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Last week, I shared an article from Politico that highlighted the very real possibility of increased oversight for tech companies in 2019, especially with a redistribution of power in the midterm elections. If large tech companies begin to feel that oversight is imminent, one possible move is that they start cracking on bad actors that are currently violating their terms and conditions in a demonstration that they can self-regulate. Here’s one bad actor for them to consider:
Or, those tech companies, wary of oversight, may start a vocal campaign of calling out bad actors in the industry. Tim Cook, Apple CEO, may have fired the first salvo on this front:
Apple’s Tim Cook blasts Silicon Valley over privacy issues — Washington Post
Or, yet still, they may use weakened encryption as a bargaining chip in order to minimize or delay oversight.
On this, a couple interesting things to consider from Axios’ Codebook newsletter:
The "Five Eyes" intelligence alliance — Australia, Canada, New Zealand, the U.S. and U.K. — recently released a coordinated statement on the need for governments to have access to encrypted files. Soon after, Australia introduced its legislation.
Many products are designed with U.S., Canadian and U.K. markets in mind, given their size. Legislation from those countries is mimicked around the world.
Unrelated Unrelaed Unrelated
I have a particular soft spot for big, ambitious projects, and the New Yorker covered two remarkable ones:
Larry Krasner’s Campaign to End Mass Incarceration — New Yorker
Recent Startup Funding Announcements 💰
US— New York
Stringr (Lindsay Stewart, CEO and co-founder)
Stringr, an NYC-based marketplace that allows media organizations to buy video footage from both amateur and professional videographers, raised more than USD 1m earlier this month.
Recommended rule to live by: I have a five minute rule. If it takes 5 minutes to get it done now, I do it now, as opposed to placing it on my task list. I also have the major question I ask myself each morning, 'What are three items that must get done today?' I then work on those items first (and sometimes only) so that I can focus and complete them.
Recommended book: I primarily read for pure pleasure, so if you like something with a great voice and you like to eat, “Kitchen Confidential” is something I enjoyed this month. If you are looking to learn, I liked “Think Fast. Think Slow,” which delves into how the brain processes things and skips steps when it needs to.
How long did the round take to close: A lot of time is devoted to raising a round because you want investment to grow the company, and you also want to find investors who can contribute expertise as well as money. The process, even when a round is closed, always exists.
Seems as though the process of raising money isn’t efficient. Your thoughts: I’ve thought a lot about what I’d say if I were investor or if I managed a fund. While I realize investors too need a pipeline, I feel the filtering process of using more junior employees often soaks up a lot of time and resources, which is why for the most part, Stringr always kindly requests to have the partner in on the first meetings who might be interested. For my company, it’s a good filter of who is excited by our space, and it also allows us briefly to tell our story. I think these calls could take 10 minutes, and would be a valuable resource saver to all.
How many firms did you speak with: In this last round, we talked to 5.
Comment on valuation after the round: This last round was a convertible note.
What capital will be used for: We made key sales hires and are soon to release a new compelling feature on our app.
Total amount raised to date: 4.6m.
Competitive landscape: We are in the video business and offer the only nationwide network of videographers from which our customers can source video rapidly. We also have a platform that allows for the editing, publishing and monetization of video. Currently there are no straight-play competitors (as the videographer network is quite unique), but that doesn’t mean there won’t be. We’ll keep our eyes peeled.
Macro trends: There are a good number, but one that is always on our minds: Video is expected—people who consume media expect to see video. Stringr enables the sourcing of custom video quickly and in a scalable fashion.
June.ai (Allie Sutton, co-founder and CEO)
June.ai, a NYC-based communication hub, raised a USD 1.5m pre-seed round earlier this month.
Recommended rule to live by: I used to jump right into a task as soon as I got to the office every morning. I realized that may appease my feeling of excitement to get the day going, but it didn’t allow me to plan my day properly. Now I make a conscious effort to spend my first few minutes in the office making a list of all the things I want to accomplish for that day and prioritizing the three most important tasks. With my priorities in place, I can work much more efficiently.
Recommended book: A New Earth by Eckhart Tolle. It helped me truly detect when my ego is at play throughout the day.
How long did the round take to close: We spent three months raising this round of funding.
How many firms did you speak with: During our three months of fundraising, we spoke to roughly 75 to 100 investors.
What capital will be used for: We are using the funds raised most recently to expand the team and continue making June the best possible communication experience for our users.
