Zui Founders Unveil Team Group, Offering Startup Services and Funding
[Corrected 8/14/13, 11:45 am spelling of partner Tom Broadhead.] It wasn’t long after San Diego Web entrepreneurs Cliff Boro and Tom Broadhead sold their kid-friendly Internet startup Zui (founded as KidZui) to Saban Brands of Los Angeles that the wheels began turning.
The Zui deal was announced last September. By January, the business partners were making a small investment in another Web startup. Boro and Broadhead had enjoyed some modest success before selling Zui, most notably by selling Infogate to AOL Time Warner in 2003. So they had begun the post-startup journey to a higher plane of existence as venture capitalists, right?
After operating in quiet mode for nearly a year, Boro and Broadhead are now taking the wraps off Team Group, a San Diego firm with two lines of business and an approach that is akin to sweat equity for venture investors. One business, called Team Ventures, invests small amounts of capital in seed-stage Web startups. A related business, Team Services, manages the human resources, accounting, cash management, and other administrative, financial, and strategic tasks for early stage entrepreneurs.
So far, the firm has made four investments: DealStruck, a San Diego startup developing a crowdlending platform; Chatmeter, a San Diego startup that provides local brand management; 6Sense Insights, a San Francisco data analytics startup; and a mobile startup in San Diego that remains in stealth mode.
Team Group also has seven clients on the services side, Boro says. While the average size of the firm’s investment is about $100,000, Boro adds, “Our principal investment is us, working alongside the entrepreneurs.”
Team Group represents a new iteration of CVT Ventures, a venture capital and startup development group that Boro and Broadwell had established with Vidar Vignisson, a Zui co-founder they had worked with at Infogate. CVT still exists, but Boro says, “Vidar went on to do different things” and CVT is no longer making investments.
“We’ve structured Team Group a little differently,” Boro explains. At CVT, one of the partners typically took a board seat in the firm’s portfolio companies, which included VideoEgg and Luxology. But CVT did not have a services business, which Boro envisions as a way to work much more closely with startup founders. He says Team Group also has a few more deep-pocket investors, including Jack Rivkin, a Wall Street investor and former head of CitiGroup’s Technology Venture Group.
“The service side represents a real need,” Boro says. “It’s something we do very well, and it keeps the lights on.”
The key difference in Team Group’s approach, Boro says, is that the firm plans to use its service business to generate its investment capital, instead of trying to raise a series of venture funds from endowments, pension funds, and other sources. “It’s safe to say that if the VC model is not broken, it certainly is challenged,” says Boro, who notes that Team Group’s partners will not be taking VC management fees. (They instead draw a salary out of the services business revenues.) “In some ways, we’re almost like private equity,” he says. “We’re getting involved with less than a handful of deals at a time, and we’re getting deeply involved in each of them.”
Boro says Team Services is targeting Web entrepreneurs who have raised from $500,000 to $750,000 in early seed or Series A funding or bootstrapped entrepreneurs who are generating cash flow.
“They don’t want to spend a bund of money on administrative staff,” Boro says. “To make your money last as long as possible, you don’t want to hire a CFO and build a finance team.”
Team Group’s Broadhead was the COO and CFO at Zui, and has worked as the CFO at many venture-backed startups, and Boro says Team Group’s six-person roster includes experienced controllers and bookkeepers. As seasoned Web entrepreneurs, Boro says they have learned that most startups hire and build their finance teams either too early late. Team Services can help get the timing just right, and represents an affordable alternative.
In addition, Boro says their firm also can help entrepreneurs develop their business strategies and can help them to raise additional capital.