[Investor Q&A] Graham Brooks of .406 Ventures - Competitive Fencing to VC

Graham Brooks, partner at .406 Ventures, is working with several interesting big data and martech companies in the area - like Bedrock Data, Indico, Attend, and others. Not only has he co-founded a tech company, but he also has an interesting background competing in fencing at the under-17 Junior World Fencing Championship on the U.S. team. 

Tell us about your background.

I grew up in Rochester, New York. My dad was a pediatrician and my mom was a dentist, so I was healthy, but left on my own to figure out the entrepreneurial world, which is where my passion has always been.  

My other passion early in life was fencing. I spent the eighth grade in England for my father’s sabbatical, and was exposed to fencing through school. It played into my dorky interest in Dungeon and Dragons as well as chess-like strategic thinking. When I got home, I joined a fencing club in Rochester that turned out to be one of the top clubs in the country. During high school, I competed all over the world, including the under-17 Junior World Fencing Championship in Germany as a member of the U.S. team. It was fencing that got me into Princeton where I competed for four years and was a two-time All American. Many of my high school and college teammates went on to the Olympics, but after my sophomore year, I withdrew from the national circuit and just focused on my studies and fencing for Princeton.

I ended up studying computer science while there and wrote a thesis on an early virtual reality language called VRML. I graduated in 1998, right as the dotcom bubble was starting to blossom.

What did you do after graduating from Princeton?

Coming out of school, I had the opportunity to join DoubleClick or ALK Technologies. I made the brilliant decision to join ALK because it was a startup that was spun out of Princeton, and I felt its engineering and product development groups were more established - which I could learn from (whoops). While I missed out on the rocketship ride at DoubleClick, it all worked out for me, since I met my wife at ALK.

At ALK, we focused on transportation logistics software and I did a lot of work with databases becoming a DBA. Six months in, I found a product that had been retired due to data quality problems. I rearchitected the back-end, adding fuzzy-logic data cleaning technology which began my love of the data quality/data prep space. I convinced the CEO to relaunch the product and let me take the lead. That was when my “license to code” got revoked (ha ha) and I began my life as a bag-carrying software salesman. I got the product off the ground, landing all of our first customers. I really fell in love with the business side. That led me to Tuck, Dartmouth’s business school, for an MBA to round out my business education.

What was the company that you helped launch coming out of business school?

Upon graduation, I almost joined a new type of ski company called Teleboard, but made the better decision to partner with a PhD student and an experienced CEO to found a company called Accentus. Our data interpretation technology was sold to traders on Wall Street and had customers at all the top banks. We raised a couple of million in seed funding from angels. I led sales and marketing and spent a lot of time traveling back and forth between Hanover, New Hampshire and NYC.  

Unfortunately, the company ended up closing down in 2004 when we proved that our sales model wouldn’t scale. We were selling individual licenses to individual traders and we really needed to be selling more of an enterprise solution. It taught me a lesson about failing fast, as the last six months in the company were painful and we should have pulled the plug sooner. However, it was through our fundraising process that I was exposed to the venture capital industry and decided that I wanted to pursue a career as an investor.

Why did you join Bose’s New Ventures Group? What did you work on there?

I joined the New Ventures group at Bose, which was a perfect stepping stone into venture capital, halfway between the operating world I came from and the investing world. The group looked internally and externally for new products to grow or spin out. It gave me exposure to sourcing opportunities, diligencing those opportunities and selling them through an investment committee.

I ended up working on a new line of baby products at Bose - things like baby monitors and bottles. I actually have a patent for a real-time self-heating baby bottle that heats fridge temperature milk to body temperature in 10 seconds. It would have been great when I was a new parent, but as with many large companies, the product never got launched. An inability to launch innovative products is one of the many reasons I can never work at a large company.

How did you get into venture capital?

After the ventures group was shut down in a corporate restructure, I started Bose’s business and corporate development group. I knew this wasn’t for me, but it allowed me to take my time to explore venture and break into the industry. I spent a lot of time networking and advising pre-funded startups, which led me down the path of interviewing at .406 Ventures. I convinced them to take a flyer on me as an associate and then joined the Kauffman Fellows program to help jumpstart my career in venture.  

The .406 Ventures investment team (Larry Begley & Kelci Horan not pictured)

What stage of investments do you primarily target?

One of the core tenets at .406 Ventures is the fact that we have all been operators in the past. So while we’re all looking for unicorns, we specifically look for companies in industries we know well and to which we can bring the most value. We focus on the Series A where it is still early enough that we can partner very closely with the entrepreneurs strategically and tactically to materially impact the trajectory of the company, but not so early (seed) that we need to invest in tons of companies to mitigate the risk. We invest in 20 to 25 companies out of each of our funds, so each investment is incredibly important to us. We also reserve heavily for each company to make sure we are able to get them through the ups and downs of entrepreneurship, and invest in each subsequent round.

We spend a ton of time talking to customers and industry experts in each of our verticals, enabling us to identify key unmet needs. We turn these needs into theses which drive the majority of our investing. We have 10 to 15 open theses in all of our verticals and are actively looking for companies that meet the needs we have identified. Several times in each fund, when we can’t find companies for a specific open thesis, we revert to our entrepreneurial roots and start the company ourselves, hiring the management team and building the technology. I’m actually working on one of those in the big data space now. Still pretty early, but stay tuned.

What are the top traits you look for in terms of investing into a company or founder?

We primarily invest in people who are very smart and incredibly driven. We look for people who have done the impossible and have the drive to keep doing it. It is impressive to see a first time founder who has built something of substance with limited time and money.

