Who says that chats about enterprise software have to be boring? They don’t, we learned during our conversation earlier this week with Sapphire’s Jai Das, a pleasant time that touched on a host of topics including startup sectors, his investing group’s capital base and, of course, the Slack-Salesforce deal.
Our conversation took place about an hour before the deal was formally announced, but the tea leaves had been read by the market far in advance, so we were able to chat about it as if it was already consummated. Which it became a little while later.
Our conversation with Das was part of our Extra Crunch Live series, which you can learn more about here. If you’re not a member, head here to get started. Extra Crunch Live has previously hosted Bessemer’s Byron Deeter and Sequoia’s Roelof Botha, among others.
The whole chat with Das was interesting and good, but his comments explaining why Slack’s sale to the larger CRM giant stuck with me all week. Using Salesforce’s acquisition of MuleSoft (a company in which Das invested) as a prism, here’s how the venture capitalist discussed the plusses and minuses of selling to a bigger company.
After noting that MuleSoft might have been able to earn a larger revenue multiple as an independent company in today’s markets than it managed by selling to Salesforce, Das then detailed the sort of boost that a huge company can bring to one that is merely big (quote has been edited and condensed):
Going into your question about Salesforce and Slack, Salesforce, like any large company, does add a lot of value. When I talked to [former MuleSoft CEOs] Simon [Parmett] and Greg [Schott], they were astonished how much account control these large companies have with CIOs and CMOs.
MulesSoft would be beating on the door to get a meeting with the CIO and it wouldn’t happen. And you know, the Salesforce management team would just make one phone call, and Simon and Greg would be presenting to the CEO on down.
So I think that is the thing that people forget, that these large companies have so much ability to increase your sales velocity with large accounts, [so] it makes a lot of sense for some of these [smaller] companies to end up in Salesforce or SAP or Oracle, or WorkDay.
So perhaps Slack will find more oomph under Salesforce’s auspices than it could as a solo project. We spent the majority of our time talking about startups and smaller companies, so hit the jump for the full video and a few more quotes I transcribed for you.
Many companies will not see the uncertainty of a global pandemic as the perfect moment to go international, but for others (particularly in healthcare, online communications, and workplace mobility) the market is stronger than ever and companies are having to respond quickly internationally to both service existing clients and take advantage of the growth in demand.
We and our team at Taylor Wessing advise 50 to 75 venture-backed North American companies each year on setting up in Europe or Asia. We’ve helped companies such as TaskRabbit, Lime, Glossier, InVision and many others translate their domestic success to new jurisdictions and cultures and to thrive as global businesses.
This is a practical guide to international expansion with the challenges of the current time in mind. It’s a quick-read providing some practical tips and sharing best practices from peer companies to help you come out of the pandemic with a strong international presence. A great deal of this advice is evergreen and will serve you well whatever the circumstances may be.
In particular, we’ll cover the rise (and risks) of distributed workforces — a way for CEOs to hire the best talent anywhere in the world. This has taken on new significance with the boom in remote working as one of several options for CEOs looking for strategic growth during and after COVID.
Ten years ago, the timing question was much simpler. Founders would first of all focus on developing a product and winning over their domestic market, funded through their Series A and B rounds, and then go on to raise their Series C round, which investors would expect to be used to push into new markets.
Since then, with the age of the smartphone in full swing and international direct ordering ubiquitous, opportunities to sell into new markets appeared far earlier in a company’s growth and there is no longer a canned strategy for timing your international expansion.
The current circumstances have exaggerated this trend. There are many challenges in traditional sectors, but also many new market opportunities quickly appearing in healthcare and other technology sectors with founders wanting to move quickly into new markets.
Although it may be tempting to just get a few sales people on the ground to go for it, we would still recommend laying some groundwork and making some key decisions before diving in. For example: ensuring management can give sufficient time and attention to the new market; tweaking your product to comply with local regulations; reworking your sales approach.
If you are early-stage, tread carefully. Our belief is that the Series B round is still the earliest a founder or board should consider international expansion.
If you are early-stage, tread carefully. Our belief is that the Series B round is still the earliest a founder or board should consider international expansion. The companies we’ve worked with who have moved earlier than the B round will generally end up realizing it’s too early. They’ll end up pressing pause, or making a full strategic exit, tail between legs.
International expansion is a matter of focus, as well as financial resources. Once you’re selling into a new market, everyone in the business needs to be thinking internationally, including the CEO, CFO, general counsel, the board, engineers and staff. It can stretch everyone before there are the necessary resources in place to cope.
Even in the best of times our advice would be to not experiment or push the boundaries when it comes to your international strategy, do that elsewhere in your business. You should follow the path most travelled at this stage. This is especially true in the current climate. If you’re thinking of doing something new, something your peers haven’t done before, we should have a conversation first.
Whichever market you’ve chosen, there are some universal first steps (although they might vary slightly between jurisdictions). For example:
OTV (formerly known as Olive Tree Ventures), an Israeli venture capital firm that focuses on digital health tech, announced it has closed a new fund totaling $170 million. The firm also launched a new office in Shanghai, China to spearhead its growth in the Asia Pacific region.
OTV currently has a total of 11 companies in its portfolio. This year, it led rounds in telehealth platforms TytoCare and Lemonaid Health, and its other investments include genomic machine learning platform Emedgene; microscopy imaging startup Scopio; and at-home cardiac and pulmonary monitor Donisi Health. OTV has begun investing in more B and C rounds, with the goal of helping companies that have already validated products deal with regulations and other issues as they expand.
OTV focuses on digital health products that have the potential to work in different countries, make healthcare more affordable and fill gaps in overwhelmed healthcare systems.
Jose Antonio Urrutia Rivas will serve as OTV’s head of Asia Pacific, managing its Shanghai office and helping the firm’s portfolio companies expand in China and other Asian countries. This brings OTV’s offices to a total of four, with other locations in New York, Tel Aviv and Montreal. Before joining OTV, Rivas worked at financial firm LarrainVial as its Asian market director.
OTV was founded in 2015 by general partners Mayer Gniwisch, Amir Lahat and Alejandro Weinstein. OTV partner Manor Zemer, who has worked in Asian markets for over 15 years and spent the last five living in Beijing, told TechCrunch that the firm decided it was the right time to expand into Asia because “digital health is already highly well-developed in many Asia-Pacific countries, where digital health products complement in-person healthcare providers, making that region a natural fit for a venture capital firm specializing in the field.”
He added that OTV “wanted to capitalize on how the COVID-19 pandemic has thrust the internationalized and interconnected nature of the world’s healthcare infrastructures into the limelight, even though digital health was a growth area long before the pandemic.”
