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Founded in 2015, Activant is a global investment firm with $1.5 B AUM that partners with high-growth founders and teams that are transforming commerce.

Activant

Why open an office just for research, you might ask? 

Since our inception in 2015, Activant has been a thesis-driven firm focused on commerce infrastructure. 

But what does “thesis-driven” really mean? For us, a thesis is a view about where the world is moving, what it will look like in 5-10 years, and what technology will be required – or produce – that shift. It is supported by a base of facts that form the foundation from which to make high-conviction investments.

Activant originated from the belief that the digitization of commerce was the greatest opportunity of the coming decades, and that we need to build a firm to invest behind it. Beginning in 2015 with e-commerce, we have come to view the value chain as consisting of: “make, move, sell, and consume.”

We use the thesis approach to invest up and down this value chain. Remaining grounded in a thesis helps us make high-conviction investments in founders who share our vision of where the world is going and are building the companies to pull the world into that future.

We develop a thesis organically and iteratively over the course of months or even years in five primary ways, in no particular order:

 approach, wherein we analyze macro data as well as build detailed market maps of our sectors; for this we use Aristotle, our proprietary software platform.

 within key verticals to understand their problems and pain points.

at our portfolio companies. Whether it takes the form of board governance, strategic counseling, talent, working with the teams we partner with is enlightening.

 of founders, executives, and other investors

; nothing is as catalyzing as spending time with people actually building the future.

Today, we see this approach as more important than ever to help us find signal in an increasingly noisy world. We wanted to double down on this work and build a dedicated team for thesis research.

We decided to open an office in Cape Town because we found amazing people there - starting with 

, who brings 25 years of investing experience to lead the team. He's supported by JJ Brink and 

. We're excited to continue to expand the team and go deeper than ever in our core sectors.

Jono Vickery

We’re excited to announce the opening of Activant Cape Town, an office dedicated to conducting deep research to further our thesis-driven approach.

Pretend for a moment you’re an enterprise sales rep. It’s the last week of the quarter, and you’re just $50k away from meeting your quota. Your last prospect is nearing the dotted line, but before you know it, the close date gets pushed out by two weeks. Why? Your potential customer needs to finance their purchase (it’s a $200K ACV, 3-year deal), but they’re stuck in a back-and-forth PDF battle between your financing team, a lender, and the sales deal desk – there’s barely an end in sight.

But wait. In a world where software is eating the world – where you can sign up and buy anything with just a few clicks – why are sales teams still so critical? If product is good enough, why doesn’t it just sell itself?

Take a look at Slack – one the darlings of the B2B “bottoms-up SaaS” movement of the 2010’s. The experience was consumer-grade, the signup was easy and self-serve, and the product spread virally through organizations. In 2015, 

, “I believe we can have no commissions forever…we can have no outbound sales forever.”

Today, sales makes up nearly a quarter of Slack’s team – 900 people. Why? Because as technology companies move upmarket, their customers need to work with sales teams to build alignment across the organization, no matter how great the product is. Separate studies by Salesforce and Gartner found that approximately 75% of B2B buyers expect to interact with a salesperson during their buying journey.

Larger customers are more complex - with existing tech stacks, multiple geographies and languages, and complicated org structures. This, coupled with the woes associated with financing large purchases (think $100K+/year, 3-5 year deals) so that vendors receive payment up front and buyers can pay over time, makes a long list before the customer can sign on the dotted line. In the end, the best enterprise sales reps are skillful guides to their customers through the dreaded gauntlet of “stakeholder alignment.”

The current climate is all about being resourceful and efficient, and sales teams are no exception. While we’ve seen some strides in sales automation, one of the biggest friction points for buyers and sellers remains the financing process. 