Seems as though the process of raising money isn’t efficient. Your thoughts: In my opinion, founders spend too much time working on getting introductions to investors. A few firms have now publicly asked to be cold emailed as it saves the founder a tremendous amount of time.
Total amount raised to date: To date, we have raised $1.5 million.
Competitive landscape: We view our competitors as any tool that allows two or more people to communicate or that offers the user a way to control or manage their inflow of information. Although there are some great email products and companies, there are few companies truly challenging foundational elements of how email works. Inbox by Google was doing that, but they are shutting down. It’s a tough challenge, but we’re up for the challenge.
Macro trends: There are many trends affecting our space but the trend leading the charge is the use of AI to bring better experiences to users. Over the next few years, we will see AI provide changes in business and experiences we did not ever imagine was possible.
US— Texas, Kentucky
ICON (Evan Loomis, Co-founder)
ICON, an Austin-based construction technologies company, raised a USD 9m seed round earlier this month.
Recommended rule to live by: Great question. Do work that is meaningful to you and helps you get up each day motivated about the work ahead of you.
Recommended book: Anything fiction - - it’ll help you be more creative.
How long did the round take to close: 7 to 8 months for our seed round.
Seems as though the process of raising money isn’t efficient. Your thoughts: I think the process is pretty efficient. Humans build relationships. That takes time. Raising money is a discernment process for both parties - founder and investor - to make sure there’s a shared vision of the future, trust, and alignment. Some founders have told me that raising money is not efficient and my hunch is that's because they didn’t have a their idea fully grounded or didn’t know ‘how’ to raise money. If done well, you come out the other side with a ton of new relationships, ideas, and (sometimes) capital.
How many firms did you speak with: We were fortunate to have had the opportunity to speak with dozens of potential investors. One thing we knew we were looking for is investors who share and appreciate the mission at ICON, those with expertise in scaling tech startups, those within the homebuilding industry and those who truly ad more value than just supporting with funds.
We’re grateful to have found a wonderful set of investors in this seed round including Oakhouse Partners; D.R. Horton, the largest homebuilder by volume in the U.S. since 2002; Emaar, the largest developer in the Middle East and creator of the tallest building in the world; Capital Factory, Texas’ premier start-up accelerator; CAZ Investments; Cielo Property Group; Engage Ventures; MicroVentures; Saturn Five; Shadow Ventures; Trust Ventures; Verbena Road Holdings and Vulcan Capital among others.
What capital will be used for: Primarily research and development and growing our team.
Total amount raised to date: 9 million.
Competitive landscape: There are a handful of companies using large scale 3D printers and doing great things. We are excited to see their next steps and are rooting them on. We have a global housing crisis and 3D printing homes is not only cost effective, but can bring more homes to more people, faster than ever that are beautiful, resilient and sustainable. We can finally see an end in sight for homelessness, and the more companies aiming to help, the better.
Macro trends: As technology advances year over year, we see more and more companies getting more comfortable with the digitization within various industries plus uses of AI, robotics or other advanced software. So why not construction and homebuilding? It is about time we see a huge shift in homebuilding.
Hiring: We’re hiring at ICON and are looking for Jedi-wizard mechanical engineers and an electrical engineer to help us design and build giant robots that 3D print buildings on Earth and in space.
Rollick (Bernie Brenner, CEO)
Rollick, an Austin-based affinity buying program and enterprise lead management solution for the powersports, RV, marine and industrial equipment industries, raised an USD $8.3m Series A round earlier this month.
Recommended rule to live by: My main one is a super simple driving force - Never give up!
Recommended book: Well, I definitely recommend my book, The Sumo Advantage. It’s a compilation of the strategies I’ve used to build my start-ups by leveraging strategic partnerships with larger, credible and powerful companies. I’m currently reading Measure What Matters by John Doerr. I anticipate incorporating his use of OKRs into the company very soon.
How many firms did you speak with: We formally pitched 11 VC firms and took money from three of them.
What capital will be used for: We'll continue to expand in the powersports and RV industries and ramp up our efforts in the marine and industrial industries. We will be investing in product development and dealer support across our product line and industries served.
Seems as though the process of raising money isn’t efficient. Your thoughts: Raising money is hard as it should be. I had a start up in the late 90s. I saw companies getting funding with business plans written on a napkin. The valuations were ridiculous and almost all of the companies funded during that time blew up when the bubble burst.
