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ASV Covid-19 Notice

March 24, 2020

Dear Friends of Armory Square Ventures,

At the outset, we recognize we have entered a period of uncertainty and significant market dislocation. We trust this notice finds you, your family, friends and community members healthy and well. 

Presently, we encourage you to reach us directly with your questions or concerns, either on the ASV portfolio or other related matters. Hopefully, life changes many have experienced will prove temporary and short-lived. Like other firms and businesses our size, the ASV team has decided to continue to operate largely in remote fashion in keeping with public guidelines concerning the spread of the COVID-19 virus. We continue to serve and meet virtually with entrepreneurs and members of the tech community in our region.

Currently, we are working closely to help ASV portfolio companies manage cash carefully and diligently. Furthermore, we are conducting a series of scenario planning exercises to weather uncertain market dislocations. 

Four memos were recently drafted to address larger questions on the impact of Coronavirus. The first two by Sequoia are essential reading (see those here and here.) The third memo is one Josh Wolfe at Lux Capital recently circulated on Twitter. It speaks to how early and late-stage VC markets might evolve in coming months. The last one by Howard Marks at Oaktree Capital highlights concerns likely to affect later stage investors and those who follow the public markets. 

No doubt, the venture capital asset class overall will be impacted by current economic and social conditions. Follow-on capital in coming months will likely become harder to raise for some companies. Later stage investors are also more closely tied now with volatile public markets. That shift will mean co-investors will need to allocate more reserves to existing investments and reject newer ones. 

Key considerations for startups:

  • Cash preservation is essential.  It is difficult to know when this period will pass. Over the next 18-24 months, we suspect this will be a challenging market for many companies. All firms large and small will have to take a strong look at burn rates and ensure there is enough in reserves to weather the storm.  

  • It will become easier to separate signal from noise as entrepreneurs and investors. As Warren Buffett has famously noted in missives to investors: “Only when the tide goes out do you discover who’s been swimming naked.” If you are seeing strong product/market fit in this environment, you will stand out from your peers. At ASV, we will continue to deploy capital in valuable companies and expect others in our industry to do the same.

  • There still remain record sums of “dry powder” across the venture capital industry as a whole. VCs today are becoming closely focused on capital efficient, well-managed software businesses that retain clear paths to profitability. That focus aligns centrally with the investment thesis Armory Square Ventures has cultivated over time. ASV will continue to prioritize talent, supporting committed, creative founding teams. Our team anticipates fundraising cycles will lengthen to accommodate market changes that are underway.

The ASV team has deep experience across multiple economic cycles and risk scenarios from downturns in both 2001 and 2008. We have learned in good measure from past mistakes. We anticipate, however, that sales and fundraising cycles will no doubt become more challenging. However, those companies that sustain persistent founding teams, sound business models, lucrative and prudent cash management strategies will survive and thrive in this climate. 

Lastly, an important note: a handful of the most storied tech firms were built in prior downturns. We look forward to continuing our record of strong returns to prepare for a new chapter in ASV’s history. Thank you as always for your guidance and support. 

If you have questions, feel free to reach out.

As always, here, open and listening,

The ASV team


a man wearing glasses and smiling at the cameraa man sitting on a table

Date of Conversation: Tuesday, November 9, 2019

Participants: Patrick Bosek, Pia Sawhney

In an extended two-part interview, Pia Sawhney at Armory Square Ventures speaks with Rochester native Patrick Bosek, CEO of Jorsek, on conceiving and building a leading knowledge management software platform in his hometown.

Filmed at the Fifth Frame coffee shop in downtown Rochester.

See it on video here and here.
See a recent press release here.



Growing a company in Rochester, New York

Pia Sawhney (PS), Director of Strategy, Armory Square Ventures

It’s great to be here in your town. This is Rochester, NY. 

And, of course, in some ways, this is a Kodak moment. Because you are sort of like the product of two people who worked at Kodak. 

Your parents were really rooted in this community and they lived in this community for most of their lives. 

Patrick Bosek (PB), CEO, Jorsek in Rochester, New York

..their entire lives.

You know it’s interesting. I think that almost everybody in Rochester has some legacy to Kodak, or to Xerox or something like that. Everybody who’s born here and raised here and lived here, in some way or another, they have someone in their family who has worked in one of those organizations. 

And you know Kodak, and Xerox, and Bausch and Lomb, they were such big innovators. They laid a lot of the groundwork for what this community is.

My father worked for Women’s Health in Kodak for most of his career. He was in middle, upper management, until the end of his career, in the sales division. 

I think in a lot of ways, we are built on top of that foundation that came with Kodak and a lot of the universities and the education, and the culture and community that was created in those organizations.

The opinions around the town and what it means to live here, and how this compares to other places in the country have really shifted. So, when I was in high school there was a really negative general impression of the town, you didn’t walk around and think about there being a real culture of, you know, people who love Rochester who really wanted to stay here, who wanted to be a part of it, from a cultural perspective and build it into their lives. 

That’s not true anymore. 

