Silicon Valley VC firm Greylock is betting big that startup founders are ready to trade garages and basements for swanky offices with its legendary startup incubator
Category : entrepreneur
- On Tuesday, email security startup Abnormal announced it raised $24 million in Series A funding led by one of Silicon Valley’s oldest VC firms, Greylock.
- Abnormal first started in Greylock’s offices as an incubated startup. Cofounders Evan Reiser and Sanjay Gupta started working out of their future investor’s Bluxome Street office in San Francisco in April.
- As early rounds get more competitive, seed and Series A investors are constantly searching for creative ways to get in on funding rounds. According to Greylock partner and TellApart founder Josh McFarland, the firm’s reputation depends on getting in and building good rapport with founders as early as possible.
- Greylock general partner Saam Motamedi said he worked closely with Reiser and Gupta in the earliest days of the company, often staying late or coming in on weekends to work out kinks with the security product or gathering feedback from potential customers.
- Motamedi said he wished he could bring more founders into Greylock, but given the intensity with which he is involved can only take on one every 18 months.
- Click here for more BI Prime stories.
Garages have a special place in Silicon Valley lore. The biggest behemoths, from Apple to Google to Amazon, reportedly started from those humble beginnings. The garage even earned itself several references in HBO’s tech industry satire “Silicon Valley.”
But just like hoodies and Soylent, the garage trend is falling out of favor with the next generation of Silicon Valley tech founders, and VCs are ready and willing to step in.
Greylock, one of Silicon Valley’s oldest venture firms, has been providing startups office space and unlimited access to its team for several years. This is commonly called an “incubation” in Silicon Valley parlance, and on Tuesday Greylock announced its incubator had hatched Abnormal, an email security startup, with $24 million in Series A funding. Naturally, Greylock led the round.
“We never really pitched Greylock, though we did eventually, but early on it was just like, ‘Hey, let’s go explore together’,” Abnormal cofounder and CEO Evan Reiser told Business Insider. “Great companies take a decade or more to start, so we knew that Greylock would have to spend a lot of time and money to help us build that. We wanted to really make sure this was the right thing to do.”
Now, Reiser joins one of the more exclusive clubs in Silicon Valley. As a Greylock incubator alum, Abnormal can count among its peers the cybersecurity giant Palo Alto Networks and HR software maker Workday. Reiser found his way back to the VC firm through another incubated startup, TellApart, where he worked with founder and newly minted Greylock partner Josh McFarland.
“It is so competitive in the market right now that I think the iconic deals for a firm like Greylock that prides ourselves on being first money into a company, the hallmark of those deals will be because we got in solidly with the entrepreneur at the beginning phase of coming up with the idea,” McFarland told Business Insider.
Late nights and too many Mediterranean wraps to count
Greylock, which counts LinkedIn founder Reid Hoffman as a partner, has several entrepreneurs and executives “in residence” at the firm.
Reiser and his cofounder Sanjay Gupta moved into Greylock’s offices on Bluxome Street in San Francisco’s South of Market neighborhood in April to officially start working on Abnormal. The cofounders had complete access to Greylock’s team, breaking down the more formal relationships founders tend to have with investors they meet once every six weeks at a board meeting.
“We’d get together on a Wednesday night, we’d order Mediterranean wraps, we’d iterate, we’d work on the whiteboard,” Greylock general partner Saam Motamedi told Business Insider “We talked to customers, we’d go away a week later, they’d come back and they’d completely built new product. It’s rare to see teams operate like that.”
At each step, Reiser and Motamedi said they would stress test new tools and features with Greylock’s impressive network of top-tier security executives, some of which have signed on as paying customers. Reiser recounted a conversation he had with investing partner Sarah Guo in which she suggested an idea while they passed each other in a hallway.
“There’s kinda like a randomness to it that you get a benefit from,” Reiser said.
A messy process made easier
Having built and sold his previous company, Reiser isn’t a stranger to founding a company in Silicon Valley, but that doesn’t make the second time around any easier.
“I think there’s a common misconception Silicon Valley that you kind of sit in some place and you come up with an idea, then you hack it together,” Reiser said. “And then you try to validate, then you go pitch it to investors.”
Motamedi said that both Reiser and McFarland didn’t even have pitch decks when he first met them, and agreed that the idea of being polished only in front of investors isn’t consistent with the reality of starting a company. He typically takes on one company every 18 months because of the time and effort commitments required to work late nights, but is adamant that it’s worth the hours once the company matures and gets offices of its own.
“Greylock has differentiated itself with entrepreneurs in that it’s willing to sign up to work with someone who we think can be exceptional very early before there’s a line of code or before there’s like sentence on a slide, back when there’s just the inkling of an idea,” Motamedia said.