efficient business models and growth plans.
- We can invest up to $1 million in a company, but our initial check size is between $250,000 and $750,000. Therefore, we’re more likely to be a co-investor in a round than a lead.
- Opportunity to add value with studio team on product (roadmap acceleration, UX improvement, AI/machine learning, product-led-growth).
- We focus on companies in the United States.
A clear and compelling vision is the foundation for a growth business. A company’s team, its customers, its investors — all stakeholders rally behind a good vision. It’s the vision that motivates you and your team to work so hard each day. We believe that creativity is the characteristic that defines a team’s ability to identify an opportunity and shape a strong vision around it. We’re going to invest in companies with creativity and vision and we’re going to bring our studio team’s creativity to the table to help achieve this vision in tangible ways most financial investors can not. So we named our growth equity studio CreativeCo.
The CreativeCo team has worked together for years across multiple software companies — with a track record of founding, operating, growing and financing business cloud companies. CreativeCo’s partners are Christian Czentye, Artem Orlov and Travis Parsons, and our operating leadership is Roman Dubik (UX Director), Ashley Gautreaux (Director), Alex Gorkunov (CTO), Anton Nikitin (Creative Director), Anton Pogodin (VP Operations), and Ilya Vesov (VP Engineering).
Castle Digital Partners:
CreativeCo would not be possible without Castle Digital Partners, our underlying product design and engineering business. Castle serves as a platform for innovation and incredible talent for not only CreativeCo, but also the business partnerships and investment portfolio we’ve built over the years. 39 different enterprises, middle market companies, and startups utilized the Castle team for product acceleration in 2019. Our incredibly talented and committed team will continue to operate Castle’s professional services alongside CreativeCo’s investment activities.
The roadmap ahead:
2020 will be CreativeCo’s first year in operation, and like any startup, we’re looking forward to iterating our growth equity studio model to maximize the value we can bring to our portfolio of investments. Our goal for the year is to invest in 2–4 companies, demonstrate the power of our studio model, and continue to build relationships with like-minded entrepreneurs and investors. After many months of putting CreativeCo together, we’re excited to get started and greatly appreciative of everyone that is supporting our journey.