Investor Spotlight - Squadra

NAME: Guy Filippelli, Managing Partner

COMPANY: Squadra Ventures

FOUNDED: 2016

SECTOR FOCUS: Cybersecurity, IoT, UAV, Aerospace, SaaS

PREFERRED ROUNDS: Seed - Series A

Q: You previously founded your own cybersecurity company, Red Owl . How did that experience lead you to start Squadra and how does it inform how you invest and support your portfolio companies today?

When I founded Red Owl, I had really good investors, but as a first time product company founder, I found that there were about 100 decisions that I made during the first 2-3 years and when I look back on it, one thing my board did not help me do was answer those questions. When I founded Squadra, I founded it with the mentality of being helpful to those kinds of founders that would benefit from that type of support. Second of all, as part of the Red Owl experience, we made good and bad decisions. Being critical, I wish I could go back and have a more deliberate mindset around the product, hiring, go-to-market motions, partnerships, and finance.

Q: Many investors shy away from defense and dual-use focused startups, but these companies are a specific focus of Squadra’s investment thesis. What is an aspect of dual-use investing that you think the venture capital (VC) community misunderstands?

I’m not sure it’s that they misunderstand, there are two things that are important. One, you must evaluate the companies and two, you have to help them after they grow. In many cases to do both of those things, it helps to have a background in the space.

With a lot of the larger VCs, I think they’ve come to realize that there’s a compressed acquisition landscape within the defense space in particular. For those reasons, I think that is why people in the past have shied away from dual-use companies. That said, I try to remind people that Silicon Valley was built on a dual-use thesis.

Q: Why do you think it’s important to invest in dual-use and defense-oriented startups?

For me, it’s important because it’s what I care about and what I know. For the world it is important because a strong United States is a cornerstone to a strong world. If you look at today and you look at the importance of supporting technology and infrastructure and companies and capital that counter aggressive governments in places like Russia, China and beyond. It’s why we do it, it’s what we care about.

Q: What do you think is the most important factor when assessing an investment opportunity in a dual-use startup?

There isn’t one single important factor. The product has to be something that can be brought to market where the government use and the commercial use actually significantly overlap. In other words, avoiding the customization of a product. We are obsessive about the magnetism of the founder. We look for technical founders that will appeal to government customers and hire people that will appeal to the commercial customers. We are looking for a very deliberate way to model the first 18-24 months of what we invest in.

Q: Is there a certain level of DoD traction or customer validation you need to see before investing?

Need to see, no. With Shift5, we had no traction but in those instances, we make a decision based on how experienced the founders are and how clear their vision is so we can validate vision, traction and reputation. We will take risk on traction if we believe the founders are the right kind of founders to break through that.

Q: Squadra has an interesting approach to supporting its portfolio companies through its Venture, Operator, and Preferred Partner networks. What about that approach is especially valuable to dual-use companies in Squadra’s portfolio?

We say all the time, after we invest,we try to do four things.

1. We try to help them get the basics of their business right.
2. We try to get them to focus on their go-to-market strategy.
3. We try to make transformational hires and introductions.
4. We help them obsess about the execution of their plan.

The Operator Network is critical to getting the basics of the company right. The Venture Network is critical to the transformational introductions and focusing on go-to-market strategy. Preferred Partners are also critical to getting the basics of the business right and also the go-to-market strategy. It is also another source of introductions. The networks all overlap and then we fold in our Squadra team and we’ve given ourselves a great shot to accelerate these companies into the market.