Especially in places like this, sitting in Fifth Frame here, I think the bartender has one of those tattoos I was telling you about, the Rochester tattoos. 

PS: So, actually if you could explain that tattoo to us. 

PB: Yea, sure, so there’s the Rochester flower symbol right. Rochester used to be the flour city.

And that kind of, eventually got into the symbol for the city. So, you look at the parking meter out there, see right there. 

PS: Right there! It’s on the parking meter!

PB: Right. So, that symbol, you will find that symbol all over the city, on anything that the city owns. I think you can even find it on manhole covers, and you also find it on a lot of people. A lot of people have that tattoo. 

People love being here and love the change that’s happening here, and love the energy enough that there’s a large number of people that have put it on their bodies. I’d be willing to bet that any hip bar, one of the bartenders has it.

I think the people who go to the extent of putting a physical mark on their arm or on their leg or something, they believe in some portion of that and they want to be a part of it. 

PS: You seem really passionate about this place. Everyone is passionate about their hometown, right? Most people. But a lot of people leave their hometown. And so, you chose to stay. Not only did you choose to stay, but you built a business here. And so, what was the genesis of that idea?

PB: Well, the business was an evolution. There are people who really actively choose to start businesses, and there are people who go through a process and find themselves starting a business. And then at some point, they decide that that is what they are going to do. I probably fall more into that latter category. 

You can live here on a lot less, and that means that you have less pressure to be perfect all the time. 

I think it would be wrong to say we strategically picked Rochester to start this business. But I think that the fact that we did choose to stay here and start this business in Rochester is a major part of the reason we were able to do it. 

I think especially in the type of economy we are looking at now, where there’s so much competition, so much global competition. 

You look at our business. Our business is Software as a Service (SaaS). For all intents and purposes, it could be built here, or in Chicago or in London or in India or in China or anyplace with a viable connection to the internet. So, you’re not competing inside of your bubble anymore, you’re competing globally. And when you have to compete globally, doing that in a really high cost environment, your ability to make mistakes goes down. You have to be more perfect, and if we had to be more perfect than we in the process of starting this company, we would have failed. 

PS: How do you view this question of timing when you’re building a business? It’s something of course we think a lot about as venture capitalists. We think about when is the right time to start a business, when is the right time to scale a business, what are the expectations one ought to have in that process? And when you’re operating in another market, in a new market, are there new considerations, are there different considerations? 

PB: So, the Kodak example is an interesting one. 

If you really think what Kodak was at the turn of the century, they were more of a chemical company than they were an imaging company in a lot of ways. 

I’m sure there’s people who would argue with me on that. But if you apply the question that I think you’re asking which is, there was an obvious change, in hindsight, coming and they didn’t adapt to it fast enough. So, what can we take away from that? I think the biggest thing you want to try to take away from that is it’s hard to decide which swells are going to turn into waves, you know as they’re coming at you. But I think you have to be really open to it, and when you’re a market leader in a certain space, like Kodak was, and it’s really obvious it’s becoming a wave, you have to have the courage to abandon and maybe sometimes cannibalize a business that is very high margin for you, if that wave is going to continue in the long run.

Now, when I think of something that’s going to scale in our business, we are more agile than Kodak, obviously. We’re much smaller but we’re still not, we’re not 5 guys in a garage anymore. 

So, it does take longer to turn our trick than it used to, and I think that that’s a good thing too. Because if you chase everything you think is going to become a wave, you really end up doing nothing well. One of the things that has been really challenging for me over the course of my career. I am not saying I’m good at it yet but I’m getting better maybe, is deciding what in terms of value is going to be more timeless, and how to apply that to the innovations happening around you. 

I think there is a process of being smart and strategic about which waves you’re going to try to ride and which ones you’re going to skip and, you know, you hope you don’t get it wrong. 


A Knowledge management platform for the 21st century

PS: And so, now if you could explain to us what Jorsek is, what the company does and who are the customers? 

PB: Yea, absolutely. So Jorsek is a company that focuses on knowledge content. We have a Software-as-a-Service application. That application makes the process of creating knowledge content much faster, much more maintainable, much more scalable, and much easier to deliver to your customer across the touchpoints that they have. 

So, when you’re going to buy something that’s sufficiently complicated.. We build a tool for people who build tools not toys. So, it’s really B2B, that’s our customers. When you’re going through a process of deciding whether to buy from that company or if you’re a customer and you’re at a point when you’re deciding whether to recommend that company? Along that way, customers are going to have dozens of educational touch points with you. Some of those are in the very beginning, with very light marketing content. That’s not so much us. 

But very quickly it gets to things where you’re looking at documentation to ensure that it works the way you want it to; you’re trying the software or product in the way that you’re integrating it into your process and you may have other forms of reference materials that are involved. You’re working with your support people in order to try different things, get answers, solve problems those support people rely on. The latest up-to-date knowledge information. When you become a new customer, there’s an onboarding process. It’s an educational process, where you’re taking the process of learning about the product, how to use it, how to integrate it. Then, there’s other learning touch points, and there’s reference materials after that. 

