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.
Ever since the pandemic hit the U.S. in full force last March, the B2B tech community keeps asking the same questions: Are businesses spending more on technology? What’s the money getting spent on? Is the sales cycle faster? What trends will likely carry into 2021?
Recently we decided to join forces to answer these questions. We analyzed data from the just-released Q4 2020 Outlook of the Coupa Business Spend Index (BSI), a leading indicator of economic growth, in light of hundreds of conversations we have had with business-tech buyers this year.
A former Battery Ventures portfolio company, Coupa* is a business spend-management company that has cumulatively processed more than $2 trillion in business spending. This perspective gives Coupa unique, real-time insights into tech spending trends across multiple industries.
Tech spending is continuing despite the economic recession — which helps explain why many startups are raising large rounds and even tapping public markets for capital.
Broadly speaking, tech spending is continuing despite the economic recession — which helps explain why many tech startups are raising large financing rounds and even tapping the public markets for capital. Here are our three specific takeaways on current tech spending:
Tech spending ranks among the hottest boardroom topics today. Decisions that used to be confined to the CIO’s organization are now operationally and strategically critical to the CEO. Multiple reasons drive this shift, but the pandemic has forced businesses to operate and engage with customers differently, almost overnight. Boards recognize that companies must change their business models and operations if they don’t want to become obsolete. The question on everyone’s mind is no longer “what are our technology investments?” but rather, “how fast can they happen?”
Spending on WFH/remote collaboration tools has largely run its course in the first wave of adaptation forced by the pandemic. Now we’re seeing a second wave of tech spending, in which enterprises adopt technology to make operations easier and simply keep their doors open.
SaaS solutions are replacing unsustainable manual processes. Consider Rhode Island’s decision to shift from in-person citizen surveying to using SurveyMonkey. Many companies are shifting their vendor payments to digital payments, ditching paper checks entirely. Utility provider PG&E is accelerating its digital transformation roadmap from five years to two years.
The second wave of adaptation has also pushed many companies to embrace the cloud, as this chart makes clear:
Image Credits: Battery Ventures (opens in a new window)
Similarly, the difficulty of maintaining a traditional data center during a pandemic has pushed many companies to finally shift to cloud infrastructure under COVID. As they migrate that workload to the cloud, the pie is still expanding. Goldman Sachs and Battery Ventures data suggest $600 billion worth of disruption potential will bleed into 2021 and beyond.
In addition to SaaS and cloud adoption, companies across sectors are spending on technologies to reduce their reliance on humans. For instance, Tyson Foods is investing in and accelerating the adoption of automated technology to process poultry, pork and beef.
Mention “digital product company” in the past, and we’d all think of Netflix. But now every company has to reimagine itself as offering digital products in a meaningful way.
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.”
Latin America’s startup scene has attracted troves of venture investment, lifting highly-valued companies such as Rappi and NuBank into behemoth businesses. Now that the spotlight has arrived, those same startups need more talent than ever before to meet demand.
That’s where one seed-stage Buenos Aires startup wants to help. Henry has created an online computer science school that trains software developers from low-income backgrounds to understand technical skills and get employed. The company was founded by brother-sister duo Luz and Martin Borchardt, as well as Manuel Barna Ferrés, Antonio Tralice and Leonardo Maglia.
The Henry team.
The company claims that there’s an estimated 1 million software engineering job openings in Latin America, but fewer than 100,000 professionals that have training suitable for those roles.
“Higher education is only for 13% of the population in Latin America,” says Martin Borchardt, CEO and co-founder of Henry . “It’s very exclusive, very expensive, and has very low impact skills. So we’re giving these people an opportunity.”
With 90% of graduates coming from no formal higher education background, Henry seeks to help bring more back-end junior developers and full-stack developers into startups. Henry offers a five-month course that goes from Monday to Friday, 9 a.m. to 6 p.m., which focuses on software developer skills. Beyond technical training, Henry gives participants job coaching, resume workshops and up-skilling opportunities post-graduation.
To make the school more affordable, Henry looks to take on the same strategy used by Lambda School, a YC-graduate that has raised over $122 million in known funding: income-share agreements. The set-up would allow for boot camp participants to join the program at zero upfront costs, and then only pay once they get hired at a job.
Lambda School’s ISA terms ask students to pay 17% of their monthly salary for 24 months once they earn $4,167 monthly. The students pay a maximum of $30,000. Henry takes a much smaller slice of the pie, partly because salaries are lower in Latin American than in the United States. Henry asks students to pay 15% of their monthly salary for 24 months once students earn $500 a month.
