PD Reporter curates a weekly selection of exclusive interviews with early-stage founders and VC firms. Read by start-up founders, VCs, early-stage employees, and tech PR professionals. Sign up today.
This week’s newsletter is late due to some technical difficulties. As an aside: if you spill wine on your laptop you will almost certainly encounter a problem putting out your weekly newsletter.
We’re looking to streamline this newsletter and we’re interested in hearing from you. Thanks to everyone that responded to our email outreach thus far!
Recent Startup Funding Announcements 💰
Lively (Shobin Uralil, Lively COO and Co-Founder)
Lively, a San Francisco-based maker of a Health Savings Account, raised an $11M Series A round in late October.
Recommended rule to live by: Put your customers first and always be available for them. We started this early and we have continued as we scale. We answer our customers’ questions via email and field calls at any time we can. This often means replying to customers late on Saturday and Sunday nights. The response has been overwhelmingly positive. It has not only helped drive user retention but is a key element is our referral marketing and growth. Happy customers are the best marketing you can have.
Recommended book: Shoe Dog by Phil Knight.
How long did the round take to close: We were part of the inaugural Y Combinator Series A program. We met every other week (over the summer) with the partners at YC to prepare for our raise and schedule all of our investor meetings precisely for September. As a result, we officially started fundraising on September 4th and got our first term sheet on September 7th.
How many firms did you speak with: We initially met with about 30 different firms to determine if there was mutual interest. From there, there were 8 firms who we engaged with to dig in deeper into diligence. From there, once we received our first term sheet, three more followed. We ultimately signed the term sheet put forth by our lead investor, Costanoa Ventures with participation from Y Combinator, Point Judith Capital, and Transmedia Capital.
What capital will be used for: The funding from our Series A will allow Lively to accelerate its growth, expand its free consumer HSA offering, and further expand into the employer market.
Seems as though the process of raising money isn’t efficient. Your thoughts: First get your internal data points and story in order. Second, set a clear raise time frame. The best time to raise is when you don’t need the money. Create a formal process. Get to know the firms and partners you want to work with over a longer period of time, but when you officially start raising, you should line up all of your formal pitches in a 2 week time frame if possible. This will limit back and forth, create a sense of urgency for you and potential investors and limit your time suck.
Total amount raised to date: $15.2M.
Competitive landscape: The HSA landscape is growing, but unfortunately not in a way that prioritizes the consumer. HSAs have been around for quite some time, with big names like HSA Bank, HealthEquity, Optum Bank, Further, the HSA Authority, and Bank of America -- but Lively is the first to put the end-user first and to take away the nickel and diming of these more established firms. Lively believes every American should have access to tools that enable them to save for healthcare, which is why Lively provides a consumer HSA with no hidden fees, investments through TD Ameritrade to help users invest their health savings (optional for a fee) to generate financial returns over the long-term, and a new HSA marketplace that simplifies what is and isn’t an IRS-approved medical expense.
Macro trends: The cost of healthcare is skyrocketing, forcing people across America to make difficult decisions about their health and money. Healthcare costs have risen from 5 percent of U.S. GDP 60 years ago, to 17.2 percent today, a trend that we don’t see slowing down at any point soon. As a way to combat rising costs, employers have increasingly turned to high deductible health plans (HDHP), as a way of “sharing” costs with employees. In fact, more than 9 in 10 employers expect to offer high deductible health plans in 2019, which immediately makes their employees eligible for the tax benefits of an HSA. But not all HSAs are created equal - that’s why we offer a simple, intuitive HSA platform created for the average consumer. Lively’s HSA integrates with employer HR software, offering a paperless and easy benefit for employers to offer. And we know that the uptick in gig workers makes healthcare complicated for individuals -- that’s why Lively makes it free for the individual to sign up for an account that stays with them for life.
Hiring: We are hiring across departments: engineering, sales, marketing, and product. You can see a full list here.
Visla Labs (Dr. Wei-en Tan, founder and COO)
Visla Labs, a San Francisco-based AI medical diagnostics platform for radiology, raised a $3M seed round in late October.
Recommended rule to live by: Inbox Zero. I hear often people complaining about the amount of emails they receive almost as if it’s a point of pride. I respect that everyone is extremely busy: If an email comes in, 4 options--delete, delegate, respond, flag. We travel a lot between the US and Asia as well, and weekly check ins as well as constant availability whether Slack/Whatsapp/texting to our customers and employees is important.
Recommended book: Cosmos by Witold Gombrowicz. It’s a novel about fictional/fantastic connections that make no sense and our absurdist need to find meaning in anything and everything. I think it’s particularly relevant as we create problems more.