Esports One, a startup bringing the fantasy approach to esports, is announcing that it has raised an additional $4 million in funding.
When I first wrote about Esports One in April, co-founder and COO Sharon Winter described it as the first “all-in-one fantasy platform” in the esports world, allowing you to research players, create fantasy teams and watch games, with an initial focus on the North American and European divisions of League of Legends.
According to the Esports One team, creating this platform required building out a set of data and analytics products, as well as using computer vision technology that can track game activity (and update player stats) without relying on a publisher’s API.
The startup says its user base has been growing by more than 25% month-over-month. It may also have benefited from the pause in professional sports earlier this year, while CEO and co-founder Matt Gunnin told me recently that he also sees fantasy as a way to make video games accessible to a broader audience — he recalled one Esports One user who introduced his sister to League of Legends using the fantasy platform.
“I use the example of growing up and sitting there with my dad, watching a baseball game, he’s telling me everything that’s happening,” Gunnin said. “Now it’s the opposite — parents are sitting and watching their kids.”
Many parents, he suggested, are “never going to pick up a mouse and keyboard and play League of Legends,” but they might play the fantasy version: “That’s an entry point … if we can make it easily accessible to individuals both that are hardcore gamers playing video games and watching League of Legends their entire life, as well as someone who has no idea what’s going on.”
The new funding was led led by XSeed Capital, Eniac Ventures, and Chestnut Street Ventures, bringing Esports One to a total of $7.3 million raised. The company also recently signed a partnership deal with lifestyle company ESL Gaming.
Gunnin said the money will allow the company to grow its Bytes virtual currency, which players use to enter contests and buy customizations — starting next year, players will be able to spend real money to purchase Bytes. In addition, it’s working on native iOS and Android apps (Esports One is currently accessible via desktop and mobile web).
Gunnin and his team also plan to develop fantasy competitions for Rainbow Six: Siege, Rocket League, Valorant and Fortnite.
“As a fairly new player in the esports world, we’ve seen immense determination and grit from Matt, Sharon, and the whole Esports One team to grow into a household name,” said XSeed’s Damon Cronkey in a statement. “I’m excited to be partnering with a company that will deliver new perspectives and features to an evolving industry. We’re eager to see how Esports One grows in 2021.”
Like many things in life, building great businesses is all about timing. We’ve seen multibillion dollar failures from the dot-com era such as Pets.com and Webvan be reincarnated a decade later as Chewy and Instacart — this time as runaway successes.
The same could be said about real estate technology companies, but startups in this category have not gotten the same opportunity and attention as their peers in other sectors.
For decades, proptech has received the short end of the stick. Real estate is the world’s largest asset class worth $277 trillion, three times the total value of all publicly traded companies. Still, fintech companies have received seven times more VC funding than real estate companies.
These lower levels of investment were previously attributed to the slow rate of technology adoption and digitalization within the real estate industry, but this is no longer the case. Companies in real estate are adopting innovation faster than ever. Now, 81% of real estate organizations plan to use new digital technologies in traditional business processes and spending on tech and software is growing at over 11% per year. Technological adoption has even accelerated throughout the pandemic as enterprises were forced to quickly adapt.
Historically, the strength or weakness of the broader economy and the real estate industry have been tightly coupled and correlated. While some may point to COVID-19’s negative impact on certain parts of real estate as evidence that proptech can only thrive in boom times, I believe building a successful proptech company is less about anticipating economic upswings and markets and more about timing and taking advantage of the right technological trends. In short, this is as good of a time as any to start a proptech company if you know where to look.
History is littered with examples of companies that have done just this. Let’s take a look at three:
Procore was founded in 2002 in the aftermath of the dot-com bust, well before widespread WiFi and five years before the iPhone. The company saw the capability for software and technology to transform the construction industry long before practitioners did. Its team faithfully and stubbornly kept at it through the financial crisis, but only had $5 million in revenue by 2012. Here’s where the timing kicks in: At this time, iPads and smartphones had become more common on worksites, enabling widespread adoption.
Realizing this change in-market and adapting to it, Procore strategically priced its product as a subscription, rather than based on headcount, as was typical in the industry. In this way, early customers like Wieland and Mortenson got their subcontractors and temp employees to use the product, which then created a flywheel effect that spread Procore to other projects and clients. Fast forward to today, Procore now has more than $290 million in ARR and is valued over $5 billion.
Procore’s persistence and agility ultimately enabled it to capitalize on the right technological trends and shifts, despite what initially seemed like a poorly timed decision to start a software company in a recession. Procore is now on a venture exit path as it continues to acquire new-age proptech companies like Avata Technologies, Honest Buildings and BIMAnywhere.
Zillow was founded by the co-founders of Hotwire and Expedia. While that might not seem relevant, the vision to bring transparency to consumers is the connecting line, the mission being to provide access to siloed data and knowledge to previously convoluted industries. Before Zillow, homeowners did not know how much their house was worth. With Zillow’s Zestimate, consumers can put a price tag on every roof across North America.
Studying for med school is tough. What if it was more Pixar-like?
Sketchy, a visual learning platform, takes complex material that a med student might need to memorize for an exam, and puts the information in an illustrated scene. For example, it uses a countryside kingdom to explain the coronavirus, or a salmon dinner to explain Salmonella. The goal is for a student to be able to mentally go back to the scene while taking an exam, walk through it and retrieve all of the information.
While Sketchy’s strategy might seem odd, it’s actually well-known. The “memory palace” technique matches objects to concepts for easier memorization. So far, Sketchy has more than 30,000 paid subscribers and is on track to hit $7 million in revenue this year.
To charge this growth and break into new content verticals, Sketchy is taking venture capital on for the first time in its seven-year history. Last month, the team announced that it has raised a $30 million Series A led by The Chernin Group (TCG). Today, it tacks on $2 million to that total with financing from co-investor Reach Capital. It’s a big combined investment for a company that has been bootstrapping since birth — and the deal could help us see where online education is heading.
The capital comes as Sketchy itself looks to grow past a content service for med students, and into an education platform tackling information in critical fields, from legal to nursing. With the new money, Sketchy plans to build an in-house animation studio and hire more artists and doctors, some of whom are currently consultants.
A big part of Sketchy’s magic, and effectiveness, comes from the fact that all of its founding team have experience in medicine.
The company began in 2013 when then-med students Saud Siddiqui and Andrew Berg were in desperate need of a better study solution for microbiology. To liven up their studying, Berg and Siddiqui began weaving characters into stories to try to memorize concepts — and after a few good test scores, they started creating stories for their classmates.
