Serial entrepreneur Steve MacDonald has founded his own venture fund, MacDonald Ventures.
He is drawing on his own experiences as a founder, with “a couple of misses and a couple of wins,” and $400 million in exits, including the 2017 sale of myMatrixx, a tech-enabled pharmacy benefits manager, for $250 million.
“I’ve been able to parlay that into angel investing, with over 100 angel investments,” MacDonald said during an online interview at Startup Week Tampa Bay 2020. “It’s the reason I founded MacDonald Ventures. Over a couple of decades now of founding and running companies, I’ve had an opportunity to give back and invest in the next generation of phenomenal founders.”
MacDonald Ventures is still a couple of months away from a public debut, but MacDonald shared his philosophy on investing during the interview with Allen Clary, co-founder of the Tampa Bay Wave startup accelerator.
Early stage startups: “Over the first couple of years I find that there’s a lot of personalities. Those are the personality struggles as you try to build the foundational aspects of the business, try to understand key performance indicators, try to hone in your marketing and messaging and branding, corralling employees and getting them aligned to the mission, creating values. All those things are important and they just take time to germinate and take hold of a company. Those are the things that create the foundation for success.”
Initial investors: “As a founding entrepreneur, it’s important when you are seeking your first group of investors to make sure the investors you are pursuing and that are willing to invest, are the ones you want with you on the ride. If they are impatient and not experienced in the world of early-stage investing, you don’t want to find yourself in a situation where all you are doing is trying to resolve investor issues when you really want to focus on building your company.”
The pitch: “If you have sales, that’s the best KPI [key performance indicator] … I think it’s hard to say what [specific] KPIs because every business is unique. It’s more important that the founders know what they are supposed to measure and they actively pursue that as a business strategy. That’s the characteristic that excites me more than just the KPI itself.”
Due diligence works both ways: “When you are seeking investors for your startup, most professional investors will have at least a website with their portfolio companies. I would urge everybody before having a conversation with potential investors to get an understanding of the type of companies they invest in and determine if you fall into their sweet spot.”
Planning an exit: “It’s always a good idea to understand where you fit in the ecosystem of your industry. You should have an idea that in ideal outcome, these are the kinds of companies that would buy our company … I get nervous if the founder is very rigid in the expectation they have for their exit. The founder should be able to answer that, but they should have some flexibility in it.”
What MacDonald looks for in an investment: “I like the business-to-business services space. If that’s the kind of company you are building, you can build fairly predictable revenue streams. You can build relationships with your customers. For me it’s a more targeted approach that I can build and measure my long-term value … I try to stick with something I know a little bit about. That’s going to be technology-enabled companies. The kinds of companies I like to invest in are those companies where there is an opportunity to reduce phone calls, to reduce paper or reduce labor, and using technology to accomplish those goals. That’s my sweet spot.”
While MacDonald Ventures is still under the radar, MacDonald said he’s accepting pitches. “Send me a link to your deck on LinkedIn and if it’s something that fits our investment thesis, we’ll reach back out.”
The best way to reach MacDonald, or any potential investor, is through a personal connection, Clary said.
“That just goes back to life. You’re going to listen to people that you know and respect,” MacDonald said. “And that’s something entrepreneurs should do. They should network to try to find their way to reach the people they want to reach.”
MacDonald is an entrepreneur in residence at Tampa Bay Wave and serves on the Florida Funders board of managers and Embarc Collective board of directors. He is chairman of the Kush.com board of directors, and a member of the boards of Finexio and Softwear Automation.