#14: HEROFi, ClickSWITCH & more
|Christopher DeLuca||Aug 21, 2018|
The newsletter is back with a streamlined version. This format featuring exclusive Q&As and updates from investors and founders is one you can count on moving forward.
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Recent Startup Funding Announcements 💰
HEROFi a San Diego-based revenue optimization company for physical retail, announced a USD 3.5m round of convertible debt financing.
We raised the debt in two phases. The first took six weeks (USD 2m) and the second was eight weeks (USD 1.5m). We decided to structure a break in between the two raise amounts in order to not devote an entire business quarter to raising money.
We spoke primarily with a network of angel seed investors with substantial experience and strategic value. The total number of investors is approximately 35-40.
This was not a priced round, however, the valuation cap for the debt was USD 18m, which we are happy with.
We have invested the first tranche into upgrading our technology to a SaaS enterprise-grade, deployable in tens of thousands of locations. We will also invest in sales and marketing moving forward.
One thing I will note is that VCs essentially no longer do any seed funding, as their speed to fund and risk tolerance rarely allows them to participate. Most of my investors wired money into our accounts within 36 hours of close, and the close itself from the first conversation to commitments rarely took more than three weeks. This is the typical time-gap between two generic conversations with VCs - often leading nowhere. As a profitable bootstrap company with a good market position and client distribution, we had the advantage of raising money more on our terms than some startups can. However, to whatever degree, startups can work with smart, experienced superangels and family office investors for their first funding rounds - the faster and less intrusive the fundraising process can be. I would also advise doing non-priced rounds (i.e. convertible debt) as long as possible to preserve valuation and equity until a more substantial priced round an be done.
ClickSWITCH (Drew Fanberg, CFO)
ClickSWITCH, a Minneapolis, Minnesota-based provider of an automated account switching solution, completed a USD 3.5m Series A round earlier this month.
We invested a few months into the process to make sure that we were making the right decision for the business. We wanted to make sure that we weren’t just picking investors, but partners that have the vision and experience to help us make ClickSWITCH the company we know that it can be. We couldn’t be more excited about the investor group that invested in the round. We have a great mix of national and local investors that are very experienced and well connected in both the technology and banking spaces.
We had initial discussions with quite a few before selecting a small group to engage in more in-depth discussions.
Most of the funds will be used for product development and enhancement, but we will also continue to build out our client services and sales teams.
To date, the company has rasied roughly USD 4m.
Prior to this USD 3.5m round, the company had been essentially bootstrapped since inception, with just a $500,000 round early last year from some local angel investors. Cale Johnston, founder and CEO, did an incredible job building a tech company that cash-flowed from day one. As we started having discussions with tier one banks and other multi-billion dollar companies, we decided this was the right time to capitalize the company to take advantage of these massive opportunities.
The biggest trend we are seeing in banking right now is the desire for financial institutions to increase direct deposit adoption. With the increase in mobile banking functionality, and less visits to the local branch, traditional brick and mortar banks, as well as branchless online banks, are looking for new ways to capture the consumer’s direct deposit, because when you get the direct deposit, you typically get the consumer’s entire banking relationship. Our solution fits this need perfectly.
ApplyBoard (Adrianna Dyczkowsky, PR Specialist)
ApplyBoard, a Waterloo, Ontario-based education technology startup, raised a USD 13m Series A round last week.
The preparation was done in a window of one month prior to going to the Valley to field interest.
The company spoke with 20 to 30 investors.
To date, ApplyBoard has raised a total of CAD 17m.
The company elected to take funding from the investors that it did because they invest in "white space" which is very valuable. They seek to invest in entrepreneurs building white space companies that have the potential to create or disrupt multi-billion markets. They also have the right expertise and work well with the company.
ApplyBoard was founded by three brothers who travelled to Canada from Iran to pursue higher education. The company stemmed from their personal challenges and experiences, and after recognizing how many international students were in need of guidance they built a technical solution - ApplyBoard. The mission is to give all students the power to access the best possible education around the world. The company today is headquartered in Canada's tech hub, Waterloo region, and has offices in China, Vietnam, Nepal and India. Today, ApplyBoard is partnered with 750+ schools across North America and has assisted 10,000+ international students. With over 70 employees, 20+ languages and a presence in 93 countries, we aim to help as many students as possible.
Artificial Intelligence Startups 🤖
Glance Tech is a Palo Alto-based smart clock company, allowing users to see meetings, daily footstep count, weather and incoming calls, amongst other things.
Total funding: USD 120k (Singapore government grant),
USD 390k (equity financing), USD 470k (product crowdfunding), and USD 300k (convertible loan).
The last capital injection was a convertible loan received in three tranches. The last one was in June.
The company has begun speaking with investors regarding a possible Series A round.
Glance Tech could look to raise approximately USD 5m in a potential Series A round.
Beyond capital, a prospective investor would bring market expertise and connections with a potential partners and acquirers.
Capital from the round would be used to for market expansion and introducing a new product.
According to my experience the key metric at the Seed-Series A stage is a product market fit and the size of market. Of course if you have 100k/mo and 15% growth rate that is good, but AI can take long time to develop and sustain before it meets the significant revenue threshold.
We turned to the AI space just recently and we were valued as an IoT Hardware startup before then.
I believe that the key value that AI should bring to people’s life is to reduce all unnecessary information, messages, notifications, actions, and keep the only important ones. Like a butler helping you live and manage your home, the AI should help you to live and manage your digital space.
Narrativa is a Madrid and Abu Dhabi-based company that helps organizations analyze, understand and interpret vast amounts of data and create insightful narratives in natural language.
Total amount raised to date is approximately USD 1.5m.
The company has begun speaking with investors regarding a possible Series A round and there is a lot of interest.
Likely to close a Series A round within the next 12 months.
Capital from the round would be used for more R&D and sales staff.
100k MRR with approximately 15% growth as a target for what Series A investors are looking for seems to be consistent with conversations that the company has had.
The company would look to raise USD 3m-5m in a Series A round. Strategic players and VCs could participate in the round.
Competitive landscape: there are a few companies in the US (e.g. Narrative Science and Automated Insights) and a couple in Europe (e.g. Arria NLG) but we never find them in competitive settings. The market is huge and we are just a few.
Qbit Technologies is a Palo Alto-based company specializing in virtual and augmented reality solutions.
Has begun speaking with investors for a possible Series A round and is very likely to close a round over the next 12 months.
To date, the company has raised USD 260k, with the most recent round being a USD 80k bridge round raised in July.
Qbit would look to raise USD 3.5m in a prospective Series A round.
Beyond capital, a prospective investor would bring sales distribution, partnerships, and new networks.
Macro trend: new devices coming out, more processing power and bandwidth. A general increase in the use of VR/AR for business applications and an understanding of its advantages by the corporate market.
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