“Neither Sid or I were artists, so they were pretty bad,” Berg said. As demand continued, the duo put their scraggly sketches on YouTube. Eventually, Siddiqui and Berg roped in classmate Bryan Lemieux, a good artist, to tell the stories with them. Eventually Bryan brought on his twin brother, Aaron, and the founding team was born.
Fast-forward to today: Siddiqui and Berg have finished their residencies in emergency medicine, while the Lemieux brothers chose to leave medicine. All have moved full-time to the company after trying to balance both jobs. Still, the knowledge from working in the field continues to be useful.
The startup’s name has evolved: born as SketchyMedical, it has since rebranded to just Sketchy. While the team chose the name to nod toward its focus on art, the name also has negative connotations. Expect a rebrand in the future.
Despite this, the company claims that it is used by a third of med students in the United States. The majority of its revenues come from 12-month subscriptions for students looking to prep for med school exams like Step 1, and Step 2.
While B2C is a promising business model for many reasons (it’s always easier to convince a human to pay instead of a entire, red-tape-bound institution), the company has also posted promising B2B growth. So far, 20% of its revenue comes from direct contracts it has with medical schools. The founders said that they will pursue both growth methods for now, but based on the price of med school (and student debt crisis), it would be great to see them grow through school contracts so students don’t have to face the brunt of costs.
Reach Capital’s Jennifer Carolan, an investor in Sketchy, said that Sketchy’s product market fit with med students is a “strong signal that their content is worth it.” Even with competitors such as Picorie and Medcomic, she’s confident that Sketchy’s product is defensible and can expand into new verticals.
That said, unlike most edtech companies, which have enjoyed surging new user demand thanks to remote learning, Sketchy didn’t have a huge COVID-19 boom.
“We weren’t one of those people that hadn’t found product market fit and then exploded after COVID,” said Berg. “We’ve always been there and been growing.”
So the real trigger for today’s fundraise wasn’t COVID-19 momentum, but instead, a push to capitalize its sustained growth into more digital curriculum verticals.
Long-term, think of Sketchy as joining a chorus of startups, including Top Hat Jr and Newsela, that want to replace textbook publishers. In a remote world, live, moving content is more rapidly losing value, and upstarts are trying to replace them with more effective and engaging content.
“One of the challenges is just to make sure we don’t go too fast,” Siddiqui said. “We want to keep that degree of quality we’ve maintained for so many years, and do it at scale.”
Amount, a new service that helps traditional banks compete in a digital world, has raised $81 million from none other than Goldman Sachs as it looks to help legacy fintech players compete with their more nimble digital counterparts.
The company, which spun out from the startup lending company Avant in January of this year, has already inked deals with Banco Popular, HSBC, Regions Bank and TD Bank to power their digital banking services and offer products like point-of-sale lending to compete with challenger banks like Chime and lenders like Affirm or Klarna.
“Most banks are looking for resources and infrastructure to accelerate their digital strategy and meet the demands of today’s consumer,” said Jade Mandel, a Vice President in Goldman Sachs’ growth equity platform, GS Growth, who will be joining the Board of Directors at Amount, in a statement. “Amount enables banks to navigate digital transformation through its modular and mobile-first platform for financial products. We’re excited to partner with the team as they take on this compelling market opportunity.”
Complimenting those customer facing services is a deep expertise in fraud prevention on the back-end to help banks provide more loans with less risk than competitors, according to chief executive Adam Hughes.
It’s the combination of these three services that led Goldman to take point on a new $81 million investment in the company, with participation from previous investors August Capital, Invus Opportunities and Hanaco Ventures — giving Amount a post-money valuation of $681 million and bringing the company’s total capital raised in 2020 to a whopping $140 million.
Think of Amount as a white-labeled digital banking service provider for luddite banks that hadn’t upgraded their services to keep pace with demands of a new generation of customers or the COVID-19 era of digital-first services for everything.
Banks pay a pretty penny for access to Amount’s services. On top of a percentage for any loans that the bank process through Amount’s services, there’s an up-front implementation fee that typically averages at $1 million.
The hefty price tag is a sign of how concerned banks are about their digital challengers. Hughes said that they’ve seen a big uptick in adoption since the launch of their buy-now-pay-later product designed to compete with the fast growing startups like Affirm and Klarna .
Indeed, by offering banks these services, Amount gives Klarna and Affirm something to worry about. That’s because banks conceivably have a lower cost of capital than the startups and can offer better rates to borrowers. They also have the balance sheet capacity to approve more loans than either of the two upstart lenders.
“Amount has the wind at its back and the industry is taking notice,” said Nigel Morris, the co-founder of CapitalOne and an investor in Amount through the firm QED Investors. “The latest round brings Amount’s total capital raised in 2020 to nearly $140M, which will provide for additional investments in platform research and development while accelerating the company’s go-to-market strategy. QED is thrilled to be a part of Amount’s story and we look forward to the company’s future success as it plays a vital role in the digitization of financial services.”
FT Partners served as advisor to Amount on this transaction.
A new $65 million investment led by the growth capital and public investment arm of Sequoia Capital will give Virta Health, a developer of a behavioral-focused diabetes treatment, a valuation of over $1 billion.
Virta’s approach, which uses a combination of approaches to change diet and exercise to reverse the presence of type 2 diabetes and other chronic metabolic conditions, has shown clinical success and attracted 100 healthcare payers to endorse the company’s treatments.
“We partnered with Virta for their ability to deliver unmatched health improvement and cost savings—two clear differentiators from other offerings on the market,” said William Ashmore, CEO of the State Employees’ Insurance Board of Alabama, in a statement. “Especially amid the COVID-19 pandemic, it’s vital that we provide our members the life-changing results Virta is known for delivering, through expert, virtual care delivered right to their home.”
The company said it would use the funding to expand sales and marketing efforts for its services as well as expand its research and development into other non-pharmaceutical therapies for metabolic conditions.
The financing came from Sequoia Capital Global Equities and Caffeinated Capital and brings the company’s total funding to over $230 million, and gives it a $1.1 billion valuation, according to a statement.
Diabetes has long been an attractive condition for startups and has been the first target that companies focused on behavior changes to influence metabolic conditions aim to address. The reason why there are so many diabetes-focused businesses is because of the prevalence of the disease in the U.S. Almost half of adults in the U.S. suffer from obesity, pre-diabetes or type 2 diabetes, and the disease kills 30 people every hour. Diabetes also doubles the risk of death from COVID-19 infections.
Beyond the risks, the costs of treatment are skyrocketing. According to data from the American Diabetes Association released in March 2018, the total costs of treating diagnosed diabetes have risen to $327 billion in 2017 from $245 billion in 2012, when the cost was last examined.