How long did the round take to close: 6 months. We had a couple of false starts.
How many firms did you speak with: Many angels, and 4-5 larger venture firms.
What capital will be used for: We are going to invest in growing the team and the product to its full potential. Growth and scale will come subsequently.
Comment on valuation after the round (e.g. USD 10m-20m): Around the mid of your range.
Seems as though the process of raising money isn’t efficient. Your thoughts: I think there are many attempts to create platforms and databases where entrepreneurs can reach out directly to VCs, with varying success. Incubators like Y-combinator have also made startup financing and mentoring more of a commodity that can be easily found and exchanged. I think that what’s missing is a connection to strategic investors. Either they’re too big and unwieldy and unable to take on the risk of earlier stage, or they have other gating factors often tied to bureaucracy or a lack of understanding of start up culture.
Competitive landscape: There are many AI companies who claim to have created algorithms that could sound similar to ours, but they are vastly different in terms of not only the model accuracy, but the fact that they are still algorithms, whereas we believe in real products that can deliver value. Another difference is in the delivery techniques of the AI, and how difficult integrations can be. We are literally a one-click install, keeping security and data privacy at top of mind.
Macro trends: There’s a lot of emphasis on value care healthcare, meaning that margins are getting thinner for many providers. Since we can potentially increase speed, accuracy, and reduce liability, we couldn’t have entered at a better point in time of the markets.
Drivetime (Niko Vuori, founder & CEO)
Drivetime, a San Francisco-based interactive entertainment company developing voice games for drivers, raised a $4m seed round earlier this month.
Recommended rule to live by: our only rule as a company is "don't be a blocker" There is nothing less efficient than not being able to do your work because you are waiting on someone else.
Recommended book: There is no single book, but I am a huge believer in Marc Andreessen's maxim that the only thing that matters is market. If you are tackling a great market, your customers will literally be dragging the product out of the startup.
How long did the round take to close: We started in earnest in March 2018, and closed in May 2018. Our raise was more or less full time for about 2-3 months, but IMO remarkably efficient. We got the polite passes quickly (with a just a couple of exceptions that dragged on for 2-3 weeks) and we got the commitments quickly as well. In the end we were over-subscribed (initially set out to raise a quick $2M, but we soon upped that to $3M based off early interest, and then again to $4M).
How many firms did you speak with: We probably spoke to ~100-ish investors.
What capital will be used for: The capital is to grow the team (mainly), with some earmarked for marketing.
Competitive landscape: In the car, we see passive forms of audio consumption as vying for the same share of attention (radio, Sirius XM, podcasts, streaming music, audiobooks). In adjacent markets, we see skill and action developers for Amazon Echo and Google Assistant as potential competitors in the future, if they make the jump into the car (which they have not yet).
Macro trends: The smart speaker revolution, as well as the voice assistant revolution, will continue to drive awareness and adoption of voice-based interactions, with the car the most natural environment for voice interactivity (due to captive audience, current non-availability of any interactive entertainment and long solo commutes in North America). We are well-positioned to take advantage of this rising ride as the first to market in the car with an interactive voice offering, and with a team that has successfully built games on top of new platforms in the past (on social networks at early Zynga, as well as on mobile platforms as co-founders of Rocket Games).
Zylotech, a Cambridge, Massachusetts-based AI-driven customer analytics platform for marketers, secured a $5.5M funding round in late October.
Recommended rule to live by: Google sheets & PPT are amazing, collaborative tools. I live by 2*2 matrix graph/framework during any planning phase which helps in managing short & long term priorities, importance, complexities etc.
Recommended book: Emotional Quotient 2.0.
How long did the round take to close: Around 3 months. Often times, when I talk to founders about the process of raising venture capital, they note that it was a full-time effort for three to nine months.
How many firms did you speak with: About 20-25.
What capital will be used for: Building & scaling sales & marketing engine, product expansion.
Comment on valuation after the round: $16-25M Range.
Seems as though the process of raising money isn’t efficient. Your thoughts: Certainly, I think if we do some deeper research and build sort of a match engine or priority list of top 10 VC firm match based on fitment, focus, current portfolio etc., and spend time getting an answer one way or other and then take up next 10 or get one lead VC to get your term sheet. Then perhaps in collaboration of lead VC if you look for complimentary VC firm that would be the best.
Total amount raised to date: $6M.
Competitive landscape: Nearest competitors are few pure play Customer Data Platform, however none of them are automated and are very DIY types which requires lot of manual work and data scientist dependencies.
Macro trends: GDPR compliance is helpful and driving the growth, our product is GDPR compliant. Besides that marketing is now hybrid funnel based, beyond lead funnel driven.