Raising money is like boot camp in the military. It’s hard and it’s necessary to see who has what it takes to power through the really tough times. At the same time, there are so many more support programs (incubators, accelerators) to help get an entrepreneur ready for a capital raise. Capital Factory in Austin is an example of a program that has been extremely important to the start-up growth of Austin. Seed money is available through programs like this and the Kickstarters of the world. That’s helpful. But when it comes to landing a good VC, it should be tough.
Total amount raised to date: Nearly $14 million.
Competitive landscape: What we do is unique in the industries we serve. Our goal is to improve the overall buying experience for customers, dealers, and manufacturers. Essentially, we send dealers and manufacturers in our network higher quality buyers (through our affinity partnerships) that convert at a higher rate (because of the experience provided), and with AVALAs technology, will also increase post-sale customer satisfaction and loyalty.
Avala is a unique diamond we found. It’s competitors are Marketo, Hubspot and even Salesforce. The challenge for those solutions in these verticals is that marketing automation as a tool is great but ineffective without the vertical expertise. Avala has been supporting OEMs in Marine, RV, and Industrial for almost 20 years. Our verticals have a unique set of challenges. First, we have manufacturers that aren't permitted to actually sell anything directly to a consumer. Consumers don’t necessarily understand why that is. Second, these manufacturers have a network of franchise dealers that sell direct competitors to the OEM. Finally, the consumer has tons of choice and at times, the product and retailer choices are confusing. That’s where our tool Aimbase, comes in with marketing automation geared specifically to powersports, RV, marine or industrial products manufacturers.
Macro trends: Customers continue to want to shop online. However, in the industries we focus on, they can't make a purchase online, and they can't purchase directly from the manufacturer. They do need to work with a local dealer to purchase the product. It's all about relationship marketing and trust. What we are doing is helping build that trust between manufacturers, dealers and buyers where everyone feels that they are getting a fair deal and equally as important, a consistently great experience. How we do that is through personalizing the experience both online and in the store, through marketing automation ensuring a seamless customer journey, and by delivering high-value buyers (through our affinity network partners) to dealers.
Hiring: We are hiring in product development, dealer support and marketing in both our Austin and St. Louis offices.
Lumenari (Rob Nordsell, Co-founder and CEO)
Lumenari, a Lexington, Kentucky-based leader in narrow-bandwidth LED phosphors for LCD display backlighting applications, raised a USD 3m Series A round earlier this month.
Recommended rule to live by: Even if the road ahead is unclear and the barriers insurmountable, there is ALWAYS a path forward. Have the courage and patience to find the path regardless of time and pressure.
Recommended book: Jim Collins, “Built to Last”.
How long did the round take to close: Roughly nine months.
How many firms did you speak with: Too many to count!
What capital will be used for: Without disclosing too much, our Series A funds will be used to bring our product closer to meeting industry reliability standards and establishing strategic partnerships.
Seems as though the process of raising money isn’t efficient. Your thoughts: I don’t think lengthy time frames required to raise venture capital are a result of inefficiencies. Trust has to be established between the investors and entrepreneurs, and the investors must understand the business and product well enough to warrant an investment decision. These things take time. I think a “hurry-up” approach to venture capital would lead to irresponsible deployment of capital (not in all cases, of course), and ultimately damage venture capital as an asset class.
Competitive landscape: What we have to offer is a game-changing LCD color gamut in the most cost-efficient architecture. We view any technology that do what we do better as a competitive threat, and consequently we constantly seek to improve our product.
Macro trends: Understanding the technology trends that could make our technology irrelevant is of prime concern. We’re mitigating that risk by watching the technology trends and outlining approaches we could take to capitalize on those trends with our technology.
Other details: Raising venture capital for hard science and technology startups is very difficult because (1) there is a dearth of venture capital funds deployed to these types of companies, and (2) it is a very small group of people that understand hard science and technology. Our team has made significant accomplishments with very little funding and I believe that our persistence will pay substantial dividends soon.
VC firms & early-stage investors
Borealis Ventures (Emily Snyder, Senior Associate)
How you got into venture capital: By accident. I took a temporary job as an office manager straight out of undergrad which quickly turned into an analyst role.
Recommended rule to live by: I try my best to prioritize inbound deals and let the team know if there's not a fit, that way time is saved for both sides. I also think it's our responsibility as venture capitalists to be responsive and to support entrepreneurs.
Recommended book or other tip: Being located in a college town, I get a lot of questions from students wondering how to get into VC. #BreakIntoVC is a great overview for those new to venture and has practical tips on where to focus your efforts.
