VC Spotlight of the Week – Mark Suster

A master of many traits, Mark has been able to find success at the intersection of technology, business, and now VC. Having founded and exited two companies after a long stint at Accenture, he can clearly claim he has been at “Both Sides of the Table”.  It was this varied skill-set that led us to nominate him as VC of the week.

Name: Mark Suster

Company: Upfront Venturessuster5

Blog:  BOTHSIDES OF THE TABLE (One of our liked blogs!)

Bio: He has worked in programming/consulting at Accenture, started and sold two companies, and received his MBA from Booth for good measure (triple threat!?).  More details can be found here.

Miscellaneous/Interesting Facts: Besides his background, we are very fond of his “scrappiness with a purpose” mantra.  While C:V. has yet to raise an A round (lets just say our MAU’s aren’t there yet…), we do appreciate the ROI argument made in the case of a dedicated admin.

Dueling Valuations: Shape Security


Dueling Pianos : Music Fans :: Dueling Valuations : Finance Nerds

The time has come for our first attempt at putting on our VC hat!

We have been on record here at C:V. about how HOT we think the Enterprise Security space is so we decided to dive even deeper and perform our first valuation on Shape Security.   We made this a type of “Dueling Valuations” post with our initial valuation thesis and then a rebuttal post from a guest writer and fellow VC fanatic.

Have a comment?  Think we were absolutely insane for valuing the way we did?  Think we were spot on and want to hire us?  Email us here or send us a comment on the Contact Us page.   We welcome all thoughts/feedback!

Confused?  Lost?  See our prior post on Shape’s $40M funding round to get caught up.

*Editor’s note:  We are not VC’s, we are simply fanatics about the space and want an outlet to post our musings on.  All our research was done from browsing the internet and applying a few concepts/spreadsheets from Grad School (CGSOM represent!). We are more than happy to share our findings with you. Seriously though, we built out a minimalist cap table and pro-forma’s to factor growth expectations and we would be glad to send them along (we promise, we DO have social lives too…)

C:V. ‘s Attempt:

Overview: Shape Security is an Enterprise Security company that has pioneered a revolutionary way to deflect cyber-attacks on websites.  With its flagship product, ShapeShifter, what was normal code on a website becomes polymorphic (think random number generator) to distract attackers from taking vital information.  This is done completely in the background with no impact on the operation of the website.polymorphism

Market: One Word:  MASSIVE. Gartner estimates that Security spending in 2012 alone was $62B and is expected to grow to $86B by 2016. This aggressive growth combined with the increasing mindshare that security is gaining inside Fortune 500 Board Rooms makes for a very compelling market sizing argument.

People:  If you read our Round of the Week on Shape, you know how impressed we were by the caliber of talent they have at their disposal (See here for full post).  Their team of Board members, Investors, and Executives is easily one of the best in the Enterprise Security space. Don’t believe us? The proof is in the funding.  We don’t know of many Enterprise Security companies that can raise over $25M while STILL in stealth…

Product:  First Mover advantage?  Check.  20 customers in the Fortune 200? Check.  Appliance/Subscription business model with 7 figure price point? Check.  If an Enterprise Security startup had a wish list for creating a quality product, we are pretty sure these would be at the top of it.

Threats:  The opportunity is clearly there for Shape, yet it is not without significant risks.  The cybersecurity game is one where the good guys are always playing catch up and the attackers are always finding new ways to extract the data they need.  In this ever-changing model, there will continually be new prevention techniques and if Shape cannot capitalize on its current opportunity while continuing to invest for the future, it will have a very tough time remaining competitive.

Valuation:  We placed a $130M pre-money valuation on this round.  We feel this is a fair valuation at this point in time given numerous factors and have highlighted the key points below.

  • C Round: Given this is a C round ($6M A, $20M B), we feel that 24% is an appropriate balance of ownership at this stage for the investors and employees.  We think it stays in line with what earlier rounds offered, as well as provides enough incentive (re: hurdle rate, same or better as prior)  for the investors to depart with their capital.
  • Ability to Scale/Cash Burn:  This funding should provide Shape with enough resources to scale their enterprise offering and sales team.  Additionally, based on our estimate of Shape’s Cash Burn, we feel they should have enough cash for at least 12-18 months depending on revenue growth.  These factors should allow Shape to become laser focused on disrupting the market and greatly contributes to their value.

Guest Valuation/Rebuttal:

While I share your optimism for the company, I’d like to take a look three hurdles they face. Maybe after seeing those, we’ll see if a fair value emerges – and just as Shape emerges from the shadows of stealth.


