Morgan Flager, a general partner at SIlverton Partners in Austin.
Flager currently serves on the boards of Aceable, Alert Media, Convey, Outbound Engine, Trendkite, The Zebra, Turnkey Vacation Rentals, SourceDay, and Rollick. Before joining Silverton, Flager worked with FTV Capital in San Francisco and in corporate development for Ingrian Networks and as a product manager at Kintana. He grew up in Santa Cruz, California and earned his B.S. from Stanford University.
Last month, Silverton announced it had raised a $108 million fund, its largest to date. This is the firm’s fifth fund. In this episode of the Ideas to Invoices podcast, Flager discusses the firm’s investment focus and how it decides to invest in an entrepreneur.
Silverton’s offices are located downtown at seventh and Nueces in the historic Joseph and Mary Robinson Martin House, built in 1903, in Queen Anne and colonial revival styles of architecture.
Flager’s office is on the second floor and faces the ever-changing downtown Austin skyline. Flager said in the time he has been there he has seen skyscraper after skyscraper go up.
Bill Wood, one of the founders of Austin Ventures, founded Silverton first as a family office in 2005, but a year later he raised the firm’s first VC fund. Silverton is now on its fifth fund. Just last month, the firm announced it had a $108 million fund focused on investing in early-stage technology startups, primarily in the Austin area.
“We’ve always been an early stage tech investor in Austin,” Flager said. “We really haven’t changed our strategy much since the firm was started in 2006.”
Silverton tends to be the first institutional investor in the early-stage tech startups it invests in, Flager said.
Some of Silverton’s successful investments include Silicon Labs, Sailpoint Technologies, WP Engine, SpareFoot, TK20.
“We’ve had a lot of successful acquisitions lately,” he said.
Silverton has reported five full or partial exits representing an aggregate of more than $1.1 billion in market capitalization since the beginning of 2018.
Silverton typically invests between $500,000 to $5 million, with the average being around $1.5 million to $2 million, Flager said. The firm primarily concentrates its investments within a 20-mile range of Austin, but it has made investments outside the state including one in Utah and another in New York.
Silverton looks at roughly 1,000 investment opportunities in a year, of those, it typically invests in six to eight new companies, Flager said. And then it does following on financing for existing companies so it ends up making about a dozen investments a year, he said.
The biggest focus of the Silverton portfolio has been in software, particular business to business ventures. It also does consumer, Internet mobile investing like Aceable, uShip, The Zebra, he said.
“Most of the consumer stuff we’ve done is marketplaces,” Flager said. “So we feel like we know that area really well.”
Silverton also does some investing in hardware startups, tech enabled services, and consumer packaged goods, Flager said. But those are smaller parts of its practice, he said. The firm does not invest in life sciences, medical devices and pharmaceutical startups.
When evaluating which startups to invest in, Silverton’s primary criteria is the team behind the startup, Flager said.
“We like to back people who we have a high degree of confidence in,” he said.
Silverton also looks at the dynamics of the market the startup is going after, Flager said.
“If we can’t see our way to selling a company for a $100 million plus then generally it isn’t a fit for us,” Flager said.
Being authentic is the best way to pitch the company, Flager said.
“We want to help the entrepreneur achieve the vision they already have in store,” he said.
Flager recommends entrepreneurs don’t artificially inflate numbers in their pitch deck presentations to impress VCs. He also likes to see tangible dates and timelines for when things are going to get done, he said.
Flager sees the best traits for an entrepreneur to be passion, charisma, and self-awareness.
For more, listen to the entire interview below in which Flager talks about how Silverton Partners works with accelerator programs at Capital Factory and Techstars, the hotttest areas ripe for investment in Austin, some industries that are overhpyed and more.
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