“Given the scope of the metabolic crisis in the U.S. and globally, it cannot be understated how game-changing Virta’s results and care delivery are,” said Patrick Fu, managing partner at Sequoia Capital Global Equities, in a statement. “Virta’s technology-driven, non-pharmaceutical approach has fundamentally changed how diabetes is cared for, and our collective belief in what is possible for population health improvement. This is the future of chronic disease care.”
So much for a December news slowdown.
The last few days have been so chock-a-block with news from a host of unicorns, we’ve all fallen behind. This morning, The Exchange is going into summary mode to help us better understand the full scope of recent unicorn activity.
Why unicorns? It would be fun to noodle on early-stage news — Salut raised $1.25 million this week and BuildBuddy picked up $3.15 million — but as we’re in the midst of an IPO cycle and 2021 could have even more public debuts than 2020, we have to keep current on unicorn updates.
What will we cover, then? We’ll go back to Stripe’s possible new round and new valuation. We’ll touch on DoorDash and Airbnb’s expected IPO pricing, along with what we’ve learned from C3.ai’s own S-1 filings. There’s also Gainsight to talk about and the Slack -Salesforce deal.
That’s just the tip of the proverbial iceberg. There’s also recent news from Coinbase, Tanium, Postmates, Olive, Scale AI, Sinch, Gitlab and Kustomer. Then there are rounds for HungryPanda, Flock Freight and Flexe that might make them unicorns — or something rather close. (Update: Also Bizzabo, apparently.)
You can see why it all feels a little overwhelming. But don’t worry, we can get caught up together. Let’s go!
There’s no way to make it through all of this news in a reasonable number of words without employing bullet points. Out of respect for your time, I’ll be brief. That said, each of the following news items is worth digging into further if it catches your fancy.
Welcome, the HR software that helps organizations make and close offers to new candidates, announced the close of a $6 million seed round today, led by FirstMark Capital. Participating investors include Ludlow Ventures, Nat Turner and Zach Weinberg, and Keenan Rice and Ben Porterfield (which were existing investors), as well as a wide array of angels.
TechCrunch last covered Welcome in August, when it announced a $1.4 million funding round. That the startup was able to raise more as quickly as it has is testament to how hot the early-stage venture capital market is today, and likely an endorsement of Welcome’s economic profile and recent growth.
Past the new capital, Welcome is also launching a new product today called Total Rewards, which helps not just new candidates but also existing employees get a complete, easy-to-understand picture of their compensation, across salary, benefits, equity, etc.
But let’s back up.
Welcome was founded in 2019 by Nick Gavronsky and Rick Pereira, with a mission to help organizations close offers on candidates by providing a much clearer picture of compensation, particularly around equity. Cofounder and CEO Nick Gavronsky explained that many candidates don’t truly understand the value of the equity they’re offered, or how it works.
“A lot of recruiting teams aren’t well-equipped to use it as a selling tool and explain it effectively and showcase the value to candidates to help them think about their ownership at the company,” he added.
Image Credits: Welcome
Welcome allows companies to organize their compensation offers based on level and position, and deliver that information digitally to candidates in a way that makes sense.
The startup integrates with a variety of other software providers including Slack, Lever, Greenhouse, ADP and Justworks to name a few, simplifying onboarding for Welcome clients and bringing a broad array of information into one place.
Offers sent through Welcome show a description of the role, equity details, total compensation and even include a welcome note and video. This is in stark contrast to the black and white legal PDF often sent to candidates.
The next phase for the company comes in the form of the launch of Total Rewards, which is meant to help retain existing employees, helping them understand their compensation value and their potential at the company.
“Painting a better picture becomes a pre-retention tool,” said Gavronsky. “An employee will sometimes leave thousands of dollars on the table because they don’t understand what they’re walking away from. A lot of times companies will wait until that person is going to resign. Let me now bring up all the things that are great about our company and talk through your stock options. But the decision’s already made. So we wanted something that we can kind of put in with performance reviews.”
Welcome also has plans to offer a third product pillar in the form of real-time accurate industry-wide compensation data, helping companies understand where they fit into the larger ecosystem with regards to compensation.
Thus far, Welcome has 40 companies on the platform, including Uncork and Betterment, with hundreds on the waitlist according to the cofounders. The company plans to use the funding to build out the team and the product.
Adam Nash, a Silicon Valley-born-and-bred operator and investor, is back at it again.
Today, on his personal blog, he announced that he has started a consumer fintech company that has already garnered initial funding from Ribbit Capital, along with other “friends and angels” who appear to have also pitched into the round, including Box CEO Aaron Levie, MIghty Networks founder Gina Bianchini, Superhuman founder Rahul Vohra, and Amy Chang, who sold her startup Accompany to Cisco in 2018.
Nash didn’t reveal many details in the post or later on Twitter, saying he’ll have more to say when the company is closer to launching. All we really know at this point is that he cofounded the company with Alejandro Crosa, an Argentinian software engineer who most recently spent five months at Slack but logged more than three years at both Twitter and LinkedIn before that.
Nash said on Twitter that the two met at LinkedIn, where Nash was himself VP of product management for four years beginning in 2007. It’s a good detail to know, considering that Nash has logged time at a wide variety of tech outfits over the years, making it hard to guess at whom he knows and from where.
A computer science graduate of Stanford, where he later nabbed a master’s degree, Nash began his career interning at NASA, HP, and Trilogy before landing his first big job as a software engineer at Apple in 1996 (when former PepsiCo exec, John Sculley, was briefly running the place).
After moving on to a bubble-era company that no longer exists, Nash tried his hand at VC for the first time, joining Atlas Venture as an associate. To get more operating experience, he then jumped to eBay, where he was a director; LinkedIn, where he met Crosa; then Greylock, where he spent just over a year as an entrepreneur-in-residence (EIR) before joining the wealth-management startup Wealthfront as its president and CEO, a job that the company’s original CEO and founder, Andy Rachleff, reclaimed in 2016.
Nash didn’t disappear from the scene. Instead, he rejoined Greylock as an EIR for another year before joining Dropbox shortly after it went public in 2018 as its VP of product and growth, leaving that post back in February to start his own thing, he said at the time.
That Nash would start a fintech company specifically isn’t surprising, considering his involvement with Wealthfront, as well as some of the personal investments he has made in recent years.
In 2018, for example, he wrote a check to LearnLux, a five-year-old, Boston-based educational startup that helps employees better understand their 401k, health savings accounts, and stock options. He is also an investor in Human Interest, a five-year-old, San Francisco-based startup that offers automated, paperless 401(k) plans.
