IVCA Feature: New Member Profiles of Dundee Venture Capital and Waveland Investments LLC

IVCA Feature: New Member Profiles of Dundee Venture Capital and Waveland Investments LLC

September 2, 2015

The Illinois Venture Capital Association continues its growth and outreach with two new members. Dundee Venture Capital of Omaha, Nebraska, is committed to their local and broader Midwest investments, including Chicago and Illinois. Waveland Investments LLC is a Chicago-based Private Equity firm that invests in lower middle market manufacturing, distribution and marketing companies all over the United States.

Both firms were recently asked a number of pertinent questions about coming into the association, which included background information about their enterprises.

New Member: Dundee Venture Capital

Representatives: Mark Hasebroock, Founder & Greg Beaufait, Associate

IVCA: What is a brief history and background of Dundee Venture Capital?

Dundee Venture Capital: In 2010, Mark Hasebroock founded Dundee Venture Capital to invest in companies at the earliest stages and to mentor startups as they ramp up their growth. Mark founded Dundee VC after co-founding two e-commerce companies, GiftCertificates.com and Hayneedle Inc. In looking for investors, he found it difficult to raise capital for high-growth technology companies in Nebraska and the Midwest. It took a California roadshow and trips to the East and West Coasts to eventually raise more than $100 million from the likes of Sequoia Capital and Insight Venture Partners.

Mark knew there were others like him – building those incredible, fast-growing technology businesses – who were looking for investment capital to fund further growth. So Mark jumped into the fray and founded Dundee Venture Capital. The firm has two funds totaling $20.2 million, having made 29 investments with two exits since 2010.

IVCA: Why did the firm decide to join the Illinois Venture Capital Association?

Dundee Venture Capital: We’ve made several investments in Illinois – including Built In, DonorPath and Inventables – and expect to ramp up our investment pace in the state over the next several years. We are eager to continue to help build foundational, high-growth technology companies in the state through investment and believe the IVCA is a vehicle through which to meet like-minded investors and organizations.

IVCA: Dundee Venture Capital was founded specifically to provide seed funds to Midwest start ups at their earliest stages, because at the time you didn't see Midwest VC firms funding within their own territories. What has changed since then and how has Dundee become a leader in 'investing locally'?

Dundee Venture Capital: There are lots of VCs now that invest in the Midwest and some like us that even have it as a core philosophy. There are VCs from the coasts that are coming to the Midwest for deals. That wasn’t the case ten years ago, but there are still incredible founders who have to go to the coasts for capital. No one can do it alone and we can’t fund any one company’s entire growth cycle.

It’s great that Drive Capital, Pritzker, Foundry Group, and others are investing in the Midwest that weren’t around in the early 2000s. But there should be three times as many investors. There has to be a capital and entrepreneurial ecosystem willing to take big swings in the most innovative opportunities. We are improving in the Midwest in terms of the entrepreneurial talent, but the risk capital still lags behind at all stages.

IVCA: Do you think there is a prevailing thought regarding investors from the Midwest?

Dundee Venture Capital: The old adage is that Midwesterners are humble and risk averse. In our viewpoint, some of that is still around even in the VC arena. Consumer companies sometimes struggle to raise capital in the Midwest, and it’s really hard to get funding for an idea on the back of a napkin. We are trying to change that – if we see an idea and an entrepreneur we believe in, we’re in. We’ll help you find your first customers, work on your product, begin to scale, and secure that next round of financing. It’s hard work, but necessary, and we love it.

IVCA: In the firm’s early entrepreneurial days, you dealt with specific products to sell to the consumer market. How did that experience prepare you for Venture Capital, as far as evaluating potential companies for investment?

Dundee Venture Capital: We often harp on a few things around the office and within our portfolio, that come largely from Mark’s e-commerce background at Hayneedle Inc. and GiftCertificate.com. –‘Sales Solves All,’ ‘What If?’ and ‘You Can’t Manage What You Can’t Measure.’ Hayneedle started off as Hammocks.com, and then it was ‘What if we sold porch swings?’ We’d buy a domain, spend a little bit of money on marketing, and quickly test the results. Okay, we should sell porch swings. ‘What about socks?’ And we’d do the same. Okay, we shouldn’t sell socks. And that’s how we built this home furnishings brand that is now Hayneedle Inc.

IVCA: How do you apply that to your investment evaluations?

