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Positive Sum Invests $20M in Tegus
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September 28, 2022
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There are a few key moments in a company’s life that end up defining the business for many years to come. A product pivot, a transformational hire, or landing a key investor can have an outsized impact on a company’s trajectory. In 2017 Tom and I were lucky enough to align ourselves with an incredible set of relatively unknown investors who led our seed round and later led our Series A: The Investment Group of Santa Barbara (IGSB).

For those unfamiliar with IGSB, it is an investment firm started by Reece Duca in 1968. IGSB is unlike most early stage investors. The partners manage their own capital, and IGSB does not have any outside investors. IGSB is highly concentrated, and focuses most of their energy on just a handful of businesses at any given point in time. For the last couple of decades, IGSB has invested almost exclusively in enterprise software businesses and their returns have been exceptional. Reece and his IGSB team have compounded an initial investment of less than $250,000 into one of the best records of multi-decade compounding of any investors in history.  ‍

Reece, Tim Bliss, Alex Wolf, and their small group of partners are deeply thoughtful and we have benefited immensely from working with their team. Two particular pieces of advice stand out that have helped Tegus get to where we are today: (1) narrow your focus (2) obsess over product-market fit.

As is often the case with founders, Tom & I were ambitious, eager, and wanted to tackle as much as possible as fast as possible. We saw new opportunities at every turn. The IGSB team urged us to slow down and to nail the product early on. If we didn’t nail the product, nothing else would matter. We took their advice to heart, and spent every available minute with a narrow set of potential customers. We worked to deeply understand the pain points of these investors, discussed their research processes, and identified specific opportunities to build an offering that they couldn’t live without. 

And as we began building our initial offerings, we stayed very focused - applying an incredible amount of pressure behind very few initiatives. It is easy to talk about focus - but it is hard to commit to it. It required saying no to countless opportunities to expand to new end markets, new customer segments, and new geographies. 

In a world where the mantra is often “grow at all costs”, who has time to spend hours each day with customers? And why would we limit our opportunities, especially as I think about fundraising for my next round? But this concentration and focus has paid dividends.

Early on, our Board of Directors (at that point in time, just Tom, myself, Alex Wolf and Bob Casey from IGSB) would read books together and discuss how they could influence our decision-making. Two books stood out early on: 7 Powers, by Hamilton Helmer and The Outsiders by Will Thorndike. 

7 Powers helped provide clarity on our strategic value to customers and our competitive strengths. The value of a company is ultimately predicated on its long term ability to generate cash flow. A company must seek durability to develop one of the seven powers if they hope to have durable advantage over the long run. When we entered the market in 2017, we had strong counter positioning with a disruptive price point and a service model that was uniquely opposed to what GLG, Guidepoint, ThirdBridge, and the traditional expert networks were offering (a great lesson that the more profitable the incumbent, the stronger power of counter positioning. As Jeff Bezos says, “your margin is my opportunity”). 

Counter Positioning allowed us to quickly gain traction. We recognize that we cannot rest on our laurels and must constantly be searching to develop new sources of power (i.e. Scale Economies as our library of content grows). The book also taught us to start with what makes a company valuable and to focus on what creates an advantageous position over the long term. When we think about developing power, it must be long term. If it is not durable, it is not power. 

The Outsiders has also heavily influenced how we run Tegus. We believe that capital allocation is one of the most important parts of our job. Since day one we have focused on generating positive cash flows and on running the business efficiently. As a high growth startup it was unfashionable to focus on free cash flow in 2019-2021, but we were undeterred. 

Running the business efficiently allows us to control our own destiny. It has allowed us to raise significantly less capital than almost any peers at our stage and scale. We have deployed our capital in unique ways. A couple of years ago, we used excess capital to buy back shares from early investors. Over the course of the last twelve months, we have acquired three businesses, including BamSEC and Canalyst. And we continue to look for new opportunities to allocate our capital in service of our customers.  

Today marks another key moment for Tegus. We are excited to announce that Patrick O'Shaughnessy has invested in Tegus via his venture capital firm, Positive Sum, and that Patrick will be partnering more closely with Tegus via his media company, Colossus. Colossus is the parent company of podcasts including Invest Like the Best, Business Breakdowns, Founders, 50x, and more.

Patrick shares our passion for producing interesting, valuable, and unique content for institutional investors. Both Tegus and Colossus share a maniacal focus on quality, and we believe this partnership will unlock a ton of value for the community that we both serve.

We are building for the very long term at Tegus, and we are excited to partner with Patrick for many years to come as we both continue to develop new content and data sets. Together, we are excited to broaden our audiences and to extend our reach to even more people interested in learning about how businesses work.  

Delivering exceptional value for customers while efficiently allocating capital is the ultimate job of a Founder & CEO. We couldn’t be happier with our capital partners to date and are thrilled to add Patrick to the team. 

Mike & Tom Elnick