If a Henry student doesn’t get employed in a job that allows them to make $500 a month within five years after the program completes, they are off the hook for paying back the boot camp.
Henry is also focused on helping more women get into the field of software development. Internally, Henry’s remote team is 20% women, 64% men. The current students reflect the same breakdown.
One issue with coding boot camps is that while it might help a student go from unemployed to employed, the lack of credential and degree might limit career mobility past that first job. For that reason, Henry has created a database of alumni resources, including up-skilling and reskilling opportunities in the latest skill, which will be free of charge for graduates.
Henry needs to execute on job placement to be successful in its field. Currently, more than 80% of students in Henry’s first cohort have found jobs, but it’s too soon in the startups’ trajectory to get a stronger metric on that front. About four Henry graduates have been employed by the startup.
The need for more talent in emerging countries has not gone unnoticed. Microverse, also funded by Y Combinator, is similarly using income-sharing agreements to bring education to the masses in developing countries, including spaces in Latin America. Henry thinks the competitor is approaching the dynamic too broadly.
“They’re focusing on all emerging markets and don’t teach to Spanish speakers,” Borchardt said. Henry, alternatively, focuses on Spanish speakers, over 60% of its market in Latin America.
What if Lambda School, the source of Henry’s inspiration, was to break into Latin America? The founder added that the richly funded company has tried, and failed, to expand into international geographies, including China and Europe, due to fragmentation.
Currently, Henry has graduated 200 students and is working with 600 students across Colombia, Chile, Uruguay and Argentina. It plans to expand into Mexico and to bring on Portuguese instruction.
Now, VCs are giving Henry some cash to do so. After going through Y Combinator’s Summer batch, Henry announced today that it has raised $1.5 million in seed funding in a round led by Accion Venture Lab, Emles Venture Partners and Noveus VC. There were also a number of edtech angel investors from Latin American that participated in the round.
“I love the human interaction within instructors and our staff and students,” Borchardt said. “That is something very powerful of Henry compared to a MOOC. The biggest challenge is how do you scale maintaining those assets that bring you that?”
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.
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.
Fylamynt, a new service that helps businesses automate their cloud workflows, today announced both the official launch of its platform as well as a $6.5 million seed round. The funding round was led by Google’s AI-focused Gradient Ventures fund. Mango Capital and Point72 Ventures also participated.
At first glance, the idea behind Fylamynt may sound familiar. Workflow automation has become a pretty competitive space, after all, and the service helps developers connect their various cloud tools to create repeatable workflows. We’re not talking about your standard IFTTT- or Zapier -like integrations between SaaS products, though. The focus of Fylamynt is squarely on building infrastructure workflows. While that may sound familiar, too, with tools like Ansible and Terraform automating a lot of that already, Fylamynt sits on top of those and integrates with them.
“Some time ago, we used to do Bash and scripting — and then [ … ] came Chef and Puppet in 2006, 2007. SaltStack, as well. Then Terraform and Ansible,” Fylamynt co-founder and CEO Pradeep Padala told me. “They have all done an extremely good job of making it easier to simplify infrastructure operations so you don’t have to write low-level code. You can write a slightly higher-level language. We are not replacing that. What we are doing is connecting that code.”
So if you have a Terraform template, an Ansible playbook and maybe a Python script, you can now use Fylamynt to connect those. In the end, Fylamynt becomes the orchestration engine to run all of your infrastructure code — and then allows you to connect all of that to the likes of DataDog, Splunk, PagerDuty Slack and ServiceNow.
The service currently connects to Terraform, Ansible, Datadog, Jira, Slack, Instance, CloudWatch, CloudFormation and your Kubernetes clusters. The company notes that some of the standard use cases for its service are automated remediation, governance and compliance, as well as cost and performance management.
The company is already working with a number of design partners, including Snowflake.
Fylamynt CEO Padala has quite a bit of experience in the infrastructure space. He co-founded ContainerX, an early container-management platform, which later sold to Cisco. Before starting ContainerX, he was at VMWare and DOCOMO Labs. His co-founders, VP of Engineering Xiaoyun Zhu and CTO David Lee, also have deep expertise in building out cloud infrastructure and operating it.
“If you look at any company — any company building a product — let’s say a SaaS product, and they want to run their operations, infrastructure operations very efficiently,” Padala said. “But there are always challenges. You need a lot of people, it takes time. So what is the bottleneck? If you ask that question and dig deeper, you’ll find that there is one bottleneck for automation: that’s code. Someone has to write code to automate. Everything revolves around that.”
