Favorite things to do in Austin: Wakeboarding, followed closely by mountain biking.
Santa Cruz, CA
- Morgan Flager is Partner with Silverton Partners, a venture capital firm based in Austin, TX. Prior to joining Silverton in 2006, Morgan worked with FTV Capital in San Francisco, where he focused on growth investments in software- and technology-enabled services. Before becoming a full-time investor, Morgan held various executive positions at Ingrian Networks (acquired by SafeNet) and Kintana (acquired by Mercury Interactive Corp.).
- Morgan currently sits on the board of BlackLocus, CopperEgg, Socialware and UnboundID and is actively involved with Silverton’s investments in Javelin Semiconductor, Sailpoint and Sparefoot.com.
- Morgan received his BS from Stanford University and serves as a guest-lecturer on entrepreneurship at the University of Texas.
- [Photo by René Lego Photography]
- DESCRIBE THE VENTURE CAPITAL BUSINESS...
- The venture business is really, in my opinion, a mentor, kind of mentoring kind of business. You really have to learn from someone who's done it before, who's been successful, who is passionate enough about what they're doing to want to teach those skills to someone else. So, for me, that was Bill Wood, who has a long history in Austin, co-founded Austin Ventures, co-founded Silverton Partners, which is where I work. So he was really the reason that I moved down here, and that chance to kind of do early stage investing, which I'm also passionate about with him, was a huge one.
- WHAT SETS SILVERTON PARTNERS APART?
- We're more involved than a typical venture investor and so we're not going to have 50 deals in a particular fund. We're not going to sit on 20 board seats. It's just not part of our strategy and we have a $75 million fund. So we would like to return at least two to three times that fund.
- We might have 15 companies. So if you just do the reverse math on that, each one of those opportunities that we invest in needs to return at least 15 to 20, or else we can't make the numbers work. So we would have to compromise the strategy and do more deals and all that sort of thing.
- TALK ABOUT THE SILVERTON PORTFOLIO...
- If you look across our portfolio, a lot of it has enterprise software, some consumer-oriented software, a lot of kind of traditional software enabled tech. The reason why that's the case is because Austin has a lot of great software people. In identity management, which is an area that we have two investments, from Tivoli Systems to Waveset to the current generation of companies that we're involved with, SailPoint and UnboundID, they have the lineage. They've done it before. There's the talent pool of engineers that have built those products before. The chance that that company is going to be successful is huge.
- We don't have the access to capital that Silicon Valley does. There's not a hundred firms waiting to put $100 million into a particular business idea. So we have to be more thoughtful about, "Hey, can we build this company to something meaningful and exciting on less capital, maybe $10 million or $5 million or $20 million? That kind of shapes some of the opportunities that we look at.
- The byproduct of that -- which is super exciting for entrepreneurs in Austin -- is the less capital you raise, the more of the company they typically own. So, us looking for capital efficient companies also promotes high employee ownership at the end, and it's a very virtuous cycle.
- WHAT COMPANY IS RISING TO THE TOP OF YOUR PORTFOLIO?
- So one of the companies that I'm most excited about in our portfolio is a company called SpareFoot, and it's in a really un-sexy industry. It's in the storage industry, and not storage like more data on your disk drive or even cloud storage, both of which are substantially more sexy than this industry.
- This industry is like the 5 by 8 unit that you put your college stuff in when you move back home and need a place to store it. So they help people, who are looking to find a unit, find the cheapest unit. Maybe they have some specifications around what it has to have, climate control, what have you. And they want to, basically, go and book themselves into that unit, and they want to do that online.
- Not only do they provide kind of the conduit between all of these online shoppers that are growing every day in terms of how they find stuff and this relatively boring industry that has kind of not wanted to adopt technology and it's kind of been drug kicking and screaming into the digital age.
- They also provide a bunch of tools and software back to those facility owners to kind of help run their businesses in the digital age. So they allow them to take reservations on their own website. They allow them to manage their inventory and a bunch of other things that previously these guys didn't have good tools to do.
- WHY WILL SPAREFOOT SUCCEED?
- Why I think it might be one of the breakout successes in Austin, and perhaps nationally, is the industry is super fragmented. So 85% of the industry, the owners have 1 to 2 facilities.
- Public Storage, which is the largest player on the market, has a $20 billion market cap and only owns 6% of the industry. They have all of the technologies and tools that the other 85% of the market doesn't have and if SpareFoot can empower the 85% of the market to be on a level playing field and compete with a Public Storage, the value that they're going to create for those guys is going to be immense.
- Hopefully, whenever you're creating and empowering that big of a market that substantially, you can take a little piece for yourself and I think that's a huge opportunity for the company.
- WHAT'S DOWN THE ROAD?
- We're going to have some break out stories probably in the next three to four years here. My hope is that those companies don't all sell out and get acquired, because whenever you have an exciting company, of course someone else wants to own a piece of it, that they hold out, and they really build a long, sustainable growth business here that employs thousands, and not hundreds. Hopefully, one day they will spin out and create their own mini companies that have a chance to perpetuate that cycle.