Perceivant strikes valuation between $10M-$20M

Are expiry windows on employee stock options fair?

Last week, we talked a little about employee stock options. Context: I’m spearheading a community of remote workers interested in roles at early-stage startups that offer equity.

Since then, I’ve spent time thinking about what doesn’t work with stock options. This piece from 2014 by Sam Altman was a good jumping off point. What stood out to me is expiry windows on exercising options. Why do they exist? What legitimate function do they serve that isn’t predatory? There seems to be no good reason for why, in most cases, employees have 90 days after vesting to exercise their options. It seems like an attempt to clawback equity from employees that can’t afford to exercise the options the moment it vests. Considering expiry windows, and the undue burden they place on employees, Altman concludes: “This doesn’t seem fair.”

That’s why I was happy to find this Medium post by David Hariri, co-founder and Head of Product Design at Ada Support, which covers stock options in Canada, but also how the company moved away from short-term expiry windows. From the post:

At Ada, we felt uncomfortable about a 30-day or even a 90-day expiry. The expiries on our options are set at 5 years. We think this constitutes “real ownership” and allows our team time to plan for the cost of exercising the options they earn.

Of note here, I think, is the word uncomfortable.

I haven’t fully fleshed out my thoughts here but I’m heartened to see companies like Ada move away from the expiry window on options.

On a related note, things could be worse. You could not even be offered the stock options in the first place. According to Index Ventures’ Introducing our guide to stock options for European entrepreneurs’, on the whole, it’s worse in Europe.

What we discovered was striking. In Europe, startups aren't sufficiently rewarding the risk people take by joining them. On the whole, they’re not offering enough people a meaningful stake in the business. As a result, Europe is currently failing to attract and retain the talent it needs to produce the next global tech giant.

The function of equity is to reward risk. If companies aren’t offering it, they won’t attract the talent they need. So, to address the problem, Index Ventures, in conjunction with founders from some of Europe’s top startups, launched the Not Optional initiative, with the goal of getting European entrepreneurs, investors, and legislators focused and motivated enough to remove pre-existing regional barriers to offering stock options across Europe.

This isn’t just a perk on top of a salary: universally, stock options reward employees for taking the risk of joining a young, unproven business, and give them a real stake in their company’s future success. Stock options are one of the main levers that startups use to recruit the talent they need; these companies simply can’t afford to pay the higher wages of more established businesses. 

This is a great initiative and I’ve reached out to the Not Optional initiative about partnering or garnering support for a community of workers interested in receiving stock options.

The impetus behind the Not Optional initiative is fuelled by a venture capital firm’s desire to generate returns (nothing wrong with that). But, I think the notion of offering stock options to employees isn’t just about creating the next unicorn in Paris or Lisbon or Berlin. Offering real ownership is about fairness.


Chris ✌️

Recent Startup Funding Announcements 💰

Trint, a London and Toronto-based automated transcription and editing platform, recently raised a $4.5M round. After the round, all of the company’s shares remain common, despite raising over $9M to date (Crunchbase had the figure at $7.6M), according to Jeff Kofman, CEO and founder. The company has strategically opted not to raise money from a traditional VC and does not have one on its cap table. “It gives us a little more freedom to navigate the company without being told what to do by outsiders.” Trint did speak with a number of prospective VC investors for the round but politely decided to walk away – despite being in diligence with 2 firms – around November when it became clear the company was going to hit its fundraising mark. The company does have a board member who sits on a very large VC firm, whose early stage fund, Horizon Labs, has put money in, Kofman noted.

Valuation after the round is in the “tens of millions of pounds.” Trint has strong revenue. The company is not cash positive but does have a lower burn rate than expected for a company with close to 50 employees and two offices. One of the company’s strategic investors in this round, TechNexus, reached out after Trint raised its pre-Series A round, around May 2017.

State of the space

(note: the comments below were transcribed with Trint’s software)

So I call the space we're in the voice economy. It is an emerging sector of A.I. that really was only kind of-- it was just a small player probably an even a decade ago. It was something that maybe people imagined. There'd been a couple of legacy companies, like Nuance, around much longer. Nuance is, by the way, not a competitor. It's in a completely different space. It's in the transcription of one person's voice, mostly in the medical field for, say, a doctor giving notes on a medical checkup. That product isn't designed to work for conversations like ours is. But the voice economy itself, that aside, is, really, a new and emerging huge, huge, multi-billion dollar sector. And there are, gosh I don't know. But there are certainly thousands of companies in the U.S., Europe, Israel and elsewhere who are working on voice in some form.

