The Appian Way connected the far reaches of the Roman Empire to its core. Appian Ventures, a new Denver-based venture fund, hopes to make its own way by investing in software and technology companies that enable what it calls “Applied Connectivity,” the application and management of network connectivity to help companies improve their performance and increase their revenue.
“At least $1 trillion has been invested in computing infrastructure, the network, software, and in computing devices,” says Mark Soane, a co-founder and managing director of the $80 million fund. “We believe the opportunity in IT right now is around the technology that drives performance out of those assets”
Appian will invest up to $5 million in each of its portfolio companies, focusing on seed- and early stage companies and making an occasional exception to invest in growth-stage companies. It is looking to invest in companies developing real-time enterprise applications, applications management and Web services and infrastructure management technologies. It expects to make between 20 to 25 investments over the next three to four years. So far it has invested a total of $5 million in five deals, alongside firms like Silicon Valley’s Draper Fisher Jurvetson and Mobius Venture Capital.
The fund’s investments include Roving Planet, a company that develops systems which manage and control wireless networks; Cadre Technologies, a maker of order fulfillment software; Oxlo Systems, which makes instant messaging software; and Left Hand Networks, which builds storage networks.
“We won’t build the network, but we’ll invest in companies that help manage the network, or get useful data off the network or manage people all connected by the network,” says Soane, who is also the chairman of the Colorado Venture Capital Association. He says that the market for “Applied Connectivity” software and technology will grow at 30% a year into a $150 billion market by 2008.
The pipeline for new deals is rich, he says, but Appian’s investment team plans to spend more time working with entrepreneurs to sharpen their story and their strategy than adding new investments to its portfolio.
Maybe it’s a philosophy drawn from one of the firm’s founding investors, Rutt Bridges. The software entrepreneur-turned-political activist’s own investment group, Quest International Management, is seeding Appian’s first fund, investing alongside other institutional investors like Key Bank, Silicon Valley Bank and Wells Fargo. Together, the limited partners have coughed up enough capital to leverage their $28 million investment into an $80 million SBIC-sponsored investment fund.
Although Bridges will not manage the fund’s operations or source investments, he’s assembled a team with experience on both the investing side of the venture business, and the operational side.
In addition to Soane, the fund’s managing directors and co-founders are Phillip Dignan, a former general partner with Roser Ventures and a former director of the Colorado Venture Capital Association; Stacey McKittrick, former vice president of operations for The Centennial Funds; and Don Parsons, a former general partner with the Centennial Funds and a onetime engineer with IBM.
As a group, the fund’s managing directors say they have been partners in nine Colorado-based funds and have been “actively involved” in investments in such notable companies as Verio, Veritas, Raindance, Voyant and Highground Systems.
Appian counts two other co-founders: Lisa DeNazario, the fund’s administrative director who was formerly director of administrative services for Centennial Ventures, and David Link, vice president, who was previously a general partner with Quest Capital Partnership.
Appian’s investors hope to tap a board of advisors that it calls “Connectivity Partners” to source investments and do due diligence. Bill Bryant, the co-founder of QPass and NetBot, and a onetime partner with Atlas Ventures in Seattle, will sit on the advisory board alongside Chris DeMarche, the co-founder of Verio, and Bob Gill, the former chief executive of Mobile Force Technologies.
Fund Size: $80 million.
Fund-Raising: The fund held a first close in 2002 with $11 million and closed at $80 million in June. The firm does not expect to begin fund-raising again for three years.
Managing Directors: Phillip Dignan, Don Parsons, Stacey McKittrick and Mark Soane.
Advisors: Include Bill Bryant of Qpass Inc. and Visio; Tim Enwall of Gartner Inc. and Solista; Bob Gill of MobileForce and ConferTech; Jim Lejeal of Oxlo and Raindance; Chris DeMarche of Verio Inc., Nextel Communications Inc., and OneComm; and Juan Rodriguez of Exabyte Corp. and StorageTek Corp.
Investment Focus: Early stage companies that develop software and technologies that enable “Applied Connectivity,” the application and management of network connectivity to improve business performance. Preferred initial investment is $1 million to $2 million and the maximum will not exceed $5 million.
LPs: Quest Capital, which manages investments for software entrepreneurs Barbara Bridges and Rutt Bridges; Wells Fargo; Key Bank; and Silicon Valley Bank. Fund I is licensed and funded as a Small Business Investment Company.
Recent Investments: Roving Planet, Cadre Technologies, LeftHand Networks and Oxlo Systems.
What’s in a Name? Appian comes from the Appian Way, a paved road that stretched out from ancient Rome.
Source: Original research; Appian’s Web site.