Bubble Spotting: Investment Insights from TrueMotion’s Vance Loiselle

Editor’s Note: This is the second part of a two-part interview featuring Lance Voiselle. In the first installment, Loiselle shared his two core strategies for developing successful software companies.

Vance Loiselle has served at the executive level at four public companies BMC, BladeLogic, Accenture, and Breakaway, and is currently the CEO of TrueMotion, a behavior-based platform that enables insurance companies and consumers to improve road safety using smartphone sensor technology and powerful data analytics. By measuring behaviors like hard braking, acceleration, and even distracted driving, this innovative platform effectively tracks safe drivers and rewards them with discounts on their auto insurance.

With more than twenty years of software industry experience, Loiselle has seen a lot of changes in the investment world and in how software companies get funding. A proven CEO who has gone through several IPOs, he has the advantage of both first-hand experience and a long-term perspective that allows him to recognize trends and shifts in the market.

On the Investment Landscape

Loiselle recalls what it was like when he and his team were raising funds at BladeLogic. “This goes back to the post-2001 bubble, when we had to grow up,” he says. “We had raised around $25 or $26 million in venture capital, but we were very, very rigorous and ruthless about our expenses. We questioned every hire we made and ran very lean and mean – only one or two marketing people pretty much the whole time, only outside salespeople, no business development people, and barely enough engineers. We were very capital efficient and cash-flow positive almost from the beginning.”

That austere picture was very different from Loiselle’s second startup experience which took place at a time when good teams demanded a premium. “When I got there, there were seventeen people,” he recalls, “and the Silicon Valley valuation was very high the entire time, in part because there was lots of capital out there and a lot of competition for the deals. There was a lot of talk about unicorns, but the really good companies that had the propensity of have a good outcome – whether they were unicorns or not – deserved the good valuations they earned along the way.”

Loiselle thinks the inflation in some of the private company valuations that we’ve seen in the last few years is the result of later-stage investments. “What I saw was being fueled partly by public-market investors, mutual fund-type investors, and hedge funds who wanted a place to invest on higher-growth opportunity,” he says. “So, you just had more capital from later stages coming earlier in the market so they had a chance to get in.”

Today, Loiselle is seeing trends that mirror the investment landscape of earlier days. “Fast-forward to today and I’m seeing an environment that’s not quite the same as the early 2000s, but definitely one in which companies have to have real businesses with a real opportunity to be profitable at some point,” Loiselle says.

“It’s not that you have to have revenue already for a Series A, but you can’t expect to go into a Series D without monetizing what you’re doing. Does the sales model have to be perfect? No. But, you have to have a really clear product market fit and be able to show that you’re building a real business.”

Ultimately, Loiselle thinks we’ll see the investment landscape revert to something that resembles the Series A and Series B of the mid-2000s.

On East Coast vs. West Coast

In addition to giving him experience with a lot of companies in a lot of different investment environments, Loiselle’s career has also given him the opportunity to work on both coasts, and he sees a definite difference between the investment practices of the East Coast and West Coast. In general, he’s found that West Coast investors are more likely to ask questions like, “Why not?” and “Why can’t you/won’t you do this?” while East Coast investors are more likely to approach a potential investment by asking, “Why are you doing that?”

“I’ve found that on the East Coast there’s a little more rigor and thinking through the ramifications of decisions,” Loiselle says. “Depending on the kind of technology you’re going after (and the amount of capital out there), it has opened up a little bit, but I still think Silicon Valley has a slight advantage in terms of being open to potential opportunities.”

Which isn’t to say that Loiselle doesn’t see the downside of Silicon Valley’s propensity for bravado. “The problem is, you end up with a lot of – quite frankly – people who don’t actually understand what it takes to operate and run a business from early lean times through fast growth,” he explains. “They just assume that capital is freely available.” He has also seen cases of that freely available capital going to people’s heads. “You get a little bit of narcissism,” he says. “The more capital you have, the more people tell you how great your company is and how great your product is, even though you may not be profitable. You start to believe everything you’re hearing, and that keeps you from making the hard decisions that you need to make to be successful.”