I think like any emerging sector you will see one of three things happen to a lot of these small companies. One, they'll be bought by a bigger company. Two, they will merge into what's sometimes called a roll-up where you see a bunch of small companies merge into a larger company that has more power, more dimension more depth, more breadth. Or three, some of them don't survive. And I think that we're very much at an early stage in the emergence of the voice economy. So I think all three of those things will be happening in the next six to 36 months.

Pixeom, a Silicon Valley-based edge computing platform, spoke to 5 investors for its recent $15M funding round, according to Sam Nagar, CEO and founder. All but 1 of the 5 moved to a term sheet. The round was led by Intel Capital and National Grid Partners and “others.” The company has had a relationship with the leads for about a year. To date, Pixeom has over a million installations of its software by dozens of Fortune 500 companies.

Macro trend

As the edge computing market becomes more well-defined, we will see enterprises architecting their workloads to leverage both the edge and cloud in different ways. Today we hear more about doing things like training ML models in the cloud and then performing inference on the edge. The future however, will be ubiquitous, tiered infrastructure, and Pixeom has been intentionally architected to offer consistent infrastructure from cloud to edge, while offering the advanced capabilities for building out the tiers.

SurveySparrow, a Palo Alto and Kochi, India-based SaaS customer experience platform, spoke with roughly 3-4 investors and received 2 term sheets for its recent $1.4M seed round, according to Shihab Muhammed, CEO and co-founder. Over the next 6-12 months, the company aims to grow customers to 20,000 from 8,000.

Macro trends

Two macro trends, namely, that customer experience is emerging to be the key differentiator in the market, and second, that people are favouring a conversational experience today. Our product was born with a vision to rise these two waves.

By 2020, it is expected that customer experience will override price and product as the key to why people choose a particular product/service. Customer experience is the new marketing. And we are building SurveySparrow as a continuous improvement platform that would help to better the customer experience of a company by closing the feedback loop and resolving issues. 

Brightback, a San Francisco-based customer retention automation software for subscription businesses, spoke with 4 VC firms for its recently announced $11M Series A, according to Guy Marion, CEO and co-founder. The company raised the round in 6 weeks and has known the lead investor, Index Ventures, for 3 years.

Macro trend

Now that cloud and the subscription-based business models are the new norm, in and out of the tech industry, customer retention has become the new acquisition. The blockbuster IPOs of 2019 have rewarded those who are profitable and efficient, while the world has become cynical of those who perpetually lose money and customers.

The mantra for the past decade, at least in SaaS and subscription companies, has been acquire, grow, acquire some more. As an industry, we invest millions acquiring and converting customers, but we don’t make an equal investment in retaining those same customers. Losing users is so common, most leaders don’t even know when their last customer canceled—let alone why. When a customer stops purchasing from you, it’s not just one transaction that’s lost , but the customer’s total expected future sales. It’s a gargantuan problem.

The reality is 15-30% of customers cancel for the wrong reasons. They indicate preventable issues like not onboarding correctly, not seeing value (but still need it) or not having the time to find the features and functionality they need.

If companies don’t know why their subscribers are canceling, they can’t improve the customer experience, and the cycle of churn repeats itself.

This is at the heart of what Brightback is helping SaaS companies solve. We’ve found that a systematic retention strategy increases MRR in a sustainable way. We’re providing a growth lever that CROs and success and product growth leaders can use to hit their churn targets and get closer to their customers. With Brightback, companies meet customers at the right place, at the right time with the right offer for the right reason, and they’re reducing churn by 10% - 20%.

Perceivant, an Indianapolis, IN-based education technology company that replaces traditional textbooks with interactive and data-driven learning experiences, raised its recent $590k round at a valuation between $10M-$20M, according to Brian Rowe (CEO and founder) and Jason Konesco (president). To date, Perceivant has raised a total of $3.75M.

Macro trend

Accessibility. The term “accessibility” is associated with the action of placing course materials on the web to better serve those with hearing or visual impairments. However, many students outside the traditional sense can benefit from these measures. By ensuring content and web software is compliant with all learning styles, classrooms and educators are able to more easily customize learning experiences and styles for each student. And as personalized learning continues to take different forms in the classrooms, it will become vital for education to optimize new levels of accessibility in the classroom. Perceivant’s digital courseware and guided learning tools meet this need.

Data. Today, only 41 percent of colleges and universities leverage data and predictive analytics, with the majority of the efforts focused on operations, fundraising and recruiting efforts. But students and educators can reap the most benefits of predictive analytics in the classroom when it is combined with guided learning and instruction. As this idea continues to go mainstream, data will more aggressively serve as a powerful risk assessment tool while becoming more sophisticated in the overall development of at-risk students by monitoring their learning journey. It will also further be leveraged to identify effective learning materials and level of engagements in real-time to ensure the efficacy of courseware. Perceivant provides predictive analytics, risk assessment tools and guided learning in our platform. This allows educators to ensure students are engaged, retaining information and gather feedback, so they can intervene at higher impact to ensure success for their students.