Then you also have micro-content that will also be embedded in products, talk-through chatbots and things like that, as you’re using smaller pieces of it and becoming an expert in it.

So, all of that content, all of that knowledge content, can be written in our software, and point to each one of those things simultaneously, and from the same source. You don’t rewrite any of that stuff. 

PS: So, how did you arrive at a place where you thought, ‘Well, it’s a good time for me now to seek venture capital?’ Was that something that somebody suggested to you or was it something that you did some research on, did you feel the company was going in a direction you felt warranted additional attention from a VC? How did you come to that decision? 

PB: Sure. So, I think it was a combination of factors. One of them was the company. The company had reached a point of maturity, from both product and organization that we felt it was ready for institutional capital. We thought that we were in a good place, we were profitable, we were above that size margin where people get freaked out about companies that are not in the major hubs. So, we had some proof points. 

But, I think there was also a major change happening in the world that was the stage for this whole thing. You see that customer experience is becoming a really big thing that people are focused on, as they should be. The problem is that people are thinking of customer experience as, ‘How do I get a bunch of analytics and then have somebody reach out to that person?’ 

But the problem is that stuff is not scalable. The way that people need to look at customer experience is by breaking it down a little bit more. One of the pillars of customer experience is the educational knowledge piece. And people are not focused enough on that chunk. We started seeing organizations getting to a point where they were realizing that was competitive. 

So, go and look at any enterprise software company on their front pages, they say the same things as their competitors, all of them. They all say the exact same stuff. You have got to read deep to realize whether one of them is different and where they are different. 

Where we start to touch the customer is where it’s starting to matter.

No longer are we in a world where you can just have a better product, because everyone’s product is pretty good today. No longer are we in a world can you say, ‘We’re the best,’ because everybody says the same thing. Now, you have to be able to start to create intelligent materials that speak to your customer around their problems and solutions, that are going to be a little bit meatier, a little bit more in-depth, those types of things. And that’s becoming a really important part of the customer experience.

PS: It sounds like what you’re saying is it’s helping the customer get a better sense of the product, understand the features of the product a little better, understand the uses of the product a little deeper. Essentially what you’re saying is that the better they can do that, the better the product can become too, presumably.

PB: Absolutely.    

PS: If the customer does not really understand what the utility or functionalities are, it’s very difficult for them to say, well, I just bought this amazing enterprise platform because what’s in the platform? I have no id— You know. 

And so, you need to be able to go someplace to figure that out, in a seamless, easy, relatively straightforward manner. 

PB: Look, I’m going to pick one thing you said apart. So, you said you need to go someplace, but the reality is you can’t go someplace, you go many places. One of the major issues you see in almost all companies is that the answer is a little different everyplace. And that does not reinforce somebody’s understanding. What this is all really about is it’s about creating a higher level of understanding of the capabilities and how to execute on those for your customer, because customers don’t use parts of your product they don’t understand. And when they don’t use your entire product, they aren’t as valuable as customers because they are not getting value out of your product.

So, you have to be consistent in every place they go. It could be their cell phone, it could be their support site, it could be the chatbot on your website, it could be the context, it could be the learning site they take to onboard onto your system. Every touch point has to be high quality.

So, we document our software because our software is a B2B enterprise system. So, it’s the perfect use case for our system is to document our system in it. And, of course, we do. And frankly, we don’t sell to companies our size, something I always think is really ironic about being an enterprise startup. Like you are way too small to buy your own product. But I cannot imagine having to deal with the type of knowledge delivery that we do in another application. We couldn’t do it. There’s no way we could do it. If we could do it, our support costs would just be so much higher than they are now. I don’t know how we’d function.

PS: So, you’re saying that because you incubated this product and you can use it for your own company, that it’s giving you some mileage? 

PB: Absolutely. Our product is a core component of how we’re successful as a company. We run all of our knowledge materials through our product. All of our policies or procedures as well. We are a relatively small team. We are a startup. Our ability to punch above our weight, in terms of the amount of knowledge that we deploy out toward our customers, and how much that system reduces our overall cost from a support perspective, is massive. 

It’s the reason we’re able to do our jobs in so many ways. 

PS: That’s fascinating. That’s really interesting.

I wanted to ask you a little bit about this coffee shop. You seem to be a fan of this place. How did that happen? You know the owner? Does everybody here just know everybody else?

PB: I mean, it’s a small town. So, I know Wade, he’s one of the owners. I know John. I know Wade better. I’ve known Wade [for some time]. They were the first, really good, third wave, third generation coffee shop, here in Rochester. 

You have to remember that the coffee that I brew in the morning is from here. We actually have a Jorsek blend that Wade put together for us, which is designed to [our] business’s tastes. 

PS: And what is that taste? 

PB: It’s a little more fruit-forward. It’s a little bit lighter, not with heavy earth tones in it. It’s not an overly sweet coffee, but it’s not an overly savory coffee either. 

Wade’s a master among his peers so I look forward to my cup of coffee here on Saturdays and Sundays.