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Meet an Investor: York IE Chief Investment Officer and Co-Founder Joe Raczka


One look at York IE’s website shows it isn’t your typical VC firm: It has dozens of employees with skills that range from engineering to marketing and public relations. That’s because the Manchester, New Hampshire-based firm offers in-house advisory services that help tech startups build, scale and monetize their operations. It’s a unique model that seems particularly relevant in today’s uncertain startup landscape.


To learn more, Startup Boston caught up with Joe Raczka, York IE’s Chief Investment Officer, Managing Partner and Co-Founder. In this interview, he discusses the origins of York IE, his outlook on the tech space, and his thoughts on AI.  


SB: I’d like to start off discussing York IE and its role as both an advisory and VC firm. Is the advisory service completely separate from the investment side, or do the two areas overlap?

 

JR: They overlap, and I'll take you through the whole story as to why. When we started, we came out of careers as operators. We had built a startup in New Hampshire, and scaled it to about $100 million of annual recurring revenue (ARR), and sold it to Oracle in late 2016. During that run, we were bootstrapped for a while, up until $30 million of ARR, but we did bring on some outside capital through that company growth phase. As we were going through those different step functions of growth, we discovered the board, investors and others around the company would bring in different advisors. And for those stages, they were the appropriate types of folks. But we really could have used that help in the early days when we were just getting started. So our whole goal in starting York IE was bringing active capital to the earliest stages of the startup journey, where founders, management teams and early leaders can benefit the most from that type of help.

 

The advisory business today is very much aligned with the investments practice, so we can do advisory work for portfolio companies, and we provide a lot of advisory services for non-portfolio companies as well. The benefit there is, we get a lot of insight from companies outside of seed stage – which is where we focus our investments – and work with Series B, C and beyond, as well as pre-revenue companies. On the advisory side, we get a lot of interesting insights. We are always learning new operational capabilities and different skill sets and how folks are doing things. We can bring that back into the portfolio. So there's a lot of crossover in terms of how the two pieces of the business work together.


SB: And you're agnostic in terms of geography, I imagine.

 

JR: We’re agnostic. We’ve got five or six international deals, and the rest are across North America.

 

SB: Your focus is mainly software as a service (SaaS), is that right?

 

JR: Yes, up and down the stack. So, infrastructure to apps, vertical SaaS, etcetera. We've now invested close to $50 million across 52 businesses.

 

SB: That reminds me of a post that you retweeted from David Sacks of Craft Ventures, about how the SaaS recession appears to be over. Do agree with that: Was there indeed a recession, and is it ending?

 

JR: When we look back at the portfolio or companies that we evaluated through our process, a lot of what happened over the last 18 months was a focus on the existing install base, and upsells associated with that base. Not a lot of net new sales were happening. So probably the basis of that tweet was more the idea that budgets are opening up. We're seeing new buyers come to market, and people have more certainty about where things are headed. And go-to-market strategies have had to shift; there's a little bit more of a direct relationship, consultative type of selling motion out there.


SB: More broadly, you noted in an October blog that we will face a lot of uncertainty in 2024. Are you still bracing for uncertainty like you were in October, or a bit more optimistic?

 

JR: I don't think it's clear as day in terms of where we're all headed; there's some reckoning that will take place in ‘24, mostly in the shape of down rounds. Since day one, York IE has been focused on pragmatic founders who are thoughtful about capital strategy – not a growth-at-all-costs type of model.


That said, there are lots of signals of optimism in terms of the LPs coming back to the market, and the IPO window potentially opening up in the back half of this year. Inflation numbers are still running pretty hot, so it’s anyone’s call as to what happens with interest rates at this point. 


I was recently at a conference with 45 other VCs, and most folks are pretty optimistic about where we're headed in the back half of this year. Some of the folks I spoke to who hadn't done a net new deal in the last 18 months had two term sheets out. They're starting to see founders who are much more realistic about what they can value their companies at. The big gap that we saw personally in the last 18 months was the bar for series A. You no longer can just get to a million of ARR and have a high level of confidence that you can raise a series A. 


But there’s tons of quality deal flow, lots of really interesting founders out there solving some big problems. So we feel really good about where things are headed.

 

SB: And in terms of where things are headed, I’m curious to hear your thoughts on AI. Is that a tech you're leaning into more when you’re looking at SaaS companies?

 

JR: We've been investing in that for a couple of years, and AI is a part of everyone's business these days. In fact, I don't think we see a deck that doesn't mention AI somewhere in there. There's a lot of truth seeking on what's real and what's not, but AI is going to be a part of everyone's day job – yours and mine, our businesses and our startups. It's all interwoven. 


The critical piece for us is asking whether AI is for workflow, customers, or internal uses. In other words, how are they thinking about using it? Is it as simple as layering on some open source large language model for an interface? And of course, a lot of it comes down to data and how the models are learning. And that's where we put a lot of focus.


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About the author: Randall Woods is a former editor at Bloomberg News and currently is a Senior Vice President at SBS Comms, a communications agency for technology companies and startups.

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