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Troy Medicare raised at $25M-$30M valuation

Do employees care about stock options?

In the process of putting together this newsletter, I reach out to and hear from many founders. One thing that I’ve noticed is that more companies than expected are remote-friendly and willing to offer equity to remote hires. So, I launched a sister newsletter aimed at featuring remote roles with equity at early-stage startups. Over the past the week, the newsletter has added 1k+ new sign ups organically. But it was unclear to me whether those new sign ups were driven by people interested in 1) remote positions, 2) equity positions, or 3) remote+equity positions.

So, I turned to Reddit to gather feedback on whether receiving equity (via an ESOP or some other plan) is viewed as an incentive to join an early-stage startup (you can view the threads here and here). Overwhelming answer: meh!

Several people referred to equity via an employee pool as a kin to playing the lottery. There may be some “anti-survivorship bias” at play here (several commenters noted that they worked for startups where the equity ended being worthless), but the level of consistency in the responses is notable.

In my mind, one of the main reasons to join an early-stage startup as an employee is to have exposure to the upside if things take off. But, I think it’s clear that there are things that could be improved with equity issued to employees (longer windows to exercise options, policy change on when employees are taxed).

This recent HBR post by Steve Blank tackles the topic (‘How to Make Startup Stock Options a Better Deal for Employees’). Blank writes:

Investors and founders have changed the model to their advantage, but no one has changed the model for employees. Moving the liquidity goal posts may have removed the incentive for non-founders to want to work in a startup versus a large company. Stock options with four-year vesting period are no longer a good match for employees when it may take 10 to 12 years for the company to go public or be acquired.

The piece concludes with a call for a new incentive model: Restricted Stock Agreements (RSAs) for early hires and Restricted Stock Units (RSUs) for everyone else. Based on the redditors willing to talk openly and at length in both threads, it might be time for something like this.

It’s clear that VCs have asymmetric power in their relationship with founders and employees. But if employees don’t value the thing that’s meant to incentivize them to stick around and work hard, doesn’t that ultimately hurt everyone involved?

But there should also just be a sense of fairness for all employees. Whether they’re working in-house or remote, they should be rewarded for their efforts, if and when there’s ever a liquidity event. Which isn’t a given.

Final thought goes to Naval:

Couple bits of housekeeping:

  • The Memo: the recently launched newsletter that features remote roles with equity at early-stage start-ups has added over 1k sign ups in the past week, and has a few handfuls of paying subscribers. Email me if you’re interested.

  • Support the newsletter by sharing with your colleagues or by becoming a paying subscriber.


Chris ✌️

Recent Startup Funding Announcements 💰

Troy Medicare, a Charlotte, North Carolina-based licensed health insurance startup, raised its recent $5M Series A round at a valuation between $25M-$30M, according to Flaviu Simihaian, CEO. The company spoke with over 200 investors for the round and has known the investors in the round (undisclosed) for a year. To date, the company has raised a total of $5M (Crunchbase had $6.2M). Troy Medicare is planning to launch in 5 counties in North Carolina in 2019, with the goal of signing up 1,500 seniors.

Macro trend

The trend currently is towards more local healthcare. We see more doctors deciding to go out on their own, and we see consumers more knowledgeable and empowered than ever to make complex healthcare decisions. We believe we are perfectly positioned to take advantage of these trends.

Our competition is Aetna, Humana, United Healthcare, and BlueCross Blue Shield of North Carolina. However, we are the first health insurance startup to focus on the local independent pharmacy as the quarter-back of healthcare. We believe healthcare is local and that is our advantage against the big health insurance companies that run our healthcare system.

Soma, a Helsinki-based blockchain-based social marketplace startup for watch enthusiasts and merchants, raised its recent €1.1M bridge funding round at a valuation between $5M-$10M, according to Jukka Hilmola, co-founder and CEO. The company raised capital from Finnish angel investors together with a government portion; as the round was raised from the existing investors, no term sheets were circulated externally. To date, Soma has raised approximately $2M. The company has known investors in the round for years (but Hilmola does not consider it to be a prerequisite to raising capital, citing knowledge of entrepreneurs that raised in their first meeting with investors). Capital raised will be used to find product/market fit, generating revenue, and building a team capable of scaling.

Macro trend

This industry is currently going through a phase where we see an upward trend in overall interest in watches. Watch collecting is gaining popularity globally and you can see a phenomenon where people get together to discuss watches and their collections. This phenomenon is happening in the digital environment (i.e Facebook groups) and physically in local clubs or restaurants.