Dundee Venture Capital: As we look at entrepreneurs and companies on both the consumer and B2B sides, the common themes are ‘Can this team sell?’ Because you have to sell your vision to investors and employees, and your brand and product to customers. Another characteristic – ‘Do they live, breathe, and preach their Key Performance Indicators, the metrics that drive their business forward?’

Because it’s easy to focus on a lot of different things, and have a lot of flurry as a startup founder. But there are probably only a few metrics that truly are the value drivers for your business in the long term, and you better know them well. The last thing we look at is, ‘Are they thinking big enough?’ Are they asking themselves and their team ‘What If?’ For example, what if we raised more capital, what if we moved our 2017 sales goal into 2016, or what if we tried this crazy marketing stunt?

IVCA: The philosophy of your investments includes direct mentorship and guidance of the companies you seed. What has your firm learned through this philosophy, and how has it bred success?

Dundee Venture Capital: There is a reason a lot of the successful seed-stage investors move on to larger funds and later-stage investing. Yes, it’s more money, and active seed-stage investing is really hard. These are young companies with a lot of growth potential, but the path for any startup is never entirely smooth on the road to success. Our job is to help the entrepreneurs in any way possible to smooth the road ahead of them.

Sometimes that means tough love, and sometimes it’s helping with product thoughts, and also interviewing potential employees or making M&A connections. As the companies mature, they sometimes need our guidance less and less, and that’s perfectly okay too. But it’s important for us to find coachable founders eager to leverage external resources, because building a technology business at such a fast pace is really hard. Plus it’s harder still – and close to impossible – to try and do it alone without some trusted help along the way.

IVCA: What does Dundee Venture Capital hope to achieve in their interaction with the IVCA?

Dundee Venture Capital: We are eager to meet and continue to work with other investors in the state and help shape – through investments and otherwise – the entrepreneurial ecosystem of Illinois and the Midwest.

For more information regarding Dundee Venture Capital, click on dundeeventurecapital.com.

New Member: Waveland Investments LLC

Representative: Meghan Otis, Principal

IVCA: What is a brief history and background of Waveland Investments LLC?

Waveland Investments: We started the firm in the year 2000 to invest in lower middle market operating businesses. Dennis Zaslavsky and Meghan Otis have been investing together since its inception, and Greg Maletsky joined the team six years ago. Our investor base consists of family offices and high net worth investors. 

IVCA: Why did the firm decide to join the Illinois Venture Capital Association?

Waveland Investments: We spoke with [Vice Chairman] Walter Florence and [Executive Director] Maura O’Hara recently, and felt we should get more involved in the organization and take advantage of the opportunities for networking and various programs.

IVCA: Your firm invests in lower middle market manufacturing, distribution and service companies in the U.S. Besides the usual financial characteristics, what is the prime 'it' factor that you look for when evaluating potential investment?

Waveland Investments: We look for strong niche opportunities and are drawn to investments with identifiable areas of historical under investment or under performance, where we can identify potential value. Additionally, it is important for us to partner with talented and experienced management teams that have a vision for value creation. 

IVCA: You also indicate that you seek to close your deals without external financing. How does that factor into a fast completion of a transaction?

Waveland Investments: We have done this, but primarily with distressed opportunities that required a firm commitment with financing completed at a later date. In more typical non-distressed situations, we employ third-party debt financings, but at very conservative levels such that we provide ample room for a business to grow.

IVCA: Your current investment portfolio – and your exits – include some familiar brands. What characteristics do you find in established American brands that need 'refreshing,' in a general sense, when you decide to invest in them?

Waveland Investments: Each case is somewhat unique, but we will address a few of the companies. For the restaurant outlet Potbelly, we believed in the concept and saw their strong performance at their initial growth stages – we felt strongly that the market would continue to embrace the offering and fuel growth. As it related to Clark [gasoline] Brands, we saw a deep and established brand that had faced some distress, and therefore had not been actively pursuing growth. We believed that with focus and investment, we could grow dramatically. We also invested in a housewares company, where we correctly believed there were many potential add-on acquisitions. 

IVCA: What does Waveland Investments LLC hope to achieve in their interaction with the IVCA?

Waveland Investments: We would like to continue our involvement in the Private Equity community in Illinois, plus foster and create additional relationships.

For more information regarding Waveland Investments LLC, click on www.wavelandinvestments.com.