Nash is also riding a very big wave. According to Pitchbook, consumer fintech is on pace to attract a record amount of venture funding in 2020, at least in North America and Europe.
We’ll let you know more about what Nash is building as soon as he’s ready to share more. The little that Nash is saying publicly for now is that he and Crosa believe there is “still a lot more to do in consumer fintech, and that through software we can help bring purpose to the way people approach their financial lives.”
Scale AI, the four-year-old data labeling startup, has discovered that selling the picks and shovels needed to develop and apply artificial intelligence is big business.
The company, which created a visual data labeling platform that uses software and people to label image, text, voice and video data for companies building machine learning algorithms, has raised another $155 million. The funding round, led by Tiger Global, pushes Scale’s post-money valuation to more than $3.5 billion.
Importantly, Scale is now a “break even” business and is set up to continue to add employees and expand into new markets in a sustainable way, Scale’s CEO and co-founder Alexandr Wang told TechCrunch. Scale will use the funds to grow its workforce from 200 people to about 350 by the end of next year. (Those employee numbers don’t include the tens of thousands contractors it uses to label data) It’s also focused on new markets and adding products and platform capabilities.
Scale got its start by supplying autonomous vehicle companies with the labeled data needed to train machine learning models to develop and deploy robotaxis, self-driving trucks and automated bots used in warehouses and on-demand delivery. Legacy automakers such as General Motors and Toyota, chipmaker Nvidia and a slew of AV startups, including Nuro and Zoox have used its platform.
More recently, Scale’s customers have spilled over into government, e-commerce, enterprise automation and robotics. Airbnb, OpenAI, DoorDash and Pinterest are some of its customers. That pace of expansion has accelerated in 2020, according to Wang.
“One thing that we saw, especially in the course of the past year, was that AI is going to be used for so many different things,” Wang said. “It’s like we’re just sort of really at the beginning of this and we want to be prepared for that as it happens.”
Part of that preparation means evolving beyond being just a data labeler. Earlier this year, the company quietly launched Nucleus, an AI development platform that Wang describes as the “Google Photos for machine learning datasets.” Nucleus provides customers a way to organize, curate and manage massive datasets, giving companies a means to test their models and measure performance among other tasks.
“Nucleus is the first product of our future, I would say,” Wang said. “We definitely we see that the next biggest bottleneck for a lot of our customers is, ‘how are they going to have the suite of tools and suite of infrastructure that exists today for building out software? None of that exists for machine learning.”
The plan is to continue to build out Nucleus into a fully integrated platform that helps more companies be able to do AI, Wang said.
Scale made its first acquisition to support Nucleus with the purchase of a four-person startup called Helia. The team, which has expertise in real-time video and neural network training, will support Nucleus.
“The one thing that we were noticing across our whole customer base was that more and more customers, even beyond just the self drive folks were wanting to do AI on real-time video. And so it was becoming this expertise that we knew just wasn’t going to go away.”
Today, the early-stage, mission-focused, San Francisco-based venture firm Obvious Ventures released a very readable overview of how each of its portfolio companies is benefiting the world in its own way.
Its report shines a light on the grocery deliver service Good Eggs, for example, sharing that roughly 70% of the products sold by the company are grown or produced within 250 miles of its food hub in Oakland, California That matters because fresher food is more nutritious. The electric bus company Proterra is meanwhile starting to save cities millions of dollars in diesel fuel costs while also eliminating thousands of tons of carbon dioxide.
It’s the kind of investing to which more people are gravitating, says Obvious’s cofounder and managing director James Joaquin . We talked with him last week along with one of his firm cofounders, the serial entrepreneur Ev Williams. You can find part of our conversation with Williams here; below, we talked mostly with Joaquin about how Obvious is thinking about 2021 and what the team finds most interesting these days. (Hint, hallucinogens are now in the mix.)
TC: For founders reading this, how many companies is Obvious talking with on a weekly basis right now?
JJ: Annually, we look at or consider about 2,000 investment opportunities. It’s obviously not completely linear distribution, but in terms of incoming investment opportunities that we track, it’s a very large number. Most of those get filtered right up front as either being in a geography we don’t invest in because we’re focused on North America — we’re not focused on Europe or Asia — or maybe they’re what we would call world neutral or world negative [so] outside of our thematic areas. But then a subset of those our team will meet with, and the bottom of that funnel is that we make between 10 to 12 investments per year.
TC: At some firms, everyone is a generalist. At Obvious, each partner seems to have a specific focus, like your focus in part on plant startups. Is this correct?
JJ: That’s one of the areas that that that I focus on, for sure. I mean, we’ve got five investing partners in the firm. Within food, I lead our work in plant-based protein and plant-forward food and consumer products companies. Thanks to work that Ev and [Twitter cofounder Biz Stone] did, we were very early investors in Beyond Meat. We’re also an early lead investor in Miyoko’s Creamery, which is a plant-based butter and cheese company that is one of our fastest-growing portfolio companies right now.
TC: How do deals get green-lit?
JJ: The inside baseball is that we tend to form two-person teams on a given deal when it reaches the due diligence stage. So there’s always a lead partner or managing director who’s championing the deal, but there’s a second person from the investment team working on it, too. Then ultimately, a CEO or a management team presents to the full investment committee before we make a decision to to issue a term sheet.
The process isn’t quite unanimous, but each managing director at the firm has the power of veto, so if someone feels really strongly that Obvious shouldn’t make that investment, they have that power to stop an investment, but that rarely occurs.
TC: Who are you seeing that’s newer to the table? More firms say they are paying attention to the themes on which you’ve been focused the start.
JJ: I would say there are a number of new firms that kind of are similar age to us that have also been investing in some of these frontiers. Firms like Lux capital have done a lot of co-investing with us in the computational biology space. Data Collective is a firm that we’ve co-invested with in some of the full stack healthcare work that we do. S2G Ventures is a great plant-based protein food firm that we’ve co-invested with, so those are some of the new faces that we think are part of this world-positive generation of investors trying to solve big problems with startups and with cutting edge tech.
TC: Are you interested in hallucinogens?
JJ: It’s absolutely a theme where we’ve been doing research. I should say we’re interested in it specifically for medical use, but we think that these former Schedule 1 drugs like ketamine, MDMA [commonly known as ecstasy], and psilocybin have great potential to solve the mental health crisis that not just the US but that the world is seeing ramped to be a top five human health issue. In the early trials around treatment-resistant depression, PTSD, suicidal ideation, these molecules are showing great promise.