Odaseva, a San Francisco-based cloud data management platform for enterprises running critical business applications in the cloud, will look to use capital from its recent $11.7M Series A round to expanding geographically (beyond North America and Europe) and to go after the biggest global customers, according to Sovan Bin, Chief Executive Officer & Founder. The company knew Partech, the lead investor in the round, for 2-3 years prior (Odaseva and Partech both have offices in France and San Francisco). To date, the company has raised $14M and approximately 3 million Salesforce customers are using Odaseva. Capital from the round will help Odaseva accelerate its go-to-market strategy and build relationships with global customers, which include General Electric, Heineken, Orange Bank, Robert Half, Schneider Electric and Toyota.

Macro trends

  • Regulations like GDPR are forcing companies to look at data protection holistically.

  • GDPR has defined the industry and doesn’t just include data protection but also spans the gamut from DRaaS to back-up to managing new data rights such as the right to have personal data deleted. Data protection is not just backup but also global data governance now.

  • Another trend is the amount and complexity of regulations out there. It seems as though new regulations are popping up in every corner of the world -- data protection for states, companies, non-profits – every level of global society, and we are seeing that not protecting your customer data is not just a technical risk but a financial and reputation risk. The way you protect your data defines your organization and your brand.

AppSheet, a Seattle-based no-code application platform, was introduced to the lead investor (Shasta Ventures) of its recent $15M Series A round over the course of the past 6 months, according to Praveen Seshadri, founder and CEO. To date, the company has raised roughly $19M.

On raising capital

On the one hand, I could say I’d love to have finished it in one day. But at least for me, there was a lot of learning in the process. I met people in the VC community. The best VCs are savvy, experienced and willing to give you feedback. I learned from each of them even when they decided not to invest, and some of them may decide to invest in the future. When Shasta and NEA pursued the investment, I learned a lot from their diligent process, in terms of how they looked at our business. And it also shines a spotlight on every flaw and weakness in your business, which forced me to understand and think about it.

Macro trend

While “software is eating the world,” there is extreme disparity in the distribution of software engineers and therefore in the ability for all but the biggest businesses to create software and automate processes. AppSheet is disrupting this inefficient system by empowering every business at every scale to innovate rapidly without having to hire a software engineer.   

MotoRefi, an Arlington, Virgina-based auto refinance startup for consumers to save on their auto loan, received multiple term sheets for its recent $4.7M round, according to Kevin Bennett, CEO. On the process of raising capital, Bennett notes that he “found it to be less about converting skeptics than about finding kindred spirits who share the same vision.” Ryan Moore, co-founder of Accomplice, led the round.

Macro trend

We’ve seen that Americans are taking out larger car payments than years past, and that consumers often don’t get the best deal on their loan when they initially purchase the car. It’s our goal to help customers find refinance offers that are a better financial fit, with a lower interest rate, lower car payment, or both. On average, our customers save $100 on their monthly car payment with they refinance with MotoRefi, and they can check their rates with no impact to their credit.

Embark Veterinary, a Boston-based dog DNA testing company, received multiple term sheets after talking to about two dozen investors for its recent $10M Series A round, according to Ryan Boyko, CEO. With the recent capital raise, the company is focused on growing the core business and is looking to improve the care of over a million dogs.

Macro trend

Personalized medicine is coming to dogs, and we will be at the forefront of providing evidence-based improvements for dogs' care.

Curtail, a Santa Barbara-based network traffic analysis solution and continuous security tool provider, recently raised $3.25M in funding. Curtail CEO, Frank Huerta, has known, Chris Kane of Tarus Capital (lead investor) for 27 years and recently reconnected with their business school reunion in September. On the competitive landscape, Huerta notes that “the classic security and QA folks out there are going after similar markets, but we’re taking a singular approach in the DevSecOps space to reimagine and improve computing in the cloud.”

Macro trend

Cloud, containerization, DevSecOps and the move to continuous integration/continuous delivery (CI/CD) are some of the most significant trends we see and that aren’t going away. These all play into what we’re doing in the DevOps space as we work to help teams mitigate the risk of unplanned downtime by changing the way IT is done for government agencies, financial institutions, service providers and enterprise organizations that are developing and launching new software and services

Nabis, an Oakland-based distributor of cannabis products to licensed businesses in California, recently raised $4M second round of funding. The company had roughly a 60% close rate for investors, however several investors also participated in the company’s last round, according to Vincent Ning, CEO. Nabis did not have a lead investor for the round. To date, the company has raised $5.25M.

