Mark Terbeek — Greycroft

Wednesday, May 25, 2022

Mark is a leading B2B investor and on the board of Scopely, Icertis and more.  He shares his current investment theses and explains how Greycroft operates as a seed to growth stage venture fund.

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Mark Terbeek is a partner at Greycroft and one of the leading LA B2B investors. He’s on the board of Scopely, Icertis, Botkeeper and many others. Mark joined Greycroft in 2013 after a decade in venture at MK Capital. He has a reputation for being extraordinarily nice. Mark we’re thrilled to have you on the pod today.

Thanks. I appreciate that. Excited to be here.

Great. I also have my partner and sometimes co-host David Waxman. Hi there. Great. So, yeah, it’s great to be with you, Mark. I remember when you joined Greycroft and I think at the time was Dana the only partner here in L.A.? Yeah.

Yeah, correct. Yeah. We we the firm at the time and it’s funny, it’s been about seven and a half years, you know, sometimes it feels like a year and sometimes it feels like 20 and sometimes on the same day. But yeah Dana, Allen, and Ian started the firm in roughly two thousand six. And they were just in the process of starting to raise Fund Three when Dana had reached out and mentioned, you know, we’re starting to scale, you know, I could use some help in L.A. It was just here in L.A. and then Allen and Ian in New York.

So we had known each other for a long time. We had co-investor a few times and so that was in the early part of 2013 when I officially came on board. And it’s been great. It’s been a terrific fit for me and hopefully for the firm.

I assume if it wasn’t a good fit for them, they would have figured out how to get. I hope so. Yeah, exactly. So yeah, it’s been nice. And you were already in L.A., right. Correct. Yeah, I, my wife is a documentary filmmaker so we moved down. So after I left Stanford in ninety seven, I started an early SaaS infrastructure software company, and then my wife was kind of waiting patiently for me. She wanted to come down to L.A. to pursue her career. That was in 200 I called you the the leading one of the leading B2B investors in L.A. is that is that do you think of yourself as a B2B investor?

I mean, and then I said, you’re sitting on the board of Scopely, right? So, yeah.

Yeah, it’s funny. So I’d say I, I try to spend about 80 percent of my time looking in kind of enterprise software and then a little a little bit in the infrastructure software area too, which is kind of my background as a founder. And because of my history in L.A., the early days, I’ve also done some media investing over the years. And certainly gaming being the largest category of entertainment. That said, generally most of the consumer investing at our firm, you know, runs through Dana and then one of our partners in New York, Ellie Wheeler.

I tend to take the what I think are the sexy companies, but normally be thought of as the sexy B2B software, the sexy enterprise that’s got it.

So well, I want to hear about that, but I can’t leave that the gaming stuff go. I mean. Sure. Where do you think we’re all going to be in like five years with gaming? Are we all going to be, you know, running our lives through games or.

You know what? Yeah, it’s really fascinating. So, I mean, the first mega mega trend, right, is as I mentioned, it’s already way bigger as a category inside entertainment than all the other categories combined. Filmed entertainment, television, you know, any sort of radio, podcasting, whatever, all those combined aren’t even as big as gaming. Right. So and it’s growing way faster. So I think there’s a couple of reasons. Right.

One is the technology of games has gotten so good and so realistic and so similar to real world and real life kind of stuff. The second is there the interactivity of the games, especially player to player, both ability to play against somebody, but also to communicate and build relationships with people.

One of the one of the really interesting things about Scopely to me is that they you know, they saw this new platform in Mobile and just swarmed all the you know, they went all over mobile. And they’re really, I think, the dominant player in casual mobile.

What do you think the next platform is? And it’s sort of a leading question. I’m curious about about VR in particular. And they are. Yeah. Yeah.

So it’s interesting. When trying to figure out what the new platforms are going to be, we would always study where gaming and music because that those were the two categories that younger, let’s call them kids. But whatever they could be, teenagers, teenagers, young adults, whatever, they they tend to have time and not as much money.

And so they’re incredibly aggressive about adopting new technologies particularly gaming and music, because that that’s kind of where you get a sense of where the world’s going. And usually once they start going in that direction, they stay going in that direction for a long time. 

You know, there’s so much upside even from when it becomes obvious what the winner is to where it finally goes is an amazing so like even for public stocks and stuff, I think about that all the time of, you know, there’s still so much upside because the laggards in that are later adopters. The market’s so huge. 

