Active Capital, Focused on Seed-Stage SaaS Startups, Raises $21.5M

San Antonio—Active Capital, a San Antonio, TX-based venture firm that invests in seed-stage software-as-a-service startups, has raised $21.5 million for its first investment fund.

Active Capital has been investing for the last 18 months as it raised money from limited partners in mostly San Antonio, Austin, and Virginia. While Active’s investments cover a wide range of software businesses across the country—from startups focused on accounting to cybersecurity to cloud computing—a common theme among them is that they’re founder-led businesses, says Pat Matthews, the CEO and general partner of the firm. Active has made 20 investments so far.

Active Capital is pursuing SaaS businesses anywhere in the country, not just in Central Texas, and it is placing a particular focus on areas outside of traditional tech hubs like Silicon Valley. That investment focus has been of growing interest among investors and acquirers in Texas and nationally. Mercury Fund, which has offices in Houston, TX, and Ann Arbor, MI, said last year it was focusing on funding SaaS, cloud services, and data analytics companies with recurring revenue. San Antonio-based Scaleworks and Dura Holdings, as well as Austin-based BuildGroup, have similar interests. In 2007, AOL co-founder Steve Case announced a $150 million venture fund, Rise of the Rest Seed Fund, aimed at pumping investment capital into tech companies in so-called flyover states.

Matthews says he believes there’s plenty of room for all the investment capital as more people start building businesses in emerging tech hubs throughout the country. Businesses that need to still be in Silicon Valley will still move there—and Active could invest in them too—but others will sprout up in new areas, and venture firms are responding to that, he says.

“I think venture capital is really starting to specialize and move away from (having) a few firms in concentrated markets,” Matthews says. “You’re going to see tech ecosystems emerge in all different parts of the country. You’re going to see venture capital dollars start to invest there. I think we’re very much on the forefront of that.”

Matthews, a former startup executive himself, says he wants to take the lead on the seed investments he makes through Active. Cat Dizon, the executive director of angel investment firm Alamo Angels, and Pat Condon, a founder of cloud computing giant Rackspace, are working with Matthews as partners at Active Capital.

“I like to think of us as founders that have built the kind of businesses we’re investing in,” Matthews says. “As a small fund we’re designed to lead. We’re not designed to follow the lead or join the party round.”

Active Capital is Matthews’ first time as the general partner of a venture firm, though he has been an active angel investor for almost a decade. (He is also a founding board member of San Antonio-based Alamo Angels.) At Virginia Tech, Matthews met the co-founders of his first successful startup, Webmail.us, which sold in 2007 to San Antonio’s Rackspace in an all-stock deal that Matthews said has been valued at about $50 million. More recently, Matthews was the CEO of Filestack, a SaaS business in San Antonio owned by investment firm Scaleworks.

Matthews taps into an ever-growing network of people he’s worked with throughout his career to raise the funds, he says, some of which came from former angel investors and other from former business partners. That includes San Antonio billionaire Graham Weston, the former CEO of Rackspace who was executive chairman when the company acquired Matthews’s Webmail.us business.

“Pat has a unique ability to relate to founders and really knows how to leverage his experiences to help them through the process of building a great company,” Weston says, according to a news release.

Matthews believes venture dollars will still seek startups outside the usual tech hot spots even as financial markets, especially in tech, have had a tumultuous ride over the last few months. It didn’t limit his ability to raise capital, Matthews contends, even if some potential limited partners did say no to investing. He says he believes the investors who did participate in his first venture fund believed in his ability to work closely with startup executives on being financially disciplined, as well as his desire to work closely with the founders of the businesses in which Active invests. Active Capital has invested about a third of its fund so far, and may not put the full remainder in new businesses, retaining some of the funds for its existing investments.

“We’re the influential investor,” Matthews says. “We only invest in companies we’ve helped build.”

Some of those businesses include San Antonio-based artificial intelligence software maker FunnelAI, which studies a consumer’s intent to purchase cars or auto services; San Antonio’s Flightpath Finance, which works with customers’ accounting software; and Austin-based organizational chart software maker Pingboard.

Matthews found success as an angel investor before branching out with his own firm. One early investment was Favor, a delivery app founded in Austin in 2013. Favor sold to H-E-B, the national grocery chain of Texas and the state’s largest private employer, last year for an undisclosed price. Matthews got to know Favor’s founders, Zac Maurais and Ben Doherty, as an early investor in the company. After they left Favor, Matthews invested in their new business, Sunroom Rentals, and Maurais and Doherty invested in Matthews’s Active Capital.

“I built a great relationship with Ben and Zac,” Matthews says. “I did it all that through coaching and guidance and tough love. And I’m really proud of it.”

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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