Fylamynt aims to take the effort out of that by allowing developers to either write Python and JSON to automate their workflows (think “infrastructure as code” but for workflows) or to use Fylamynt’s visual no-code drag-and-drop tool. As Padala noted, this gives developers a lot of flexibility in how they want to use the service. If you never want to see the Fylamynt UI, you can go about your merry coding ways, but chances are the UI will allow you to get everything done as well.
One area the team is currently focusing on — and will use the new funding for — is building out its analytics capabilities that can help developers debug their workflows. The service already provides log and audit trails, but the plan is to expand its AI capabilities to also recommend the right workflows based on the alerts you are getting.
“The eventual goal is to help people automate any service and connect any code. That’s the holy grail. And AI is an enabler in that,” Padala said.
Gradient Ventures partner Muzzammil “MZ” Zaveri echoed this. “Fylamynt is at the intersection of applied AI and workflow automation,” he said. “We’re excited to support the Fylamynt team in this uniquely positioned product with a deep bench of integrations and a nonprescriptive builder approach. The vision of automating every part of a cloud workflow is just the beginning.”
The team, which now includes about 20 employees, plans to use the new round of funding, which closed in September, to focus on its R&D, build out its product and expand its go-to-market team. On the product side, that specifically means building more connectors.
The company offers both a free plan as well as enterprise pricing and its platform is now generally available.
Wellory, a startup that bills itself as taking an “anti-diet approach” to nutrition and wellness, is announcing that it has raised $4.2 million in funding.
The round was led by Story Ventures, with participation from Harlem Capital, Tinder co-founders Sean Rad and Justin Mateen, Ground Up Ventures, NBA player Wayne Ellington, Hannah Bronfman and others.
Wellory founder and CEO Emily Hochman (who was previously the head of customer success at WayUp) told me that she struggled with dieting in college, to the point where she was risking chronic illness and infertility. As a result, she became determined to gain a better understanding of nutrition and her own health, eventually studying and becoming a certified health coach at the Institute for Integrative Nutrition.
Hochman said that through Wellory, she wants to offer that same understanding to others, which she said has created a “managed marketplace” matching users with a licensed nutritionist, registered dietitian or certified health coach. Those coaches create a personalized plan for losing weight or achieving other health goals, then continue to provide feedback as users share photos of each meal and additional health data.
For example, she said that a customer who had just given birth and was interested in postpartum weight loss would get matched with a coach who specializes in that area.
“The thing that is so important is that we build personalized plans,” she added. “We don’t have anything that says, ‘At Wellory, we do these 10 things and that’s a standard diet.’ We’re actually going to help you learn how to make smart and healthy decisions.”
Wellory CEO Emily Hochman (Image Credit: Wellory)
Wellory officially launched in September, but Hochman said some beta testers have been using the service for nine, 10 or 11 months. She said early customers include people who are interested in weight loss, those who need nutrition advice due to chronic illness and “optimizers” who simply want to make sure they’re eating as healthily as possible.
She also noted that although customers usually sign up with a specific goal in mind, “once they hit their goal, because of the power of a strong relationship, they say, ‘I don’t want to go back to where I was, let’s keep building, let’s make sure I can sustain this.’ ”
The app is available on iOS and Android and currently costs $59.99 per month. Hochman plans to introduce additional pricing tiers. and she said the funding will allow Wellory to expand the technology and marketing teams, and to explore new partnerships.
“As a data technology investor, we get approached by different types of wearable or diagnostic companies nearly every week,” said Jake Yormak of Story Ventures in a statement. “We love the category but what we saw in Wellory was a way to put a human coach at the center of understanding this health data. With nutrition as the wedge, Wellory has built a trusted relationship with people who affirmatively want to better understand and improve their wellbeing.”
This morning AgentSync, an insurtech startup focused on agent compliance management, announced a new funding round worth $6.7 million.
The new capital will help AgentSync move faster, with co-founder and CEO Niranjan Sabharwal saying that it is pulling hires earmarked for next year into 2020. He added that this most recent fundraising cycle consumed far less time than the round that preceded it.
TechCrunch asked what the company is calling this round, which was raised via a SAFE note instead of as a priced equity investment. Sabharwal said that it could be called a Seed-Extension, which seems reasonable.
The new investment was raised at a cap of around 4x its previous conversion ceiling.
TechCrunch last covered AgentSync this August, when the startup announced a $4.4 million funding round. Akin to fellow early-stage startup Welcome, which announced a second 2020 raise earlier today, AgentSync managed to quickly raise again.
In AgentSync’s case, it’s not hard to parse why the company was able to: It’s growing very quickly.