Competitive landscape

Our competitors are other licensed distributors, but in a way, we stand alone in market positioning as the largest independent distributor in California. Other distribution companies that may be larger are verticalized and own their own brands, so it's hard for cannabis brands to work with them due to conflicts of interest where brands feel as though they are competing with their those distributors' products.

Macro trends

In terms of macro trends, they primarily fall into the categories of regulations, banking, and capital. The improving landscape of the cannabis regulatory landscape will allow more cannabis companies to exist, and as a true 3rd-party distribution company, we'll be able to capitalize on the growth in number of new brands that come to market. Next, as cannabis progresses closer to federal legalization, major banks will allow cannabis businesses to bank with them, allowing better financial infrastructure for electronic payment processing that will digitize the industry further. This all then leads to more investor capital flowing into the cannabis space, from larger and larger institutions, providing more access to growth stage capital for current cannabis businesses to expand beyond what they've currently been able to.

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PopBase seeks $1.5M in seed round

Hey everyone,

Last week, I asked Reddit and the Indie Hackers community a simple question: would you rent an apartment without viewing the unit IRL if it meant you would be compensated half of one month’s rent? The response was overwhelmingly negative. (You can delve through the threads here and here).

For a while, I had been thinking about a startup that could cut the real estate agent out of the rental transaction. Background: In Toronto, condo owners who rent out their units are generally represented by a listing agent and a prospective tenant is represented by a real estate agent. When the lease is signed, they typically split one month’s rent as their fee. When there’s no agent representing the tenant, the listing agent takes the whole fee.

I had been thinking about a model where a platform could match tenants with listing agents and the tenant would keep or receive half of the fee that’s normally paid. In competitive rental markets, like Toronto, listing agents don’t have an incentive to deal with a platform like this. But, listing agents do find the process of showing an apartment to be an inefficient point of friction. I spoke to one that suggested moving the whole process online.

I understand that the idea of committing to an apartment online, without first going to seeing it, is a radical one. Some people in the comments on both threads pointed to online schemes that are created with the intention to deceive, with no actual rental apartment ever being made available.

Someone, sarcastically, in one of the threads, asked me if I’d ever rent a unit without seeing it, and I had this response:

Yes, potentially. To date, the standard for renting an apartment is that tenants go to see the unit before signing a lease. It's a difficult product to recreate online as it requires a UI that addresses all of these trust factors (e.g. smells, sounds, ceiling height, etc...), but I don't believe that the experience of seeing a place IRL is one that can't be replicated online and I think it can be made better.

The process of renting online is one that requires establishing trust and that’s a difficult thing, but the idea that it won’t eventually happen, or that attitudes won’t change, strikes me as inaccurate. Attitudes expressed by people in these threads seem a kin to those, expressed by some, around driverless cars: they feel less safe with the idea of a driverless car than they do behind the wheel.

But this goes to a larger point: how do you know when you should listen to what the market is telling you and how should you know when to build, despite strong opposition? This is the gamble.

Few bits of housekeeping:

  • Remote jobs with equity/stock options: I launched a sister newsletter that brings together remote jobs that offer equity at early-stage startups. These roles are either not well-advertised or, when they are, they don’t mention anything about equity. I launched the newsletter because I believe remote staff, just like in-house staff, should have the opportunity to share in the financial upside of a successful startup. If you’re interested in checking it out, ping with the type of role you’re looking for and I’ll send you a link.

  • EIR + Head of Community: I read this Medium post by Ishaan Malhi where he details his hybrid role within a Venture Capital firm, spending half his time tending to the portfolio and dealflow, and the other half building a product. Have any VC firms on this listed brought on someone in this capacity in the past? If so, I’d love to chat.

  • New format?: Would you prefer to only receive updates about companies within your investment focus? I'm thinking about segmenting the audience based on preferences and sending emails more frequently, a kin to the way Axios sends out emails. Feedback me!

  • Thank you!: Thanks to everyone that supplied valuable feedback on the format of the newsletter over the past couple of weeks, in particular, Yigit Ihlamur (Vela Partners) and Clément Vouillon (Point Nine Capital). Feedback is always appreciated and if you’re liking the newsletter, a short testimonial that I can use would be much appreciated.


Chris ✌️

Recent Startup Funding Announcements 💰

PopBase, a Burbank, California-based creator of interactive digital fan clubs for social media influencers, raised a $720k pre-seed round (previously undisclosed) on a convertible note with a $4M cap, according to Lisa Wong, CEO. The original goal was to raise $500k but the round ended up being oversubscribed by 44%, so they extended it and closed a couple of months later with $720k. The company is now beginning talks for its seed round, with an expected close date in 3 months. PopBase will look to raise a $1.5M seed round. The upcoming seed round will be used to get to revenue positive by 2020; Popbase will look to achieve that goal by 1) growing its user base; 2) building out a key user content customization feature; 3) integrating good product sponsors.

