Ridgeline is a new VC firm that invests in B2B companies with a specific goal in mind: helping its portfolio companies sell to complex organizations that are hard to crack, but can be great customers if you break into them.
The Memphis, Tennessee-based firm was started in 2020 by Ben Walker, Ryan Clinton and Andrew McMahon — three individuals who each know a thing or two about complicated entities that need better tech solutions from their time working in government orgs. Walker and Clinton met at West Point before being deployed to Iraq together, while McMahon’s background includes time spent with the General Services Administration.
Ridgeline isn’t just focused on companies that could sell to the government — which has become a popular strategy lately — but does think their experience navigating that process could prove to be useful for some of their portfolio. Instead, it’s looking to back companies that could help any complex legacy entity, from the feds to FedEx.
“The corporate world has the same technology problem that the federal government does,” Walker told TechCrunch. “We are trying to drive our portfolio into complex organizations really regardless of whether they are in the federal space or the commercial space. I think that dual focus is something that is unique about Ridgeline.”
Ridgeline raised an oversubscribed debut fund of $52 million to back enterprise tech companies at the seed and Series A stages. The firm aims to take 5% to 10% ownership in its companies and plans to write checks of up to $5 million, McMahon said. The firm is about halfway through deploying its capital and looks to invest in up to 10 more companies.
Despite being oversubscribed, the fund was impacted by the market uncertainty earlier this year and had a few investors pull out at the end, Walker said. But, the LPs the firm ended up with, including large consumer conglomerates like FedEx, Dollar General and AutoZone, prompted the firm to move to Memphis.
“The opportunity to partner with them is to bolster their innovation efforts in a lot of ways,” Clinton said. “We took it one step further to establish a headquarters here to take full advantage of these relationships and drive value for our portfolio companies.”
Walker added that the fact that many of the firm’s LPs are based in middle America means they are largely overlooked by both coastal VCs and companies as potential customers for new technology, despite having many of the same problems other legacy corporations have.
“[Working near these companies] ends up being a massive differentiator to source and win deals,” Walker said. “It was one of the main reasons we moved to Memphis. You can’t fake that. You can’t have that as a narrative and not be in Memphis and make that happen. It’s still difficult to get an enterprise deal done anywhere.”
Ridgeline is targeting companies in sectors like manufacturing, supply chain logistics, retail tech and data analytics, among others. The firm has made 18 investments thus far, which include geospatial intelligence company PlanetWatchers and machine learning startup Neural Magic.
And while Ridgeline hopes to help some of its portfolio companies land contracts with the federal government, McMahon said they aren’t looking to push their companies in that direction. It is a lengthy process that isn’t for all startups, and timing of when to pitch is key.
“It’s always a responsible approach to that market,” he said. “It’s so big, it can have its own gravitational pull. They can very quickly become largely defense from a revenue standpoint. We would much rather have companies have a large commercial and enterprise revenue stream and a similar proportion of that be revenue from the government.”
While it hopes it can help its startups succeed, the firm founders also hope their efforts have a ripple effect on the companies and the people of the city of Memphis.
“It allows us to look for companies sprouting out of the South and this industrial belt that is often overlooked in VC,” Walker said. “It’s going to allow us to see things before they pop up in the general radar. It’s something we feel like Memphis has provided and it’s allowed our portfolio to punch above its weight.”
Why a Memphis VC is betting $52M on startups selling to complex orgs by Rebecca Szkutak originally published on TechCrunch