Specific areas the firm looks to make investments in: Borealis focuses on the healthcare and built environment sectors. On the healthcare team, we focus on life science platforms and digital health. In life sciences, we prefer platforms as a service, ranging from drug discovery to manufacturing. Basically proprietary technologies that allow for accelerated drug development and/or cost savings for biopharma clients. Portfolio examples include GlycoFi (protein expression), Adimab (antibody discovery), Avitide (affinity purification), Orbit Discovery (peptide display), Compass Therapeutics (immuno-oncology), and Evox Therapeutics (exosome based delivery). On the digital health side, we focus on enterprise solutions that improve care delivery, lower costs, and increase access and can demonstrate meaningful traction.
Geographical focus: While it's nice to invest close to home, we recognize that there are exciting opportunities in various places, so we'll invest in the right company regardless of location. This year we invested in two life sciences companies that spun-out from the University of Oxford in the UK for example.
Seems as though the process of raising money isn’t efficient. Your thoughts: I think the idea of technology driven marketplaces or other aggregators for private capital has been around for a while now. In my mind, that works better in the earliest stages. When a venture firm is committing meaningful capital to a company, a substantial part of the diligence is not just checking boxes with a CV, but building relationships with a team that will lead to a productive partnership over time. Likewise, as an entrepreneur, I think the importance of choosing a venture investor that you trust and want to work with is key. It's tough to automate such a relationship driven industry.
Number of investments this year: Since the beginning of 2018, we've made two new healthcare investments.
Number of anticipated investments before year end: We anticipate closing one to two investments by the end of the year.
ATX Seed Ventures (Chris Shonk, Managing Director)
Recommended rule to live by: If you want outsized returns with less risk: invest where you have an edge (operational, market, talent, etc.). Also, reputation and value-add is essential to long-term success, we enjoy backing founders and execs again and again as success breeds success and incredible people are the scarce resource, money is a commodity.
Recommended book: Cyropaedia.
Specific areas the firm looks to make investments in: Enterprise Software, Frontier technologies (AI, IoT, satellite & space, autonomous vehicles), e-commerce.
Geographical focus: Texas and the South Central US.
Amount of capital left for future investments: 1/3 our AUM.
Number of investments this year: 3.
Number of anticipated investments before year end: 2.
Anticipate raising a new fund: Yes, we will raise our 3rd fund in Q1 of 2019.
Future Funding 🔮
Cien (Damien Acheson, Head of Marketing)
Cien is a Miami and Barcelona-based AI startup. The company last raised a USD 1m seed round back in February 2017, according to CrunchBase and confirmed by the company’s spokesperson.
Have Series A talks started: Yes.
Likelihood of raising a round with next 12 months: High.
What would capital be used for: Product, sales and marketing.
For a Series A round, we often hear that 100k MRR with approximately 15% growth is what investors at that stage are looking for. Will be this the model that you use, if not, any indication of the benchmark that you’ll use: See the model market fit.
Comment on valuation after the last round of funding: We are satisfied with our valuation. Right now we're very focused on B2B SaaS companies with at least 10 salesforce users. Currently we only support Salesforce CRM but we have plans to support additional CRM systems (Microsoft, SAP, Oracle, Hubspot etc) in the future.
Competitive landscape: Some other AI sales system focus on lead scoring and forecasting. Our product also includes sales rep and macro factors, giving you a full 360-degree view of what drives sales productivity. If you don’t have that, you may waste good leads on bad reps… We also have unique technology to measure the relative value generated in each step of a modern sales organization, ending the perpetual problems around sales and marketing alignment.
Macro trends: Modern SaaS companies are often spending more than 50% of their P&L on Sales & Marketing, but as they spend more, they get less incremental revenue. This is the sales productivity trap that Cien is fixing.
Other details: Cien's three co-founders have built, scaled, and taken SaaS companies public, representing billions in market cap. We now have a team of 20+ and a group of early adopter customers. What makes Cien unique is that our app creates an accurate AI model of your specific sales situation (regardless how imperfect your CRM data is), then makes recommendations where you have low-hanging fruit and more long-term optimization opportunities. Things that used to be just gut feelings are now quantified, tracked and improved.
We have hundreds of AI models that clean up and standardize your data, and makes sense of it from a business perspective. This data can then be used to produce predictions and recommendations, that you act on. We track the progress of each recommendation and calculate its financial impact. Right now we’re performing over 31M AI predictions daily.
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