Macro trend

“Everyone, from brands to individuals needs a public digital presence that represents their "brand persona" at scale. Game design is the most efficient and rewarding method of automating engagement. And storytellers are the most efficient at creating and maintaining the integrity of a brand. Modern "celebrities" are hyper-personalized and Micro/Macro influencers define what it means to be a celebrity for Millennials and GenZ. Fans are willing to pay for acknowledgement (Twitch) and Mobile gamers span all demographics, and are more likely to engage with ads.”

DynamiCare Health, a Boston-based addiction recovery technology company, pitched over 100 investors, and closed around a dozen of them, for its recent $4.1M seed funding round, according to Eric Gastfriend, co-founder and CEO. For the round, the company set the terms of a convertible note and allowed in multiple investors rather than getting competing term sheets. Four out of the five largest investors in the company have known Gastfriend and his co-founder (who his also his father) from before DynamiCare was founded. Funding will be used to secure more large B2B contracts and also experiment with the B2C market.

Macro trend

“The traditional fee-for-service model in healthcare is being disrupted by pay-for-performance and risk-sharing systems that force healthcare providers to get serious about outcomes measurement and cost-effectiveness. DynamiCare’s digital platform for monitoring and rewarding recovery from addiction is both a cost-effective way to change behavior, and a great tool for measuring outcomes. People have told us we’re ahead of the curve, so we’re excited to help healthcare systems adapt to these new changes.”

ChurnZero, an Arlington, Virginia-based provider of a real-time customer success platform, spoke with 30 investors and got 4 term sheets for its recently announced $7M Series A funding round, according to You Mon Tsang, CEO. The company has known led investor, Baird Capital, for three years. The goal for the recently raised funds will be to help ChurnZero 4x in size. To date, a total of $10M has been raised. Gainsight and Totango are other larger players in the customer success space.

Macro tends

“We see two trends: (1) customer success is a department that is being built into every B2B subscription company and (2) the leader of Customer Success as a direct report to the CEO.”

MyVillage, a Bozeman, Montana-based in-home childcare startup, received “a lot of interest last minute” for its recently announced $5.95M seed round, which was oversubscribed, according to Erica Mackey, CEO. Had the company stuck to its initial funding target, the round would have closed a couple months sooner. The company knew the lead investor for 3 months prior.

Thoughts on raising capital

Even when you run a good process with clear deadlines and are aligned about what you will and won’t do, and have good business fundamentals, the VCs and macro-market dynamics are out of your control. Entrepreneurs should ensure the company isn’t going to run out of money or find itself in a desperate position. You should have multiple relationships with competitive VCs, and a tight and logical timeline for your process.  

VCs can experience FOMO that can definitely squash you or amplify you - a lot depends on who is talking to whom behind the scenes. The VC mindset is a huge variable you can’t really control.

Macro trends

“The political landscape has shifted on this issue, and we’re seeing candidates for local and national office running on an early education platform. Clearly, it’s a bit issue for people - for parents and from a workforce development standpoint to meet the needs. More than half of Americans live in a childcare desert where kids 0-5 outnumber quality, licensed providers.

I’m heartened that we’re seeing greater public awareness and can quantify the impact of childcare on local economies. There’s a lot of innovation coming into this space, which helps us leverage partnerships that benefit families and educators in running a successful business.

I’m glad that MyVillage is playing a role in destigmatizing the career opportunities that come with training or a degree in early childhood education. We’re also disrupting franchising, because our model cracks open the door to business ownership for a lot more people. We’re a recession proof business, and as we see the costs of housing increase while wages generally stagnate, I think we’ll see more people who want to create revenue through homeownership. People are more and more comfortable with the shared economy, especially young people, and I hope we can help more people stay in the housing market and work where they live.”

Howamigoing, a London, UK-based HR tech startup, raised its recently announced £890K seed round at a valuation between $5M-$10M, according to Julian Cook, founder and CEO. For the round, the company began speaking with investors in late November and the round was oversubscribed by mid February. Howamigoing shared its deck with around 5-10 angels and 15-20 funds, of which it spoke to about half in person or via video conference. In the end, a few angels presented a compelling offer and were able to move faster than VCs. The company has known the lead investors for many years but had not met face-to-face before this fundraise. The company made some strategic client signings across the US, UK, HK and Australia in H2 2018. Capital raised will be used to leverage these market entries/hubs and 4x client base by the end of 2019.

Macro trend

“Over the past few years consumers have gotten accustomed to receiving great user experiences on B2C applications. We see a trend whereby employees will stop being treated as second-rate citizens, forced to use outdated technology when at work that provides a terrible user experience. That’s why we’re building a B2B offering that provides a B2C-style user journey for employees.”