We think there’s an opportunity to create a full-stack healthcare company similar to what we’ve done with Virta Health for [type 2] diabetes, or the work that DevotedHealth, one of our portfolio companies, is doing for seniors in the Medicare space. We think there’s going to be one or more new mental health companies built around this new kind of drug-assisted therapy that these molecules will enable.
TC: Ev, you’re an investor in a company that last month announced a small seed round called Sanity, a platform that helps users build and manage content flows on sites, which seems like a perfect fit for you. When is a deal an Ev Williams deal versus an Obvious Ventures deal?
EW: That was one of the rare deals that I did separate from the firm. I used to do a bit of angel investing before before we formed Obvious and one of the great reliefs for me has been to just send all my deal flow to James and the team. However, as James described, there’s a focus at Obvious both in deal size and area that doesn’t include everything, so Sanity is basically an enterprise product and the reason it was interesting to me is is because of the future infrastructure of how content is [distributed] is super interesting to me for Medium’s purposes. I liked what Sanity is doing. I was really impressed. It just didn’t align necessarily with the focus areas of Obvious, so that’s why I did that deal. But it’s really rare.
TC: What percentage of the firm’s deals are inbound versus outbound?
JJ: We make sure we have the bandwidth to do both. We call it hunting and farming. Farming is farming the inbox, [and reviewing] all those introductions from our networks that come in. Probably 60% to 70% of our investment portfolio came from that inbound, but 30% to 40% came from hunting, which is building apoint of view around a theme that we care about,then going out and mapping out who are all the entrepreneurs who are doing work in that area, and who are the angel investors and pre-seed funds that are doing good work in that area, because those are important relationships for us as well.
TC: What’s your position on Bitcoin?
JJ: We definitely did our research and we tried to answer the question: are there world-positive applications for blockchain writ large and then specifically for Bitcoin as a blockchain cryptocurrency? We haven’t found any that we’ve made an investment in yet, but we’re open to the idea we continue to research that space.
TC: You recently added Tina Hoang-To to the team; she joined you from the late-stage and crossover fund Technology Crossover Ventures. Will Obvious be making more growth-stage investments?
JJ: We’re known for our early stage work, but from day one, we crafted a barbell strategy where we said, because we’re thematic, because we want to find the best plant protein companies, find the best electric transportation companies, we knew that some of those companies that we would be hunting might already be at the growth stage. So we architected our funds to be 75% early stage and 25% emerging growth roughly. Now, with the addition of Tina, we’re basically increasing our horsepower [on that front]. We’ve got someone better and smarter than us who knows [growth stage companies] really well.
TC: Might we see Obvious form a special purpose acquisition company, or SPAC, around a growth-stage company?
JJ: Ev, I know you’ve gotten incoming about SPACs. Our take at Obvious is that we do not have any plans to create an Obvious Ventures SPAC. We tend to stick to our knitting. I will say that a number of our companies that are that are at the growth stage, [meaning in the] $50 million to $100 million dollars [range] of annual revenue where they’re thinking about public markets, they’re being approached by a number of SPAC [sponsors] as interesting targets. So we’re seeing that, and it’s really up to our founders, not us [if they move forward with these]. But we certainly have a voice on the board and we’re considering in some cases, our portfolio companies going public via a SPAC
EW: I haven’t haven’t looked into [SPACs] seriously yet. I think liquidity can be a good thing, and hopefully many of these SPACs will work out, but I’m kind of in a wait-and see-mode like a lot of people.
IT security software company Ivanti has acquired two security companies: enterprise mobile security firm MobileIron, and corporate virtual network provider Pulse Secure.
In a statement on Tuesday, Ivanti said it bought MobileIron for $872 million in stock, with 91% of the shareholders voting in favor of the deal; and acquired Pulse Secure from its parent company Siris Capital Group, but did not disclose the buying price.
The deals have now closed.
Ivanti was founded in 2017 after Clearlake Capital, which owned Heat Software, bought Landesk from private equity firm Thoma Bravo, and merged the two companies to form Ivanti. The combined company, headquartered in Salt Lake City, focuses largely on enterprise IT security, including endpoint, asset, and supply chain management. Since its founding, Ivanti went on to acquire several other companies, including U.K.-based Concorde Solutions and RES Software.
If MobileIron and Pulse Secure seem familiar, both companies have faced their fair share of headlines this year after hackers began exploiting vulnerabilities found in their technologies.
Just last month, the U.K. government’s National Cyber Security Center published an alert that warned of a remotely executable bug in MobileIron, patched in June, allowing hackers to break into enterprise networks. U.S. Homeland Security’s cybersecurity advisory unit CISA said that the bug was being actively used by advanced persistent threat (APT) groups, typically associated with state-backed hackers.
Meanwhile, CISA also warned that Pulse Secure was one of several corporate VPN providers with vulnerabilities that have since become a favorite among hackers, particularly ransomware actors, who abuse the bugs to gain access to a network and deploy the file-encrypting ransomware.
Everyday thousands of trucks carry freight along U.S. highways, propelling the economy forward as consumer goods, electronics, cars and agriculture make their way to distribution centers, stores and eventually households. It’s inside these trucks — many of which sit half empty — where Flock Freight, a five-year-old startup out of San Diego, believes it can transform the industry.
Now, it has the funds to try and do it.
Flock Freight said Tuesday it has raised $113.5 million in a Series C round led by SoftBank Vision Fund 2. Existing investors SignalFire, GLP Capital Partners and Google Ventures also participated in the round, in addition to a new minority investment by strategic partner Volvo Group Venture Capital. Ervin Tu, managing partner at SoftBank Investment Advisers, will join Flock Freight’s board. The company, which has raised $184 million to date, has post-funding valuation of $500 million, according to a source familiar with the deal who confirmed an earlier report by Bloomberg.
A slew of startups have popped up in the past several years all aiming to use technology to transform trucking — the backbone of the U.S. economy that moves more than 70% of all U.S. freight — into a more efficient machine. Most have focused on building digital freight networks that connect truckers with shippers.
Flock Freight has focused instead on the shipments themselves. The company created a software platform that helps pool shipments into a single shared truckload to make carrying freight more efficient. Flock Freight says its software avoids the traditional hub-and-spoke system, which is dominated by trucks with less than a full load, known in the industry as LTL. Flock Freight says that by pooling shipments that are going the same direction onto one truck, freight-related carbon emissions can be reduced by 40%.
The funds will be used to hire more employees; it has 129 employees to date.