While we’re talking about, Scopely, what do you you know, this is about you, but where do you lean in as a board member or, you know, what have been some of the things that have come to the board level

Yeah. No, because so so I guess like first, you know, for me philosophically, kind of when I join a board, I kind of and having been a founder, I kind of appreciate what the founders are trying to do in terms of setting the culture and creating kind of a model that is in their image and, you know, that resonates and is authentic. And so I try to figure out both the culture of the company as well as the relationship with the core management team and founders, like what do they need?

And then how can I fit in to their model? Right. So I try of course, I try to bring myself in my own authentic way to that. But I also try to be respectful of the way the culture is working and the roles and the personalities of the key founders, in terms of specifically on Scopely, I mean, they have such a thing I probably respect the most about that company of a lot of things is they are the single best company I’ve ever worked with at recruiting talent.

So they don’t they don’t just do a search and then look for somebody. They’re searching for that role way before they even need it. And they’re specifically looking for what they consider to be the five best people in the world that do that role. And they start building relationships with those specific people sometimes years before that person’s ready to come up. In an ideal world, they’d get them right away. But oftentimes it’s not the right time for that person to leave yet.

Or maybe it’s not even Scopely’s not even quite ready for the level of what that person is. But but they’re growing into that. But they’ll start a dialogue and effectively a recruiting process. That’s a relationship building effort that literally I’ve been involved with some of them that have gone on for years before that person has finally decided to come.

You know, I was able to kind of spend time as they got deep in the cycles with candidates to not only interview them, to provide my perspective to the team, but also to help the candidates understand a broader board perspective, investment perspective on Scopely.

How many people are who will you interact with at at a company like Scopely?

Like, will you well, a lot of your interactions be with the CEO or will it be a much broader set of interactions?

Yeah, good. Really good question. That I think also kind of depends culturally a little bit on the company. You know, Scopely has a very collegial approach, especially at the senior management team. So I spend I probably spend the most time with Walter, but I spend a fair amount of time with Javier who’s the co-CEO and really runs all of the games. So he operates all the games and is an incredible executive. And then also Tim O’Brien, who is their CRO and kind of does all their big licensing and partnership deals.

And then also Roxanne Lucas, who is their chief people officer. OK, bring it back to just Greycroft. General, I want to make sure I cover the basics. How do entrepreneurs approach you best? Like I called you a B2B investor, you know, did someone come directly to you? I feel like Brentt works a lot with you. Yeah, well, it’s on the team. What are the best entry points?

How does someone know who to talk to if they’re looking to raise money from Greycroft?

Yeah. Yeah. So so the best way is obviously, if you know one of us or if you know someone that knows us well is just to kind of, you know, get an email intro really to any one of us. Anyone will can receive the email and can get it to the right person.

Right. And so we don’t expect entrepreneurs and everybody to know exactly what areas we’re all working on. We internally understandable kind of route it the right way, but roughly the way we organize weekly inside Greycroft. We have kind of half our team roughly is kind of focused on the enterprise team. So in L.A., that’s that’s primarily me and Brentt. And then and then also we also include our New York team, which is like Will and John and.

We kind of together kind of review all the enterprise stuff every week, and then we also have a consumer team, which is primarily Dana and Ellie and Elena, and they’ll they’ll work kind of through that funnel. But if something comes in to me that’s obviously like more appropriate for them all, forded it off to them and say, hey, this can refer referred looks pretty interesting, but why don’t you guys take a look? And I’d say one other thing is we were also quite thematic in terms of how we operate. So each investor on the whole team has a handful of themes that they’re most excited about and believe are going to be big trends over the next 10 years, 15 years.

And so each one of us does research and and and kind of lays out kind of a handful of investment theses. And then we all share those across the firm. So if Brentt’s particularly excited about, you know, network security or something like that, you know, when something comes in.

Yeah. When something comes in, you know, everybody knows, OK, Brentt will probably have a point of view on this. And we try to spend roughly 80 percent of our time outbound looking and doing sector work and looking for companies in those areas.

You mentioned a couple of things. What are all your things I’d like to know?

So for me personally, the three that I’m spending time on right now, so I would call it future of work, but it’s not as broad as what that might, I guess, generally connote what I’m looking for, specifically are business processes that up until a year ago were primarily human to human in person interactions were necessary to really make that business process work. And now obviously those are going to be much more difficult to have happen. And so we’re looking for software platforms that can, you know, come in with certain workflows and either augment or fully replace the need for those people who have done it, kind of swivel chair management style.

