Rackspace Veterans Reunite Years Later for Pingboard Seed Round

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founder-led businesses that have already launched products and have recurring revenue. After running Webmail.us with Boebel and a third co-founder, Kevin Minnick, Matthews headed departments at Rackspace such as SaaS, cloud computing, and M&A. Before founding Active, he was CEO at San Antonio-based Filestack, another SaaS business.

Active Capital raised about $13.1 million to invest in August of 2017, out of a planned $20 million total, according to a securities filing, which Matthews said he can’t comment on. The firm has already made investments in 10 other companies besides Pingboard, including leading a $1.5 million seed round for St. Paul, MN-based Ilos Video, which went through the final Techstars Cloud program in San Antonio in February 2016. Active invests typically between $100,000 to $500,000 in SaaS startups that sell their services primarily to businesses. Matthews said he’ll contribute more to companies with founders he knows well, like Boebel’s Pingboard.

The firm’s other investments include Kansas City, KS, trucking logistics platform Super Dispatch, Atlanta-based content manager Landing Lion, and artificial intelligence-based marketing platform FunnelAI, which is located in San Antonio. Cat Dizon, another former Rackspace employee, runs the operations and administration for Active Capital.

“A lot of what SaaS is today is really going after use cases that are underserved. We have all these great apps and tools that we use in our personal lives every day, and then we go to work and everything sucks,” Matthews said. “I think a lot of this consumerization of enterprise software continues to happen and it’ll continue to happen for a long time.”

Matthews said his goal for Active Capital is to help the founder of a company learn to be a CEO, which means tough love, coaching, and empathizing.

“I believe over the long term, founder-led companies end up being more valuable,” Matthews said this week in Austin. “Tech changes so much, and it’s the founder instinct that I think is the most valuable, irreplaceable thing in any business.”

For Pingboard’s Boebel, his history with Matthews and others at Active Capital led to a conscious decision to skip a large funding round, and instead take a small round from the San Antonio firm. Of course, the idea of skipping large funding rounds, or even operating as a “lean” startup, isn’t new. Pingboard’s Boebel said he doesn’t think traditional large venture capital raises are bad; he has been an angel investor in companies that have taken big rounds, such as Favor (the food-delivery app that sold to H-E-B this year) and WP Engine, which sold a majority stake to Silver Lake for $250 million in January.

More so, Boebel said he thinks that a SaaS business can grow just as well, if possibly a little slower, without taking a large venture investment, which would mean giving up a larger stake in the business. Plus, there’s not as much pressure to hit specific milestones in order to raise more funding, he says—hence the ongoing seed funding.

“It feels like you get on a treadmill of venture capital,” said Boebel, who also contributed to his company’s $2.5 million funding round. “I’ve seen too many companies miss their numbers and have to raise money on bad terms and just get really burnt by VCs, selling more of their companies than they need to.”

Of course, venture capital is still an attractive route for many founders, with $21.2 billion invested during the first quarter of 2018, the most in at least the last two years, according to a report by PricewaterhouseCoopers and CB Insights.

Boebel said his goal is to operate the business such that it can have just enough funding to reach profitability, running out of VC financing just as it does—what he calls a touch-zero operating model. And it’s not the first time Boebel has tried that kind of strategy.

After he and Matthews dropped out of Virgina Tech to run their first dotcom-era company, which failed, they founded Webmail.us. Boebel and Matthews eventually took one class at a time to finish school while still working at Webmail.us, and made a deal: They’d shoot for average and get C’s in all their classes.

The thought was: D’s were too low to count toward graduation, and getting B’s or A’s would mean they spent too much time studying and not enough on the business. “That was definitely an area we tried to optimize,” Boebel said. “I’m sure my mom was questioning things. But it all worked out.”

In 2007, Webmail.us was sold to San Antonio’s Rackspace in an all-stock deal that Matthews said has been valued at about $50 million.

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David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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