“Unlike the digital freight-matching category that uses technology to simply improve efficiency as workflow automation, Flock Freight uses technology to power a new shipping mode (shared truckload) that makes freight transportation more efficient. The impact of Flock Freight’s algorithms is that shippers no longer need to adhere to LTL constraints for freight that measures up to 44 linear feet; instead, they can classify it as ‘shared truckload,'” Oren Zaslansky, founder and CEO of Flock Freight said in a statement. “Shippers can use Flock Freight’s efficient shared truckload solution to accommodate high demand and increased urgency.”
Their pitch has been compelling enough to attract a diverse mix of venture firms and corporate investors such as Volvo and Softbank.
“Flock Freight is improving supply chain efficiency for hundreds of thousands of shippers. Our investment is intended to accelerate the company’s ability to scale its business and capture a greater share of the market,” said Tu, Managing Partner at SoftBank Investment Advisers.
With the pandemic playing havoc with children’s education EdTech startups have been on a roll. A new fundraising seems to come almost every week at this point.
Today it’s Novakid’s turn. This EdTech startup is yet another ‘learning English as a second language for children’ startup. But it at least has a chance among the plethora of solutions out there, having raised a $4.25 million Series A financing led by Hungary-based PortfoLion (part of OTP, a leading banking group in Eastern Europe), alongside a prominent EdTech-focused US fund LearnStart. LearnStart is part of the LearnCapital VC which has previously backed VIPKID and Brilliant.org. TMT Investments and Xploration Capital also joined the round. Both seed investors – South Korea-based BonAngels, as well as LETA Capital, took part in this financing round in January this year, of $1.5M.
Novakid’s teaching method is based around the ideas of language acquisition by Asher, Thornbury, Krashen and Chomsky, and it is specifically suited for children aged 4-12. It is incorporated in the US with development and customer support around Europe.
Max Azarow, Co-founder and CEO said: “Novakid is reinventing English learning for kids in countries where English is not a primary spoken language. There, English would usually be taught as an abstract subject, with focus on grammar and with little live practice offered. Novakid on the other hand, implements a unique format that combines a highly-interactive digital curriculum and with individual live tutor sessions where students & tutor only speak English for a 100% language immersion.”
Aurél Påsztor, Partner at PortfoLion, commented: “Novakid attracted investor attention due to its excellent traction, which resulted in over 500% growth year-on-year both in terms of number of students and in terms of revenue. Other attractive points were strong customer retention, international business footprint and a solid monetization via paid subscriptions.”
vivenu, a ticketing platform that offers an API for venues and promoters to customize to their needs, has closed a $15 million (€12.6 million) in Series A funding led by Balderton Capital. Previous investor Redalpine also participated.
Historically-speaking, most ticketing platform startups took a direct to consumer approach, or have provided turnkey solutions to big event promoters. But in this day and age, most events require a great deal more flexibility, not least because of the pandemic. So, by offering an API and allowing promoters that flexibility, Vivenu managed to gain traction.
Venues and event owners get a full-featured ticketing, out-of-the-box platform with full real-time dynamic control over all aspects of selling tickets including configuring prices and seating plans, leveraging customer data and insights and mastering a branded look and feel across their sales channels. It has exposed APIs enabling many different custom use cases for large international ticket sellers. Since its Seed funding in March, the company says it has sold over 2 million tickets.
Simon Hennes, CEO and co-founder of vivenu said in a statement: “We created vivenu to address the need of ticket sellers for a user-centric ticketing platform. Event organizers were stuck with solutions that heavily depend on manual processes, causing high costs, dependencies, and frustration on various levels.”
Daniel Waterhouse, Partner at Balderton said: “Vivenu has built a sophisticated product and set of APIs that gives event organisers full control of their ticketing operations.”
vivenu is also the first European investment of Aurum Fund LLC, the fund associated with the San Francisco 49ers. Also investing in the round are Angels including Sascha Konietzke (Founder at Contentful), Chris Schagen (former CMO at Contentful), Sujay Tyle (Founder at Frontier Car Group) and Tiny VC.
In March 2020, vivenu secured €1.4 million in seed funding, bringing its total funding to €14 million. Previous investors include early-stage venture capital investor Redalpine, GE32 Capital and Hansel LLC (associated with the founders of Loft).
Speaking to TechCrunch Hennes said: “You have to send your seat map to Ticketmaster, and then the account manager comes back to you with a sitemap. This goes back and forth and takes ages. With us you have a seating chart designer basically integrated into the software which you can simply change yourself.”
The pandemic has made it all but impossible for a retail company without an online presence to survive. Yet while companies heavily dependent on foot traffic like J.Crew and Sur la Table have filed for bankruptcy this year, companies that are expert in e-commerce have thrived, including Target and Walmart.
Amazon has gained perhaps the most steam in 2020, attracting roughly one quarter of all dollars spent online by U.S. shoppers throughout the year.
Unfortunately, as more shopping moves online, fraud is exploding, too. The problem is such that startups working with enterprises on the problem — flagging transactions for banks, for example — are raising buckets of funding. Meanwhile, one New York-based startup, Fakespot, is taking a different approach. It’s using AI to notify online shoppers when the products they’re looking to buy are fake listings or when reviews they’re reading on marketplaces like Amazon or eBay are a fiction.
We talked earlier today with founder and Kuwaiti immigrant Saoud Khalifah about the four-year-old business, which got started in his dorm room after his own frustrating experience in trying to buy nutritional supplements from Amazon. After he’d nabbed his master’s degree in software engineering, he launched the company in earnest. Like many other companies,
Like many other companies, Fakespot was originally focused on helping enterprise customers identify counterfeit outfits and fake reviews. When the pandemic struck, company spied an “opening crack on the internet,” as Khalifah describes it, and began instead catering directly to consumers who are increasingly using platforms that are struggling to keep up — and whose solutions are often more focused on protecting sellers from buyers and not the other way around.
The pivot seems to be working. Fakespot just closed on $4 million in Series A funding led by Bullpen Capital, which was joined by SRI Capital, Faith Capital and 500 Startups among others in a round that brings the company’s total funding to $7 million.
The company is gaining more attention from shoppers, too. Khalifah says that a Chrome browser extension introduced earlier this year has now been downloaded 300,000 times — and this on the heels of “millions of users” who have separately visited Fakespot’s site, typed in a URL of a product review, and through its “Fakespot analyzer,” been provided with free data to help inform their buying decisions.
Indeed, according to Khalifah, since Fakespot’s official founding it has amassed a database of more than 8 billion reviews — around 10 times as many as the popular travel site Tripadvisor — from which its AI has learned. He says the tech is sophisticated enough at this point to identify AI-generated text; as for the “lowest-hanging fruit,” he says it can easily spot when reviews or positive sentiments about a company are posted in an inorganic way, presumably published by click farms. (It also tracks fake upvotes.)
