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This the last newsletter of the year. The newsletter will be back in early January with a revamped look and tighter focus. Before then, I’ll be putting out an overview of all the Q&As from 2018; valuation ranges, total capital raised, and other insights from all the founders, CEOs and investors that graciously responded to questions.
See you in 2019.
Recent Startup Funding Announcements 💰
US — New York
Trusty.care (Jo Schneier, CEO)
Trusty.care, a New York-based healthcare tech startup, raised an USD 800k pre-seed round earlier this month.
Recommended rule to live by: Test. Test. Test. Never rely on anecdotal experiences or what people say they will do. Don't build something if you haven't tested that people not only say they want it but have demonstrated that they will use it.
Recommended book: We spend all of our time reading books on Medicare and healthcare regulations....but if you are interested in that subject I highly recommend "An American Sickness: How Healthcare Became Big Business and How You Can Take It Back" by Elisabeth Rosenthal.
Thoughts on work-life balance: It is hard to find balance in the early days of a startup (as I write this up on a Saturday afternoon after spending 5 hours with my entire team.) But, it is critical that you do a couple of things along the way no matter what: 1. Don't isolate yourself. It is lonely to be a CEO but the good news is other CEOs are also lonely, find people you can talk to openly. 2. I bike to work every day and go to the gym doing weightlifting at least 4 days a week. It takes time. It is not mission critical. But, it actually is. Without this release and time away from the thick of things, I would lose perspective and my work output would end up being significantly worse. All of that said, I have three kids and I miss their bedtimes several nights a week. I rely on a network of people to help make the household function instead of trying to do it all myself and sometimes you just need to say you can't be all things to all people in the start of a company.
How long did the round take to close: We laid the groundwork for a raise from May-July. We started taking in capital in August and closed in November.
How many firms did you speak with: We were raising from angels and some of those from angel groups, so the number of investors we spoke to was a lot. But the number of groups that we presented to where no one invested was 10% of the total pitches. We had one angel lead the round, and he set the terms. Everyone came in under those terms.
Comment on valuation after the round: Between $3-$5m.
Length of relationship with lead investor: 5 years.
What capital will be used for: Our raise is going towards development, legal, and marketing.
Seems as though the process of raising money isn’t efficient. Your thoughts: If there was a better matchmaking tool connecting founders to funds that invest in the stage and sector that you are operating in, then that would be fantastic. Barring that, it takes the time it is going to take and really depends on so many factors.
Total amount raised to date: $800K.
Competitive landscape: Our biggest competition is the status quo method of solving problems with navigating health care. Searching on Google, asking a friend, calling your insurance company, blindly doing whatever, going to a broker or reading a book.
Macro trends: There are three trends that are affecting our space:
1. The country is rapidly aging
2. The Centers for Medicare and Medicaid are making a ton of data available for startups.
3. With Amazon, Google, Apple and Morgan Stanley entering (or continuing) in the health care space, we expect that there will be a lot of consolidation and interest in tools that dramatically improve customer experience.
Luminoso Technologies (Adam Carte, CEO)
Luminoso Technologies, a Cambridge, Massachusetts-based an AI-powered customer insights company, raised a USD 10m Series B earlier this month.
Recommended rule to live by: If only it were this easy. For me, it’s avoiding shortcuts that create long-term problems. Growing rapidly brings a continuous stream of new challenges so we have to do things the right way up front or we will get in our own way in the future.
Recommended book: At the risk of sounding geeky, I never stop drawing upon the examples in The Lord of the Rings. I’ve read Tolkien several times to myself and again to each of my two children and I’ve found no better guide for learning how to take ownership of the tasks, build a team, and manage the challenges that human nature constantly present organizations.
I’ve read a lot of business books, most of which confirm a certain amount of common sense. But the one that has stayed with me for years is The Goal: A process of ongoing improvement by Eliyahu M. Goldratt and Jeff Cox. Better: A Surgeon's Notes on Performance, by Atul Gawande is not a business book, but like The Goal emphasizes the value created by a team constantly focused on making incremental improvements.
Thoughts on work-life balance: Every company needs a mix of people and personalities to succeed. A company in which everyone has work-life balance will struggle to succeed in a competitive environment, but its opposite - a company in which everyone works night and day - will encounter other challenges. Every company needs both, but I expect the the CEO and executive management to emphasize “work” over “life.
How long did the round take to close: To some degree, until a company has visibility to being cash flow positive, fundraising is a continuous process in which we are constantly meeting with interested investors. But we formally launched the Series B at the end of June and closed on November 20th, so nearly a five-month process from beginning to end. The proceeds from the Series B should be more than enough to get Luminoso to breakeven, so we are now completely focused on growing the company.
How many firms did you speak with: We kept a list of about 60 investors, then narrowed that down quickly to about three dozen.
Number of term sheets submitted: We received 3 term sheets from investors interested in leading the round.
Comment on valuation after the last round: As a private company we do not comment on valuation other than to say it was at a significantly higher valuation than the preceding round.
What capital will be used for: We expect the funds to be used in three areas:
International expansion. Because our technology supports 14 languages natively, we already have offices in London, Tokyo, and Sydney. We’ll continue to invest internationally to satisfy demand in Europe and APAC.
Product improvements. Our product is great for trained analysts, but we want to make it easier for “citizen data scientists” to use it, especially at smaller companies.