  • Replication and Replacement: While their polymorphic approach is certainly novel, especially considering their hardware approach, it is not the end-all be-all — and many other solutions exist under $1,000,000. Take Cross-Site Request Forgery (listed on their “Product” page as a sample attack). In many cases, a simple CSRF token can be a viable option which might only take one developer a couple of weeks to roll out across the board. While ShapeShifter offers a suite of solutions, the price tag may convince larger firms to devote developers’ time towards matching their capabilities. Where there’s money to be made or saved, people will flock.
  • Outrunning the Other Campers: I liked the analogy of “you don’t have to outrun the bear; just don’t be the slowest one running,” for deflecting attacks. Many hackers will no doubt go after weaker, easier targets. But where the analogy comes up short is when one camper is already dripping in honey, where’s the bears focus going to be? If you’re sitting in, say, Amazon’s shoes, do you really expect to pass off all threats to other smaller competitors? You’re going to be too valuable of a catch.
  • Constantly Changing Landscape: This iteration of ShapeShifter technology will not be the company’s last. To truly offer the “comprehensive defense,” they will have to innovate at the same rate as a world of thousands of hackers who have big paydays on the line. They were able to roll out the technology in apparently as short as two years, and that development time may decrease with a higher headcount, but I worry that they’ll end up just like Randy Marsh playing Heroin Hero.

Wildcard Prediction: I’m not all pessimism, guys. Here’s an upside you might not have seen coming. One source of funds I didn’t see backing Shape could become of one of their biggest customers: the Department of Defense. Given CEO Sumit Agarwal’s time spent at the Pentagon, he must have a sense of what the government needs as the U.S. becomes vulnerable to threats beyond trench warfare and the Redcoats (Russia is apparently still on the table, though). While nothing has been announced, it seems that massive DoD grants could have provided some easy non-dilutive funding – except for that pesky caveat of nonexclusive, irrevocable, royalty-free licenses… This leads me to believe they see them as a target customer, and boy, are they a big one.


With those, I tried to reverse-engineer the deal as best as I could. I think the deal was for 30% of the company (Series C, but with pro-rata follow-ups from GV, KPCB, etc.), and with that we’re looking at a pre-money valuation right around $95M. This would put their EV/Revenue multiple more in the realm of 3-5x, depending on what those early customers were willing to pay. This indicates some serious growth potential, but nothing’s a lock in the ever-evolving battle waged against cybercriminals.

I expect that this company could surpass $1B in value by 2020. With an exit at that, to one of the big guns who truly can offer a comprehensive security package, the VC’s would be looking at a 40%+ return – not bad for getting in at a Series C.

And when the team is this strong, you trust in their judgment of the market needs.

So there you have it.  Both our takes on Shape.  More to come!

Monday Morning Memo


Happy St. Patrick’s day fellow C:V. readers!!  We hope you are wearing green today or finding a way to celebrate some other way. Here at C:V. we celebrate by writing our Monday Morning Memo while listening to the Boondock Saints theme song (you would be surprised how productive you can be when the MacManus’ are on your mind…).

Recap of Last Week:

Last week we had our VC spotlight on Bill Gurley and Round of the Week on speed reading technology company Spritz.

What Lies Ahead:

We ran into some issues with our Valuation attempt so that will be posted soon this week (#premoneyprobz) as well as our VC Spotlight and Round of the Week.  Additionally, we will be beginning a March Madness style feature on various tech/finance blogs we follow so stay tuned!!

Round of the Week – Spritz

Pretty neat how this actually works without giving us a headache…


Finally coming out of stealth this week, Boston based speed-reading technology company Spritz has raised a $3.5M Seed round.   Check out the technology behind the faster reading tool here.  They plan to license their technology to app and web developers, which should be a good way to test new channels indirectly and inexpensively (free downstream R&D!).

Given that Spritz has the ability to disrupt so many MASSIVE markets (Email, Education, Business, etc.), we wonder if they are only using the licensing model initially for feedback loops to find product-market fit and then will pivot to a more vertical approach?  Either way, it will be fun to read about what happens (hopefully much faster than average!)

Name: Spritz


Funding to Date: $3.5M Seed

Deal Notables:  This was a tranched deal ($1M, $2.5M).  When we see tranches, we see it as our duty to at least guess what the terms of it were…

C:V.’s guess:  Initial funding went for development and since they are all about User adoption, we think they hit their User growth goal which triggered the final piece. Simple. Actionable. Desirable for all.

VC Spotlight of the Week – Bill Gurley

Bill is a partner at Benchmark Capital and has both a technical and a Wall Street background (dual threat!).  He won our VC Spotlight award this week due to his intriguing background and his recent post about Uber’s dynamic pricing strategy. We are huge fans of Uber as is, but anyone that uses Supply and Demand curves and actually references Elasticity in a blog post is bound to grab our interest!

