Facing continuing economic headwinds as well as the threat of budding new technologies, companies and startups that are looking to scale in today’s rougher economic environment need to think about their future funding needs differently.
The current venture capital environment has intensified following events such as the crash of Silicon Valley Bank, said Marc Stoll, a partner at venture capital company Eclipse. The crash will make access to debt financing harder, for example, following a period where “access to debt financing and equity financing was quite broadly available,” Stoll, who co-leads his firm’s growth investment strategies, said in an interview.
“This isn't a phase — it's not going back to this other environment that we used to live in where there was unlimited capital and it was just a matter of growth and raise and growth and raise,” Stoll said, noting that SVB’s collapse was a “wake up call” particularly for venture-backed companies that need access to alternative forms of capital. “This is a new venture environment, and it's here to stay.”
For CFOs who want to create a path for their company to scale in this current environment, it’s critical that “you're spending time and understanding how to form the interdependencies between your departments so that you can scale an organization in a way that's not wasting lots of dollars and calories,” he said.
The road to venture capital
Based in Palo Alto, California, Eclipse’s focus is on “digitizing physical industries,” Stoll said, such as manufacturing, construction, transportation and logistics.
“Those are the industry segments that have been lagging behind on innovation and the real simple reason is because it's really hard to do and tends to be very capital intensive,” he said.
Stoll’s experience as a former CFO and finance leader plays a tremendous role when it comes to his strategy in his role at Eclipse, he said, where he is primarily focused on commercial sales and growth and then helping to scale the operational side of their companies.
“I've had a chance to see these companies going through different stages of growth,” he said of his prior experience at companies such as Apple. “My goal is to bring that operational experience and expertise to our portfolio companies and to deal evaluation.”
Stoll joined Apple in 2008 and helped the company to scale following the launch of the first iPhone, he said. As their vice president of worldwide sales finance, Stoll served as the finance lead for its global sales channels, accounting for over $125 billion in annual revenue, according to his LinkedIn profile.
Stoll has also served as CFO for Anaplan, and most recently served as president and chief operating officer for IT services and consulting company Nextiva before becoming a partner in Eclipse this February.
“Eclipse is a is a firm of operators,” he said about what attracted him to that firm in particular, noting he always saw a path in his career leading towards venture capital. “And I think that's hugely beneficial to the way that we think about investing and the way that we think about helping our founders build companies.”
Stoll himself is focused on helping the firm’s portfolio companies through complex times such as when they are first beginning to scale, perhaps transitioning from a small core group and adding operational necessities such as finance or sale capabilities, he said.
“That's the nexus where I think I can add the most value, which is helping them understand, how do you scale…in a methodical way?” he said.
Taking a disciplined approach
In this new venture environment, having that disciplined approach to growth a core tenant of Eclipse’s strategy when evaluating potential portfolio companies — it’s important for companies to be “incredibly focused” and deliberate, and lastly, “they have to be realistic,” Stoll said.
“It's no longer about coming into a pitch and talking about how big the opportunity is and how quickly I'm going to achieve that opportunity,” Stoll said. “It's really about demonstrating a measured path towards success that we as a venture firm can believe as operators.”
That doesn’t mean the venture capital firm is not interested in or investing in companies that have long exit paths, he said — but they are going to make those investments with “teams that are disciplined,” he said.
That means it’s important to have a roadmap for how the company may be chartering growth or making use of new technologies — for example, Eclipse isn’t “chasing AI” in the way that other firms may perhaps be chasing generative AI, Stoll said.
The technology could certainly be utilized as part of Eclipse’s goal of helping to digitize those lagging physical industries, but “having AI as part of that strategy, it doesn't necessarily excite us and it doesn't necessarily turn us off that investment either,” Stoll said.
“We're looking for this understanding of how you're going to practically use a transformational technology like generative AI, but do it in such a way that you can practically move this physical industry towards digitization and make a true value statement towards the customer,” Stoll said. “That's where you win.”