Hoy Health, a Morristown, NJ and San Juan, Puerto Rico-based health tech platform, raised its recent round (undisclosed amount) at a valuation between $5M-$15M, according to Mario Anglada, CEO. The company spoke with 20-30 investors and received four term sheets for the round.

Macro trend

We see the expansion of primary care self-pay solutions that will allow consumers to have access to medical services without the need for insurance. This trend is evident in the United States and across our geographical footprint today. 

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EdgeMicro to raise Series A in late 2019

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Recent Startup Funding Announcements 💰

Polarr, a San Jose & Shenzhen-based smart photo editing platform, took 6.5 months from start to close to raise its recent $11.5M Series A round, according to Borui Wang, founder and CEO. The company spoke with 20 investors and received 3 term sheets. Wang has known the lead investor, Threshold Ventures, for 2 years, after meeting at a cocktail party in Boston and then keeping in touch. Polarr’s customer base includes Samsung, OPPO, and Western Digital. To date, the company has raised $13.5M (Series A + $1M seed & $1M convertible note).

Macro trend

5G is definitely very interesting. Polarr is focusing on offline edge based A.I. but we do see hybrid A.I. leveraging 5G being very powerful in the long run, basically simpler A.I. running on the phone, more sophisticated A.I. running on the server. If you’re building that solution we want to get in touch.

Implicity, a Paris-based provider of remote monitoring for cardiac implantable electronic devices, took 2 months, 4 months sooner than anticipated, to raise its recent €4M round, according to Dr. Arnaud Rosier, CEO & Co-founder. The company spoke with 30-40 VCs and received 7 term sheets. Post-money valuation for the round is around $20M. Implicity has known the lead investor for 6 months. Competition in the US includes Murj (raised $13M) and ScottCare Cardiovascular Solutions. To date, the company has raised approximately $6M.

TRIBE, a Melbourne-based marketplace for brands and influencers to connect, took about 6 months to raise its recent $7.5M Series A round, according to Anthony Svirskis, CEO. Valuation for the round was “ in the normal valuation range for a Series A.” TRIBE spoke to numerous investors in Asia, the UK, and the US, and the company saw “a few terms sheets.” The company met the lead investor 12 months prior. TRIBE is using capital from the round to launch in the US and anticipates that the US will be its largest market by year end. To date, the company has raised a total of $13M.

Macro trend

The influencer marketing category still has a lot of maturing to do. We’ve seen budgets increase enormously over the last few years which proves it's gaining more credence in marketing playbooks, but there’s still development required in reporting and ROI which we’re continuously investing in. For our content product, we actually feel we’re ahead of the market, so there’s a need for the marketing world to catch up and understand that high quality creative can be sourced from their customers faster and cheaper than the traditional creative solutions. It may take another year or two before we really see that shift.

Figure Technologies, a San Francisco-based fintech company in both the home equity and blockchain space, took 90 days, end-to-end, to raise its recent $65M Series B round, according to Sara Priola, co-founder and General Counsel. The Series B post-money valuation, in February 2019, was over double that of the Series A, which closed in May 2018. Figure didn’t set to raise a Series B round; the company had “plenty” of cash remaining from its previous round. The company launched its first product, Figure Home Equity Line, in September 2018, and grown customers to around 1,500 in the past 6 months. Figure has known the lead investors, RPM Ventures and partners at DST Global, for years. To date, the company has raised over $120M.

Macro trend

As a nimble and thoughtful company, we are fortunate to be able to both help set the direction and navigate the headwinds when they come. For example, we’re actively engaged on the regulatory front, along with our peers in the industry, and look forward to the road ahead.

EdgeMicro, a Denver-based edge computing company, raised its recent $3M round on a convertible note, which did not require a formal valuation, according to Mike Hagan, CEO. “EdgeMicro is pre-revenue, so it’s premature to estimate valuation.” To date, the company has raised approximately $6M, via 2 convertible notes. EdgeMicro will go to market in late 2019 for its Series A round and the company will set a valuation at that time. EdgeMicro’s supply chain is fully established and the company will be capable of manufacturing and deploying up to ten units per month beginning late 2019.

Macro trend

The current internet infrastructure under-serves an enormous portion of consumers and commercial customers: roughly a third of U.S. The culprit is a centralized architecture for the internet, which means content and computing services live far from most users and takes an inefficient path to get to them. Centralized content, centralized peering and unoptimized mobile network topologies (which were architected for phone calls but not mobile computing) all create performance issues that are frustrating to both consumers and corporate users.