Remember the PDF battle? This incumbent process of offering flexible payments is full of paperwork and intentionally opaque, making it slow and difficult to scale. It bogs down sales teams when speed and customer service matter most – during the deal-closing process. B2B sales teams need to build alignment within their own organization (namely finance and sales orgs), and within their customer’s (namely procurement and legal).

 is an end-to-end sales closing platform that embeds financing and payment options at the point of purchase for enterprise technology. It enables:

 to increase efficiency and velocity. Vartana lives in the CRM, the home for sales teams. It underwrites every potential deal, and provides a closing, payments, and financing toolkit that helps qualify, win, and execute more deals. The result is more sales closed, faster, and more commissions.

 drive higher revenue and cash today. Vartana eliminates manual workflows, allowing finance teams to support sales while also ensuring high-quality customers. It even fits into existing captive financing processes and can free up liquidity for many vendors who today, reluctantly offer financing off their balance sheets to win and retain important customers.

 to purchase business critical technology like cybersecurity, cloud, and IoT solutions today without massive cash outlays upfront, all while streamlining the entire sales process.

Vartana’s go-to-market targets adoption at the sales level – those who are actually selling in the trenches. When we talked to reps who had closed deals using Vartana, they said that the thought of having it removed from their toolbox would put them at a severe disadvantage.

And Vartana is already live with blue-chip enterprise vendors including 

, which provides exposure to high-quality, lower-risk end-customers who are purchasing mission-critical software.

In addition to building out more products to simplify the life of sales teams, Vartana will be able to extend their reach into other digital form factors like B2B marketplace checkout.

Co-founders Kush and Ahmed embarked on their journey in 2020. Prior, they worked at Motive (formerly KeepTrucking), a fleet management platform, where they encountered inefficient contract management and inflexible payment systems. Their years of hands-on experience gave them an understanding of how deals could be prolonged due to inadequate payment flexibility. This eventually led them to leave Motive with a vision to build Vartana.

When we met Kush and Ahmed, we were deeply impressed with the clarity of their vision. They see Vartana as business that can streamline sales closing today while building over time into a full-fledged platform, and back it up with a relentless focus on execution.

Activant is excited to announce that we have led 

 $20M Series B, with participation from existing investors Mayfield Fund and Audacious Ventures. We’re proud to partner with co-founders Kush & Ahmed and the entire Vartana team on their mission to streamline the sales closing process.

This partnership has been three years in the making. We began researching B2B commerce and checkout years ago, 

publishing our perspectives in TechCrunch in 2021

 on the topic last year. We were subsequently introduced to Kush and Ahmed through those reports, and when we saw what they were building at Vartana, we realized it was special.

Why we're investing in Kush and Ahmed of Vartana

Supercharging Sales Teams

Over the last decade, high burn rates became the norm in Silicon Valley. Look no further than the Software-as-a-Service, or “SaaS” market. Investors and founders had an unspoken pact. Investors were ok pushing out profits, as long as management teams delivered on growth. This worked swimmingly well because of two long-term trends. First, interest rates declined for the better part of 30 years, decreasing the cost of capital. Second, the cost of managing cloud infrastructure decreased, as we shifted from single tenant to multi-tenant, and then to AWS, Azure, and the like. Now that 

 of these trends have reversed, we believe that many of today’s SaaS companies are headed straight into a storm if they don’t take a hard look at their business model.

The SaaS business model it isn’t new. While Salesforce may have popularized the term SaaS, you could buy an allocation of time sharing for a computer starting in the 1960s. In the ‘90s it was called “application service providers,” or “ASP’s.” These ASPs hosted software centrally and charged customers on a recurring basis for access. Prominent ASPs that survived include 

. We don’t hear about 99% of ASPs, because investors held them as close as Cleopatra – just about everyone got bit (with a few exceptions).

First, interest rates declined and remained at nearly zero from 2009 to 2016 – which increased the value of a dollar in the future. This made investors much more willing to push out profits, so investors championed a SaaS revolution and put profitability in the back seat. As we know, rates have been rising, and have brought back a renewed focus on cash flow and business model.