You know, that’s that’s one area that we’re that we’re looking at.

Second would be kind of modern supply chain, so much more dynamic network orientation to how businesses manage their vendors and suppliers and how they’re going to basically not only try to be less single threaded on any one particular vendor, particularly if it’s in a country perhaps that’s going to have political challenges or just they want to have a better kind of way to manage a more dynamic nature.

So we’re looking at lots of things around that all the way from contracting, kind of like Icertis through procurement, down into even how they manage their individual vendors. We just backed actually a deal that that Brentt led for us called, which is basically a modern version of Dun and Bradstreet. So they have an ability to effectively understand and score vendors based on a ton of both public and some of their own data that tries to get at. Is this company healthy?

And then finally, like what I call the modern CFO stack in the world where, you know, there’s an explosion of data APIs, accessible third party, first party data that’s that’s exploding now.

Is there a way for the CFO office to better understand all of that data and therefore make better decisions to drive the business as opposed to being more backwards, looking on compliance and general ledger and accounting and stuff like that? I consider those all very sexy, how do entrepreneurs know that those are your themes.

I mean, like each of us, Brentt has two or three games, got two or three. Ian’s got two or three. So there’s probably a total, what I don’t know, 30 ish. And so we wouldn’t want an entrepreneur not to just because they heard my three to say, well, I don’t really fit in there. I would think Greycroft, because it’s quite likely somebody is working on a theme that was related. I would just probably, you know, know that right away and hand it off to that person, introduce them, I love to talk to you for a second about stage. I think when we were interviewing Dana, we called you a Series A firm and she recoiled in horror. Yes.

So but I still do kind of think of you as a series A firm. So, so correct me again.

So so we believe the way we think of Greycroft as a seed to growth stage venture fund. You know, we’re ideally finding companies, you know, first institutional round these days. That’s often called the seed round or whatever it is. But, you know, ideally we’ll get involved whether we lead that round or a co-lead or even just a piece of that round in those rounds are pretty collegial and syndicated around how they form were fired up to get involved as early as that level and start helping.

Certainly the series A we want to be aggressive in and follow into that round or if we missed that seed round, that’s certainly also a natural starting point for us. Is the series a round. And then we’ll typically, with our early stage fund, still follow through into the B round, kind of with the early stage fund. We then separately have a growth fund that’s, investing minimally. Twenty million and probably as much as 40 million single check. So in a perfect scenario, would be like a Scopely or an Icertis where we start in the original round and then we’re an investor in every single round of the company afterwards

But, you know, Dana’s reaction kind of to the A round is we think of ourselves as wanting to kind of be a part of the business as early as we can and as long as we can in the history of the company. Maybe it’s an obvious question, but do you just from the fund that you’re investing on? I think it’s a 250 million dollar fund, so not counting the growth, the the growth fund. Does your ownership grow or shrink over time?

I mean, when it exits?

Yeah, it’s a good question because so the way we’ve set up our fund strategy is. We’re trying to get in early and then the the growth fund will come into B rounds when they’re really scaling typically as a like as a rough rule, the company’s got around 10 million of ARR.

You know, as a B2B company, you know, it’s kind of definitely in the range of the growth fund. Typically that rounds going to be 15 to 50 million that they’re going to raise. So if you look at, for example, like a Scopely, so we were investors in the early stage fund with that and then a big investment of the growth fund. 

If you look at the company, like our ownership across the two funds, has actually gone up. What’s your relationship with this sort of Sand Hill Road?

Yeah, so so we you know, so historically, the firm has always been very collaborative and syndicate friendly, the firm has a view of when we invest in a company, you know, we always think of ourselves as a possible lead candidate for a we’re. You know, we have our own perspective, we don’t care what other people think or don’t think, we can be contrarian, we’re focused on our own view of the market

So at the end of the day, when the round is finishes and is selected by the team, you know, ideally we hope we win and prevail as the lead. But we’re also indifferent in the sense that if we’re the co-lead or even if we’re a smaller investor, as long as we think we can earn a huge rate of return on that capital and we can really be helpful to the management team in the syndicate, we’re fine even if we don’t end up kind of leading it, we’ll get going because we know we’ve got the growth fund and other instruments. And when the next round comes, we can lead that next round. 

And I think generally we’re well regarded because of our flexibility and because, frankly, our perspective on our network tends to be really complementary to a lot of the Silicon Valley funds because of our L.A. and our New York bases know we’re able to bring customer relationships, partner relationships and talent relationships in those markets.