Applications demand more in terms of performance and data latency than what the networks can deliver as architected today. EdgeMicro uses a neutral colocation approach to edge computing that matches an economic model that has worked exceedingly well for other key areas of internet infrastructure, like major peering points. It’s a model that all of the major stakeholders understand –including content providers, applications providers, telcos, cable companies, security companies and wireless carriers. This approach removes risk and capital cost for all of those companies, and it is highly scalable and cost-effective.

Knox Financial, a Boston-based fintech company focused on making investment property ownership accessible, took 6 months to raise its recent $1.4M in seed round and raised the round on a convertible note, according to Spencer Taylor, COO and co-founder, and Dave Friedman, CEO and co-founder. The company raised the round all from private angels, so no term sheets were in play. Knox Financial talked to dozens of potential investors. The company has know the lead investor for over 10 years. The company has just started signing its first clients. “The goal for this next stage is to get to a deal flow of 10-20 homes per month coming into the program.”

Macro trends

  1. We see a vacant space where Americans are looking for ways to build wealth beyond indexing the market with mutual funds. Wall Street and big banks are not on the side of the people anymore. It’s Watt St vs Main st. We are making investment property ownership, an investment that used to be reserved for the very wealthy, available to anyone. In the process, we’re keeping ownership local, and offering rates of return on these investments that people can't find in other financial products. We’re proud to be offering this kind of opportunity to such a wide swath of homeowners.

  2. The baby boomers are retiring. They have owned real estate in top tier cities for decades and have seen the value of their properties multiply. They want to retire and live the lifestyle they’ve become accustomed to. Unfortunately, a lot of their wealth is trapped in their homes. They don't want to sell because they’ll incur transaction costs and capital gains taxes. If they do, they can’t find investments that produce adequate cash flow while continuing to grow in value. Income property offers just such an investment profile. We make it frictionless.  

  3. With younger generations, there is a shift towards renting. Nationally, rents are climbing by over 3% per year and often much faster in top tier cities where Knox operates. We can meet this demand with our inventory of Knox properties.

  4. Finally, there is a movement to enliven the equity held in peoples’ homes. People are looking to have the equity they have in their home work for them. We can do that by turning the home into a passive, profitable investment.

👨‍💼🖥💻👩‍💼Thoughts on Remote Teams

[Remote team can absolutely be as effective as team in the same physical location] I wrote a blog about it. Borui Wang, founder and CEO of Polarr

We’re favourable towards distributed workforces and remote teams. It takes time to build the systems and trust to enable this within organisations but when it works, it creates a flexible work environment that drives job satisfaction. The key is making information accessible and readily-shared via strong inter-company communication and collaboration principles. Anthony Svirskis, CEO of TRIBE

Tip/Productivity Hack 

Zoom video conferencing. We are 71 people in 5 offices and 4 time zones around the world with distributed teams throughout the business. Having the ability to speak to someone face-to-face no matter where they are in the world has made a huge difference to our young business.Anthony Svirskis, CEO of TRIBE

Work blocks. I read an article years ago that came out of Y Combinator about manager time vs. maker time.  Basically, for people like me who both need to participate in meetings and be a manager and also need uninterrupted time to work creatively, the best path forward is to create block out time for each function. It’s not easy to do, but the payoff is worth it. – Sara Priola, co-founder and General Counsel of Figure Technologies

If you can finish something in 5 minutes, do it right away and don’t procrastinate. – Borui Wang, founder and CEO of Polarr

If you are going to do it more than 5 times, document or automate. – Spencer Taylor, COO and co-founder and Knox Financial

When you are on the management team of an early stage company that is moving quickly, it’s critically important to get the most out of yourself and your team each day. And I think consistent, clear communication is the most important factor. It’s the key to building consensus and making critical decisions quickly. You can have a great idea and a great business plan and a great product, but if the communication isn’t there the company will struggle. It’s that important. For our team, we’ve built this into the DNA of how we work, with a two-hour team call every Monday to foster communication and set a course for each week. Then we augment that with 30 minute standup calls every other day of the week to stay in sync. That routine works well for us. – Mike Hagan, CEO of EdgeMicro

Books 📚

Sapiens: A Brief History of Humankind by Yuval Noah Harari – Anthony Svirskis, CEO of TRIBE

The Undoing Project by Michael Lewis – Sara Priola, co-founder and General Counsel of Figure Technologies

High Growth Handbook by Elad Gil; The Messy Middle by Scott Belsky; Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb – Borui Wang, founder and CEO of Polarr

Zero to One by Peter Thiel – Spencer Taylor, COO and co-founder and Knox Financial

The Obstacle is the Way by Stan Holiday – Mike Hagan, CEO of EdgeMicro

Something else

🌉 VC Starter Kit

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