For example, we have invested in two companies founded by Jason Davis. His first company, Adtuitive, was started while he was finishing his PhD at UT Austin. In six months, he built the product based on technology from his thesis, landed his first customer, and was serving 100M ads a month. He made all of this happen with $6K. It was pretty extraordinary. The company was a 10x return for us when they were acquired by Etsy.

What sectors of technology, industries, or trends are of interest to you?

I spend the majority of my time in big data and martech. I have done some work in healthcare IT in the past.

What is the current fund that you are investing from?

We are investing out of our third fund, which was announced in 2015. It is a $220M fund.

Which investments are you involved in?

Bedrock Data (Boston), Simon Data (Boston), Indico (Boston), Compass (NYC), Reltio (CA), Attend (Boston), Connotate (NJ), CoPatient (Boston), AbilTo (NY), Iora Health (Boston), WoodPellets.com (NH). I was also involved in Digitalsmiths (acquired by TiVo) and Adtuitive (acquired by Etsy)

What excites you about the Boston tech ecosystem?

Boston has a history of great tech companies, but we lost our mojo for a stretch after the dotcom bust. This has really changed over the past five to six years. A lot of momentum has been built by creating a solid ecosystem with exits like Endeca, HubSpot, and Rapid7 - with quite a few more IPOs on the horizon, including several .406 companies. These successes are creating our own serial entrepreneurial mafia, angel and super angel investors, and been-there-done-that mentors. This has driven a marked increase in the number of great entrepreneurial companies being created, many by alumni of these successes. For example, I’m an investor in Bedrock Data, which was started by early HubSpot employees.

I’m very bullish and excited about the future of Boston. There is a ton of great talent, technology from the universities, and a strong funding ecosystem without the hype, salaries, and distractions of the West Coast.

What companies outside of your portfolio do you find interesting in Boston?

I’m a big fan of the problem Andy Palmer and the team at Tamr are tackling. I also like DataRobot and InsightSquared.

Greatest misses - are there any companies that you passed on that you wish you hadn’t?

During my job search, while I was looking to get into the Venture Capital industry, I was spending a lot of time helping a bunch of startups. One was The Echo Nest. We came close on their A round, but it is definitely in my anti-portfolio as they ended up having a great exit to Spotify.

I also had an early look at OMGPOP before they had success with their Words With Friends game. Social gaming was outside of our core expertise so it didn’t make sense for us, but it's still painful as they were acquired by Zynga 24 months later.

What is .406’s Student Fellows program?

We’ve been quietly building this over the past 8 years as a platform to help student entrepreneurs launch their businesses.  When I joined .406 Ventures, we looked around the Boston tech ecosystem and brainstormed ways we could help make an impact. We noticed that schools like MIT and Harvard always draw attention, but there is a lot of great entrepreneurial activity at other schools too like Northeastern, Boston College, Babson, and others.

Academia can teach entrepreneurship, but it can’t replace true experience. We built the Student Fellows program as a way to bring this knowledge and our network to student entrepreneurs. Designed after the Kauffman Fellows program, we target five to 10 Fellows per year for our two year program. We help them network with other student entrepreneurs and get them together for educational sessions where we bring in guest speakers and rockstar practitioners from the Boston startup ecosystem, and connect them to resources to help jumpstart their companies.

One of our core tenets is that there is no obligation or equity exchanged as part of our Student Fellows program. We want to make sure that the program is purely additive and in no way takes advantage of the students or schools. That said, many of them have raised capital, often from other firms - though there are times where we are the right partner for them.

Since we launched the program, we’ve seen more than 50 companies created by the Fellows, of which >15 have gone on to raise funding (upwards of $40M). Examples include Attend, Codeacademy, Jebbit, and New Ground Foods.

.406 Ventures Student Fellows - classes 5 & 6 together 

Who do you admire or who has been the greatest mentor for you?

I’ve been lucky to have lots of mentors, from my fencing coach in college to the Co-Founder of Accentus. Liam Donohue and the other partners in the firm at .406 have also been great mentors to me.

Outside of being a VC, what are you personal interests or activities?

I try to spend as much time as possible with my family. I have two little girls who are 9 and 11 years old. I spend a ton of time at swimming and rock climbing competitions.

Graham with his two daughters

The Brooks family rock climbing

Outside of family, I am a big kiteboarder and do a lot with MassKiting. It’s a great sport that can be done year-round in New England and there's a fantastic community of diehard fans. Through the community, I’ve gotten to know the guys at WOO and was an early adopter. I’m still pretty low on the airtime leaderboard, but broke my personal record this past weekend with my first 20-foot jump.

Graham In Action Getting Some Air While Kiteboarding

What type of music do you like?

I like lots of different music, but I tend to listen to a lot of Irish punk music like the Dropkick Murphys and Flogging Molly. But I am really always up for trying something new.

Are you involved in any charitable organizations?

I’ve been on the board of the MIT Enterprise Forum for the past five years, which is a great organization for the local ecosystem. I’ve led its membership committee, spent time working on programs, and worked with entrepreneurs to mentor them as they start companies. It's got a great mix of big speakers and very personal, applied entrepreneurial education for first time entrepreneurs.  

My wife and I have also gotten involved in a national program called A Better Chance. It takes kids from inner city high schools and moves them to attend schools in other areas in the country. Each student has a host family who spends each Sunday and one weekend a month with the child and provides support outside of what the academic system offers. It is a great opportunity to deeply impact someone’s life, but also to really get to know them over an extended period of time. We were honored to become a host family this year.

Keith Cline is the founder of VentureFizz. Follow him on Twitter: @kcline6.