Do you set expectations for subsequent rounds or do you just kind of decide ad hoc, like, yeah, what I tell them is, listen, you’re going to execute.

Your plans are aggressive, probably even more aggressive than we think you’re going to achieve. That’s probably why there was a bid/ask spread, at least in the negotiation. Right. And at our perspective on it is, look, you think you’re going to be growing even faster and that would make nobody other than you and us with that would be amazing. Right. If that’s the case, expect that we’re going to be aggressive and try to lead subsequent rounds or at least try to be a major player in those subsequent rounds.

That said, I’m not asking for you upfront to accept any offer that I’m going to give you. I’m going to compete just as. As any other new firm to kind of win your business, kind of about the next time,that said, other great firms are inevitably going to be trying to preempt you or competing in the same kind of round that we’re competing on. And you should absolutely do the best thing that’s for the company right in the board, you know, minus me, because I’ll be conflicted, will make a decision on kind of what the right thing to do is. And I want you to always know I’m 100 percent behind whatever the best. I guess hopefully I’ll convince you that our offer is the best.

But I also get you’re a great company. You’re going to have 10 other offers and you’re going to do the best thing for you. 

One thing David and I talk about is should we be doing more to build out our operating partners, board partners, mentor networks?

How what have you seen work really well and what have you done and where you going? Yeah.

So so this is this is one area that I’m super excited and proud of, kind of the evolution of the firm over the last really five years. When we talk to entrepreneurs about the flexibility I mentioned before of we can lead, we can be a co-lead, the other area of flexibility that we philosophically, fundamentally believe in is we want companies to build the best board.

They can build it. Right. It might make sense if I’m leading the deal and trying to break off that I would be the guy. But also, you don’t have to just take Mark because Mark’s leading the deal.

If there’s someone that’s better internally for whatever reason, that’s totally fine. We don’t have any ego. We don’t have any economics around the way we structure our firm. We want the company to be the best company it can be.We’re also happy to step off the board and just be a board observer and bring on someone else that they can recruit on and use some collateral to capital to kind of get them out there.

And we philosophically believe that companies have the best boards. We’ll get the best outcomes. So that’s on the investing side. Right.

We also then have built this platform team. That really fundamentally today we have three people that spend most of their time on that team, so we have Alison Lange Engel, who was the former CMO stripe and at LinkedIn prior to that. 

We have Stewart Easterby, who similarly comes from a sales and sales ops and kind of an H.R. manager operating background. So he helps companies kind of as they’re scaling all those aspects of geek out with like compensation models for the sales teams, whatever they need help with.

And then also how to Hannah Shore who runs our BD team. So she spends a lot of time outbound with large platform companies, big enterprise customers, CPG companies, relationships with, like, you know, Accenture and Deloitte and firms like that.Ddo you take board seats in your earliest investments like you’re leading and see, do we can we typically don’t in the seed stage only just because most boards are still forming, the entrepreneurs are still figuring out kind of what they want and need on a board. But if they have a strong perspective and say, hey, we feel this is the time to form the word, we’d like you to do it, then we’re definitely open to it.

You know for sure, by the time the company is at the series, a stage.So even if we’re start on the board and then turn into a board observer, there’s there’s zero difference in kind of how we work with the companies.

I think we’re going to have to move to the random personal question section of this right now looking at it, but it really, what sort of documentaries does your wife make?

So primarily she’s focused on on animal documentaries. She did a series of short documentaries for National Geographic on the Big Cat initiative. So she did some on the tiger or the lions and she did some kind of saving and endangered animals. And then the last two feature length documentary she did, the first one was called Black Beauty Breed, which was a deep kind of profile on the Rottweiler, which is a dog that we ended up rescuing and didn’t know anything about, rescued and fell in love with. He passed away a few years ago of osteosarcoma.

And so she did a documentary on on canine cancer and kind of all the new therapies that are out and ways to treat this, ways to prevent it. Not surprisingly, it’s a lot like humans where obviously food and a lot of the things that dogs eat and they’re they’re kind of exercise a lot of different things you can do to kind of help, you know, elongate their lives and prevent cancer.

Well, this is fantastic, it’s been fun to get to know you better and it’s fun to collaborate with you in the L.A. ecosystem.

So, yeah, I really appreciate you guys doing this. And we love working with you guys. And and hopefully we can find a bunch of great ones together in the meantime. And thanks for having me on.