Second, the cloud moved from single tenant to multi-tenant, which dramatically reduced the cost of operating a SaaS business. From 2000 to 2014, the average first round of investment fell 80%, from $5 million to $1 million. In 2000, early startups had huge infrastructure costs - by 2014, much of that was handled by outsourced cloud infrastructure providers like AWS. Use of proceeds in a round for hardware and start-up costs (the green slice) fell from 44% of the round to about 5%. 

This reduced the capital and risk required to get started, and allowed for a proliferation of new companies, along with growth in seed funds to invest behind them.

Source: Activant Research, CB Insights Venture Roundup

The best way to move forward is to take a page from the past. The most common business model for software companies anytime before the last 15 years was called license and maintenance. In this model, software companies charged a large upfront license fee, typically 3-5x a comparable annual SaaS fee. Then they charged an annual recurring revenue, or maintenance, which was typically priced at 20% of the upfront license fee. Customers paid this in order to keep updated with patches, upgrades, and support. Maintenance often had annual increases or accelerators for keeping the latest product up to date.

The upfront lines fee ensured the software company could be profitable as it covered the cost of production and sales. The recurring maintenance revenue resulted in high margins, especially since the cost of delivery was low - which is still true today. Up and cross-selling resulted in a new license fee for additional products and extensions.

This model was brilliant, as it allowed software companies to run profitably and maintain recurring revenue. We forget, but many of the great technology companies were profitable in their first year, such as Microsoft and Hewlett Packard. They charged for services as well as license and maintenance fees - and if you want to blow someone’s mind in Silicon Valley, posit that services are stickier than software.

Eventually, though, most companies transitioned to SaaS, as investors - both public and private - essentially forced the change by valuing SaaS companies at a premium to license and maintenance.

We’ve been encouraging our companies to revisit a license and maintenance model, or something similar. Given rates are high and customers could be more likely to cancel contracts, pulling as much cash forward is the absolute best thing a software company can do in this environment. In addition to helping the software company get to profitability, the up-front license fee creates a massive sunk cost that is actually 

 likely to be canceled by a customer (as long as they don’t run out of money). And back to services, they create more stickiness than software alone.

 for new customers to one with cash up-front. For existing customers, new products and product extensions can get this same treatment.

 Shockingly, software companies that have services - both implementation and ongoing - tend to be stickier than those that are self-serve.

Don’t be afraid to use the word “license.”

 Allow your customers to buy a perpetual license to your software. However, if they don’t pay maintenance, they don’t get upgrades and patches - this again creates stickiness.

My view is any answer you are looking for in any business, has already been asked and answered in the past. We all stand on the shoulders of giants.

Note: This perspective was first published in Activant's newsletter, The Greene Street Observer. 

 for more insights and updates from Steve and the Activant team.

What can we learn from the business models of the past to weather today's market?

SaaS is Headed Straight Into a Storm

Announcing Activant Cape Town

Research in Cape Town

We’re always looking to learn about new perspectives, new research, and new ideas.

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Harish is providing the Amazon Prime fulfillment experience to everyone else through a combination of AI and an asset-light network of warehouses across the United States.

Alex is automating workflows for the world’s largest enterprises by using process mining to build the connective tissue for businesses.

Mayan is delivering Autonomous IT to the largest companies in the world through systems of intelligence.

Carsten built one of the largest commerce platforms in the world, which powers enterprise merchants and retailers across the globe and now serves as the SAP commerce engine.

Soups is stopping financial crime in its tracks by building the first end-to-end platform for fraud, risk, and compliance.

Adam is enabling restaurant owners to take back their customer relationships by digitizing their entire online and offline operations in a single platform.

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Activant is a research-led global investment firm that partners with high-growth companies.

We partner with founders who have won their initial battles and are ready for the next challenge.

We typically invest when two things come together. First, the company has the potential to achieve escape velocity and transform an entire industry. Second, we believe the founders can lead the company through hyper growth, and our support can significantly increase the probability of this success. 

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