According to an interview with Sabharwal, the company has seen its revenue scale 4x since the start of the pandemic, and 10x in the last year. The timeframes around those metrics are slightly relaxed, but the raw growth underscores that AgentSync is onto something.
Sabharwal founded the company with his spouse Jenn Knight and recently moved the company’s HQ to Denver from San Francisco.
AgentSync’s product, born out of a tool that Zenefits developed while rebuilding itself, helps insurance companies and other players in the insurance space ensure that agents are compliant (hence its name). And while that conceit might sound like a modest effort, it’s a complex effort given a multi-stakeholder environment, regulatory conditions, and an antiquated market.
The company saw strong initial traction, reporting $1.9 million ARR during its August round. Doing some mental math, if AgentSync was doing around $1 million ARR in March, it would be at around $4 million ARR today. That feels roughly correct, given the 4x-since-March metric, and the $1.9 million ARR datapoint from mid-Q2 2020.
According to Sabharwal, AgentSync now has more than $10 million in the bank, meaning that the startup is very well capitalized to continue scaling in the coming quarters. New investor Sacks is bullish about how large AgentSync could become, telling TechCrunch in an email that its “market is huge,” and that the “insurtech revolution is [still] in its infancy.”
But while AgentSync is growing quickly and has found reasonable product-market fit — 17% of its net ARR today was driven by what the company descried as net-organic expansion, to pick an example — it still has the hallmarks of an early-stage startup like inconsistent sales cycle length, according to several deals that the CEO detailed during an interview. However, the company recently hired a sales team after a period of time when Sabharwal was in charge of selling; the company’s selling process should accelerate in coming quarters.
The CEO told TechCrunch that until recently he was selling AgentSync solo with no enterprise sales experience. If he could do it, he reasoned, others will be able to as well. Sabharwal serves as the startup’s CEO, while Knight is its CTO.
Closing, Insurtech is hot, meaning that AgentSync is growing amidst fertile market ground and investor interest. Another few quarters of similar growth and we could be hearing about its Series A.
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.
Space tourism startup Space Perspective has raised a new $7 million in seed funding, from investors including Prime Movers Lab and Base Ventures . The company, founded by Jane Poynter and Taber MacCallum, who previously founded stratospheric balloon company World View, is focused on developing Spaceship Neptune, a pressurized passenger capsule that is meant to be carried by an ultra-high altitude balloon to the very edge of space to provide passengers with an unparalleled view.
Spaceship Neptune is designed to carry up to eight passengers per trip, on a six-hour journey that will include two hours spent at the upper edge of Earth’s atmosphere and a water landing in the Atlantic Ocean. The first test flight is currently targeted for the end of the first quarter of 2021, according to Space Perspective, and it will involve flying an uncrewed Neptune capsule prototype, which also won’t have the pressurized cabin of the final version.
From there, the plan is to test and develop systems necessary for Neptune to take up its first human passengers, with the goal of doing that by sometime around 2024, with ticket pre-sales launching from 2021 for interested, deep-pocketed parties.
Poynter and MacCallum’s prior venture World View originally included human stratospheric space tourism trips as part of its business model, but the company has since pivoted to focus on scientific and commercial communication and observation payloads exclusively under its current leadership. World View appointed Ryan Hartman as CEO in 2018, replacing Poynter in the top spot.
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.
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.
We’re live! Check the links below!
The conversation is part of the second season of our Extra Crunch Live series that has seen all sorts of investors and founders join TechCrunch for a dig into their work.
Das’ participation comes at the perfect moment: He invested early in MuleSoft, which sold to Salesforce for $6.5 billion back in 2018. Salesforce is expected to announce its purchase of Slack later today, perhaps before our chat. Either way, we’ll ask Das about selling companies, selling them to Salesforce in particular and what we should take away concerning the enterprise software M&A market from the deal.
Here are notes from the last episode of Extra Crunch Live with Bessemer’s Byron Deeter.
And as we noted last week, we will also dig into the role of corporate venture capital in 2020 and beyond, the state of early-to-growth stage investing as Sapphire leads rounds from Series A to Series C, API-led startups, along with the importance of geographic location in the pandemic for founding teams and more.
It’s going to be fun! And it’s in just a few hours. So make sure that your Extra Crunch login works, hit the jump, save the time to your calendar and submit a question ahead of time if you want me to see your notes before we start. In the meantime, I’m going to find my most Zoom-friendly shirt and run through my intro a few times.
We’re live in mere hours! See you soon.
Below are links to add the event to your calendar and to save the Zoom link. We’ll share the YouTube link shortly before the discussion:
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.