Name: Bill Gurleygurley-headshot

Company: Benchmark Capital (Links to their Twitter, since their website left something to be desired…)

Blog:  Above the Crowd (One of our liked blogs!)

Bio: A former engineer at Compaq and Wall Street research analyst, Bill has been an active VC for years serving on many boards. Some of his current investments/seats include:  Uber, GrubHub, and Zillow.

Miscellaneous/Interesting Facts: Bill is our most decorated VC featured so far as he has a Computer Science degree, a MBA, and is a CFA charterholder.

Monday Morning Memo

daylight savings

Good (feels extra early) Morning from C:V. HQ!  We hope you have survived the annual “Spring Ahead” daylight savings switch and what better way to kick-start your week into gear than with an all new Monday Morning Memo!

Recap of Last Week:

Last week we had Brad Feld as our VC spotlight, DocuSign as our Round of the Week and we also did a feature piece on Enterprise Security while channeling our inner Zoolander.

What Lies Ahead:

This week you can expect a VC spotlight, a round of the week, and our first valuation attempt.  We may also add in a book review and we have a “March Madness” themed surprise starting the following week, so stay tuned!

Round of the Week – DocuSign

And the award for the most crowded Cap Table of the week goes to…

crowded table

DocuSign board meeting?

Electronic signature platform DocuSign raised a whopping $85M this week (rumored at a valuation of $1.6B) to expand growth and innovation. This brings their total funding to $210M and their investor count to about the same… Seriously though, they did not name the investors this round, but according to their Crunchbase profile, they have at least 10 different investors in the round (holy syndicate Batman!).  What we would give to see the evolution of the Cap Table since inception…

Name: DocuSign


Funding to Date: $210M (reports vary, but had main rounds of $27M, $55M, and $85M among other smaller ones)

Deal Notables:  CFO Mike Dinsdale is on record as saying they are not a takeover target but rather an IPO candidate.  He claimed they couldn’t be valued properly because they span so many verticals. He definitely has a point given that they have the ability to disrupt almost every market in existence (i.e. anything that requires a signature…). Makes us wonder that if $1.6B was the value for the round, what was the associated TAM for E-signatures and DocuSign’s corresponding market share expectation?  $16B and 10%, $8B and 20%??

VC Spotlight of the Week – Brad Feld

Brad has been one of our favorite VC’s to follow ever since we stumbled upon his book “Venture Deals”. It is required reading here at C:V. HQ, and we will be featuring it in a book review shortly. Brad is also 1/4th of the Foundry Group, creators of our favorite YouTube video so far:

Name: Brad Feldfeld

Company: Foundry Group

Blog: Feld Thoughts  (One of our liked blogs!)

Bio: A longtime investor and entrepreneur, Brad is also an avid blogger on venture capital and startup issues.  He also co-founded TechStars.

Miscellaneous/Interesting Facts: Brad is an avid marathon runner and famously goes “off the grid” for a week each quarter.

Enterprise Security: So Hot Right Now!

IT Security = Hansel?  We think so!


With the recent onslaught of Enterprise Security investments (25 in February alone!), we decided to turn to our friends at Crunchbase to see just how hot this market really was.  Let’s just say, the numbers did not disappoint. Below are the key takeaways from the study:


Rising Round Size:   Average round sizes are up almost 50% since this time last year which we hope translates into companies receiving higher valuations (and not higher founder dilution…).

The Rich Get Richer:  Follow on funding rounds have been increasing in both size and quantity in the past year. This bodes well for the industry because it means more firms are putting good use to earlier rounds and leveraging that success into future investment.

If You Can’t Beat Them, Buy Them:  There have been 10 acquisitions this year alone so there seems to be a theme of consolidation at work (Looking at you Bit9…).

Finally, we couldn’t write an entire piece about Enterprise Security and NOT mention the darling of 2013; FireEye. After their successful IPO last fall and recent purchase of Mandiant (bonus points for it being a majority stock deal and limiting the cash impact!), they have clearly revealed their plans on how to take share in this market.  Now if only they would do the same for profitability

Monday Morning Memo

Gooooooood Morning Internet!

Besides channeling our inner Robin Williams, we over here at C:V. HQ are very excited to bring you the 2nd installment of our Monday Morning Memo:

Recap of Last Week:

Last week we featured Ben Horowitz as our VC of the week and also did a spotlight on Shape Security about their funding round and phenomenal management team.

What Lies Ahead:

This week you can expect a VC spotlight, a round of the week, and a piece on the current state of the Enterprise Security market.  We may also add in a book review or even a valuation attempt, so stay tuned!!