“Doubling Down” is a new series where we hear from top B2B SaaS investors on their most recent activities and takes on the current market. We had a great one last time with Andrew Steele, Partner at Activant Capital. Check that out here.
This week we’re focusing on Karl Alomar, Managing Partner at M13!
#1. What’s your most recent disclosed investment? Why did you do the deal?
I invested in a company named CAT Labs in Q1 of this year. CAT is an investigatory crypto asset platform, initially providing tools for law enforcement to track down crypto assets in criminal investigations. The company was founded by Lili Infante, a veteran law enforcement agent who founded the first crypto task force in the US about a decade ago and set a lot of the processes and guidelines for the investigatory process.
With complimentary offerings from the likes of Chainalysis performing well in this category, my main interest in this business stemmed from excitement in the founder herself and her strong founder market fit. This was truly a case of the perfect founder building a business that has scale potential.
#2. What’s your sweet spot for investing — check size, stage, type of deal? And how big is your current fund?
My main focus is to invest in Series A with an initial check of $5-15M, although I do reserve an interest in smaller checks for late Seed rounds. Coming from a more technical background, I do like technology driven service businesses and technical infrastructure, and have a keen eye on fintech/crypto, as well as AI driven SaaS platforms and productivity tools. Our current fund is about $380M of which we reserve about half for follow-on investments in our performing companies.
#3. What’s the #1 bit of advice you’d give to SaaS founders today?
I could talk about economics and scale as key factors to long-term success of any SaaS business, however, with the emergence of AI one concept has become clear for today’s founders – always look to where technology and the market are moving. I see good SaaS businesses that get stuck in a technology architecture and solutions that are driven to obsolescence due to technical advancements in other areas. Focus on what customers will need for years to come and the solutions that are always on the technical bleeding edge and ensure your offering is sufficiently malleable to stay ahead of the curve for years to come.
#4. What’s your pulse check on the venture markets right now, today?
The venture markets today seem polarized depending on stage and category. Many categories are clearly suffering in today’s economic conditions, namely proptech and to some degree fintech, while others are booming and seeing record valuations, like AI and to some degree crypto again. Positioning today is everything and good companies that are positioned correctly have the opportunity to create excitement and drive strong rounds to close quickly. On the other hand, the inverse is also true for companies that have not effectively positioned themselves in the market.
In terms of stage: although earlier-stage investment dollars seem to be flowing well, growth is still turbulent. This, in turn, also impacts where early-stage investors will place their bets. Small-cap public market valuations have still impacted how growth investors consider and value companies, mainly based on sector. Market comps are generally not strong and securing later-stage rounds has proven more difficult in recent times. Having said that, there does seem to be light at the end of the tunnel with some growth investors getting back to business and constituting some marquee growth rounds to set the stage for the rest of the market to hopefully follow suit over the coming quarters.
#5. What’s different about your fund / how you invest and support founders?
M13 prides itself on clearly differentiating the way we operate and with our unique platform offering that we refer to as Propulsion. With leadership stemming from a strong operating pedigree, we have built an organization that functions more like an operating company than perhaps a typical fund. We have done away with the common vertical approach to venture and built an incredibly collaborative operating model that consistently places our full portfolio across the organization. We promote deal collaboration between our investing partners and our operating partners through the life of each investment.
Furthermore, our Propulsion team has a clear mandate to focus on proactive support for our founders rather than perhaps a more typical reactive stance held by most investor board members. We identify the key drivers that help our portfolio companies graduate from one stage of their business to the next and proactively identify opportunities to support that while also navigating future challenges that we recognize from our own extensive operating experiences. The combination allows us to be true partners with our founders and we have built many programs and tools that reflect these principles and are heavily utilized by our portfolio as a whole.
#6. What’s an “exit” you’re particularly proud of?
Having come from an operating background myself, I would still have to say that my most proud exit to date would have been from my time at Digital Ocean. Although not a direct investment during my more recent investing years, Digital Ocean does represent a full journey for me as I joined the company upon the release of their first product and left 6 years later with an ARR of $250MM and fully prepared for the eventual IPO. The complete journey leaves me with a strong sense of pride and a wealth of experience that continues to feed my support and efforts with the balance of my investments today.
Having said that, my investment portfolio is still relatively young and I can already see some exciting businesses that I am sure will rival this exit in the years to come. I look forward to realizing many more big wins like this with great inspiring young founders that I can play a big part in.
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Karl Alomar serves as the Managing Partner of M13, an early-stage venture firm investing in visionary founders building disruptive software businesses. M13 invests in infrastructure technology—such as AI and web3—that powers the future of work, health, commerce, and money. Karl brings over two decades of executive-level experience building and growing technology businesses and spends his time at M13 across all functions of the business, specifically overseeing the Propulsion Team and running the firm.
Karl is a tech investor, serial entrepreneur, and most well-known for building DigitalOcean from the ground up, which is one of the fastest-growing cloud infrastructure companies. DigitalOcean’s value peaked at $15 billion. The ticker symbol is DOCN.
Karl was also the Co-founder + CEO of China Export Finance which grew to $140M in revenue and was the Co-founder + CEO of Clearview Networks: both of which had exits.
Karl received his MBA from Columbia Business School in New York and a BEng in Electrical and Electronic Engineering from Imperial College London.
