A local venture capital firm founded by former Rackspace executives Pat Condon and Pat Matthews and focusing on early-stage tech startups is bringing more than $20 million to entrepreneurs in traditionally unglamorous tech markets, including San Antonio.
Active Capital secured its initial installment of $21.5 million in capital to support early-stage software startups.
Featuring more than 20 startups throughout the country, Active Capital’s portfolio includes tech firms that sell software to businesses for a subscription rate. Matthews, Active Capital’s CEO, said he and Condon invest in startups with “inspirational founders” developing groundbreaking products.
“Our hope is to invest in founders that can really grow into leaders of their businesses over time,” Matthews said. “What do we look for? We look for inspirational founders that have a real sense of what markets they’re looking to disrupt or even complement in some cases. We want to work with people that have the capacity to grow and build amazing companies.”
His venture-capital approach is informed by his own path as an entrepreneur. In 1999, Matthews co-founded Webmail.us in Blacksburg, Virginia, after graduating from Virginia Tech. Rackspace acquired the company in 2007, and Matthews moved to San Antonio to join the growing Windcrest enterprise.
Matthews said his experience building a software firm during a challenging time in the industry – after the dot-com bust of the late 1990s – and in a market not known for producing tech startups drives his desire to pass on his knowledge and advice to young and early-stage entrepreneurs in similar situations.
Five companies Active Capital has invested in either are headquartered or operate in San Antonio, Matthews said. The portfolio includes Funnel AI, which automates customer leads for automotive dealerships and apartment complexes by sifting through public social media posts. Flightpath Financial develops financial modeling tools for fast-growing companies and has received capital from the firm.
Although San Antonio has seen a rise in the number of software startups and tech talent, especially as companies have spun out of the downtown incubator Geekdom to grow the budding tech district along East Houston Street, access to capital remains a principal challenge for founders as they look to provide fuel for early expansion. To raise capital, entrepreneurs often have to fly to the San Francisco Bay Area, where there’s a higher concentration of venture capital firms and more money to go around.
But Matthews believes in creating more opportunities for tech companies outside of Silicon Valley.
“My company is very driven to fund and work with [business-to-business, software-as-a-service] founders really regardless of where they’re located, but I think a great side effect of what we’re doing is we are another capital source headquartered in San Antonio,” he said. “I think a byproduct of that is more companies will be created in San Antonio and South Texas.”
Twenty years after the founding of Rackspace, San Antonio has not seen a company rise to the level of national prominence reached by the managed-cloud hosting company. Graham Weston, a Rackspace co-founder, has said that finding the next Rackspace impelled the creation of Geekdom, the startup incubator and co-working space. Weston is also an investor in Active Capital.
Just as Rackspace defied its location to become a leading hosting company, Matthews aims to create a “premier venture firm.”
“The more industry-leading companies we can build in San Antonio really helps San Antonio overall,” he said.
Matthews and Condon founded Active Capital in April but have been investing in startups for the past 15 months in some capacity, and their history as angel investors, financiers that invest their own money in new ventures, stems further into the past.
The $21.5 million fund will be spent on both new companies and providing portfolio companies with new investments, Matthews said.
Now that the capital is secured, Matthews has turned his focus to working with the founders in the firm’s portfolio. He said he will begin putting thought into raising the next fund toward the end of the year.