As for where shoppers can use the chrome extension, Fakespot currently scours all the largest marketplaces, including Amazon, eBay, Best Buy, Walmart, and Sephora. Soon, says Khalifah, users will also be able to use the technology to assess the quality of products being sold through Shopify, the software platform that is home to hundreds of thousands of online stores. (Last year, it surpassed eBay to become the No. 2 e-commerce destination in the U.S., according to Shopify.)
Right now, Fakespot is free to use, including because every review a consumer enters into its database helps train its AI further. Down the road, the company expects to make money by adding a suite of tools atop its free offering. It may also strike lead-generation deals with companies whose products and reviews it has already verified as real and truthful.
The question, of course, is how reliably the technology works in the meantime. While Khalifah understandably sings Fakespot’s praises, a visit to the Google Play store, for example, paints a mixed picture, with many enthusiastic reviews and some that are, well, less enthusiastic.
Khalifah readily concedes that Fakespot’s mobile apps need more attention, which he says they will receive. Though Fakespot has been focused predominately on the desktop experience, Khalifah notes that more than half of online shopping is expected to be conducted over mobile phones by some time next year, a shift that isn’t lost on him, even while it hinges a bit on the pandemic being brought effectively to an end (and consumers finding themselves on the run again).
Still, he says that “ironically, a lot of [bad] reviews are from sellers who are angry that we’ve given them F grades. They’re often mad that we revealed that their product is filled with fake reviews.”
As for how Fakespot moves past these to improve its own rating, Khalifah suggests that the best strategy is actually pretty simple.
“We hope we’ll have many more satisfied users,” he says, adding: “No one else really has consumers’ backs.”
Josh Elman is moving over to Apple, he announced on Twitter today, saying he will be focused on the company’s App Store and helping “customers discover the best apps for them.”
Asked for more details about his new role, Elman referred us to Apple, which confirmed his employment but declined to offer more, including about his new title. (This is typical operating procedure for the tech giant.)
Certainly, Elman has plenty of experience with fast-growing technologies and popular apps in particular. One of his first jobs out of Stanford was with RealNetworks, a bubble-era internet streaming company that went public in 1997, three years after it was funded. (It remains publicly traded, though its market cap is just $60 million these days.)
After RealNetworks, it was on to LinkedIn, which Elman joined in 2004 as a senior product manager when the company was just two years old. From there, Elman worked in product management at the custom apparel and accessories company Zazzle, then at Facebook, then Twitter.
Perhaps unsurprisingly, the venture firm Greylock brought Elman into the fold in 2011 as a principal, and by 2013, he was a general partner, investing in social networking deals throughout like Musical.ly (Bytedance acquired the company and turned it into TikTok); Nextdoor (which is reportedly eyeing ways to go public); Houseparty (acquired last year by Epic Games, which is now suing Apple); and Discord (which is sewing up a private funding deal at a valuation of roughly $7 billion).
Somewhat unexpectedly, in 2018, Elman left his full-time role with Greylock to join a company notably not in the firm’s its portfolio, the stock-trading platform Robinhood. As interesting, though he took on the role of VP of product at the popular and fast-growing startup, he didn’t cut ties with Greylock entirely, taking on the title of venture partner and remaining on as a board member to his companies.
Asked about the move, Elman told TC at the time that he had “started talking with a few of my partners about how I want to spend the next decade of my professional life. What gets me the most energized is when I can dig in on product with a hyper-growth company.”
Ultimately, the role didn’t last long, with Elman leaving last November after less than two years on the job. Now Elman — who said he’s stepping away from some of his Greylock-related board seats — has a new chance to do what he loves most that from one of the most powerful perches in the world, the App Store.
“I’m really excited to get to build ways to help over a billion customers and millions of developers connect,” he tweeted earlier. He added in the same thread: “I recently found my college resume. My career objective was ‘To create great technology that changes people’s lives’. Still at it :)”
Chris Kim and Nate Williams formed Union Labs with the conviction that investors and companies aren’t collaborating closely enough to ensure the success of the startups they back.
Kim is the former co-founder and chief technology officer at the automatic lock company August. He first met Williams when the company was attempting to create a consortium of stakeholders for the Internet of Things market.
“Nate loved the go-to-market side when he came on board. He led the charge for us getting into retail,” Kim said.
Later, when August was acquired in 2017, the two men continued to work together after Williams took a role as an entrepreneur in residence at Kleiner Perkins. Kim would assist in due diligence as the two continued to refine the thesis that they’d worked on at August — that uniting stakeholders was a critical component of success for new technology companies.
That thesis became the organizing principle for their Union Labs fund, which has raised $29 million of a targeted $50 million fund.
“We’re starting to see this bifurcation between really, really hard deep tech firms versus other firms that might [have] one out of five of their deals being deep tech. Chris and I saw a lane for ‘applied’ deeptech,” said Williams.
This lane runs through the early-stage technology firms that need guidance from operators at hardware companies rather than the software-as-a-service experts that Williams and Kim said populate most venture capital firms. “Educating a SaaS partnership about ‘hard tech’ is super hard,” said Williams.
One example of the kinds of startups that the new Union Labs fund is hoping to back is Strella Biotechnology, a company that has developed sensors to monitor the ethylene gas emitted by produce to determine the freshness of fruits and vegetables.
Union Labs is targeting 20 investments with the first fund, including 15 direct investments and another three-to-five companies that it intends to incubate.
The other public investments in the company’s portfolio include the car rental optimization service Carnect and a toolkit for home safety called Encircle Labs (that’s not revealing too much about its business).
A fourth portfolio company, that has yet to publicly reveal its services, is working on solving problems in field service management related to training.
While these issues have presented challenges for industry, with the exception of the sensor business, none of them could be considered “hard tech” from a hardware perspective… and indeed, many of them resemble the software-as-a-service businesses that many firms are writing checks to support.
For its part, Union Labs is writing pre-seed and seed-stage checks with an average size of $890,000 for an 11% ownership stake. Williams says the firm will invest anywhere from $500,000 to $1.5 million.
For startups, one selling point for the firm is the connection it still maintains with the Internet of Things consortium Williams helped to establish for August Homes. Through the consortium Williams has been able to pull together corporate backers in telecommunications, utilities, consumer electronics and insurance, along with Kleiner Perkins and GV (which Williams said are investors).
“One of the things we’ve seen is the rise of corporate venture capital firms,” said Williams. And both Kim and Williams want their firm to act as a hybrid, between corporate venture capital and a traditional venture firm.
Time will tell if they can turn their mission into something more than a marketing message.