Portfolio expansion. Our core technology has applications toward additional use cases. For example, we can use it to improve retail or e-commerce searches by making it easier for consumers to search for concepts found in peer reviews rather than relying on keywords.
Seems as though the process of raising money isn’t efficient. Your thoughts: Nothing beats being prepared. A company looking to shorten the fundraising process should start planning for this as soon as possible. Make sure that the company’s story is clearly articulated and the supporting materials are well organized. Being prepared allowed us to efficiently reach out to a lot of investors, and through this outreach we were able to find a lead investor group (Diamond Ventures) that really understood our business and had clear ideas about they could accelerate our growth. It also helped that we had strong ongoing support from early investors that validated our team and technology.
Length of relationship with lead investor: We met our lead investor for the first time during the Series B fundraising process.
Total amount raised to date: With the $10M from the Series B, our total amount raised is now just over $30M.
Macro trends: Three trends worth noting: the shift in AI use cases, the explosion of consumer feedback, and the barriers preventing AI adoption.
AI solutions require more specificity and results. In the past, AI solutions were expensive toys found in the innovation labs of early adopters, without a business case attached to them. These days business leaders look for AI solutions designed to perform specific tasks with tangible outcomes.
The explosion of omnichannel is too much feedback to digest. Consumer feedback is one example. With the explosion of communication channels - text messages, emails, chats and chatbots, surveys, online reviews, support requests, and various forums - B2C enterprises are drowning in information from constituents and are struggling to find insights from those messages that they can apply to improve their business.
Interest in AI is rising, but adoption has been held back. AI solutions such as natural language represent a great way to solve that problem by automating the analysis of that feedback. But historically, NLP has been expensive, because it’s either relied on collecting massive amounts of data or hiring an army of consultants to manually train and tune models.
Hiring: several positions, including customer success, sales, marketing, product management, research, and engineering. See website.
Sharegain (Boaz Yaari, CEO and Founder)
Sharegain, a London, UK- and Israel-based fintech startup offering a securities lending platform, raised $5m in funding back in November.
Recommended rule to live by: Easiest hack ever – never flick over emails. If you open and read an email then you should be prepared to action it, whether you reply, forward or delete. The worst thing you can do is quickly review an email only to return to it later on. I’ve found that this simple hack can reduce ‘email time’ by 10 to 15%.
Recommended book: The Hard Thing About Hard Things by Ben Horowitz.
How long did the round take to close: Raising money is rarely a quick process. However, driven by a combination of investor demand and growth traction, we spent a relatively short, focused amount of time (around four months) regrouping with investors and closing the round - a Series A-2 round of $5million. We’re grateful to already have a set of strong, globally-focused investors on board who share our vision and have been supporting us from early on.
How many firms did you speak with: We maintained relationships with relevant VCs through the years, even if they didn’t invest in us. That way, when we launched our last round we knew exactly who we wanted to engage with - and they already knew us and liked us. This resulted in the benefit of a relatively short round.
Comment on valuation after the round: Unfortunately, we won’t be disclosing valuation at this stage - though we can share that our next round won’t be too far in the future, when we may be able to disclose more.
What capital will be used for: The latest investment will help us to do two key things: roll-out the platform to a wider customer base globally (with our immediate focus being the USA) and further building out our team to support the significant early demand we’ve seen from clients.
This is a $2.5tn secret that’s about to be opened up to every investor, from the world’s largest funds to consumers. So, alongside on-boarding clients and building out operations, as the category leader we will also have to continue educating the market on the scale of the opportunity. We’ll also be informing the industry on why it’s an investment manager or adviser’s fiduciary duty to explore revenue options like securities lending.
Seems as though the process of raising money isn’t efficient. Your thoughts: Often one of the biggest struggles for entrepreneurs who are embarking on their first funding round is getting in front of the right VCs - at the moment, company founders are most likely to be successful if they are well-networked or have worked with the VC before and therefore are trusted by them. This means that those who are just starting out can often struggle to get a look in, no matter how good their business might be. Moreover, regardless of how good your network is, VCs will only invest in a business if they believe in its vision and can see that the founders have a good team and the ability to bring the business’s potential to fruition.
The fact that my team and I have backgrounds in capital markets and substantial subject market expertise in securities lending has definitely been an asset during Sharegain’s fundraising. Given the uniqueness of the idea, many VCs wanted to meet us. Back in our first financing round (early 2016) we quickly learned that many VCs just wanted to hear our story and educate themselves rather than potentially invest in Sharegain. This time over, we learned our lesson and only engaged with VCs and partners at firms who understood the environment we operate in and wanted to invest in the space.
So bottom line, entrepreneurs need to do proper due diligence on the investors that they meet and understand whether there is a probable chance of investment. Being laser-focused on the right investor base could save a tremendous amount of time and energy.
Total amount raised to date: Our latest round brings total investment to date of $12m.
Competitive landscape: For 40 years, the world’s largest investors have been making additional gains through ‘securities lending’. This entails the lending out of others’ securities in a need-to-know-only system that few understood and even fewer controlled. But change is coming: market forces are driving demand for securities lending to become a more accessible, transparent, performant market - open to all, for the benefit of all.
As the first FCA-regulated platform to open up securities lending, with others likely to follow, we expect that we are the beginning of new category which will take shape over the next few years. Like many other fintechs entering the traditional world of banking, we often talk about ‘democratisation’ - yet unlike others leading bold, change-making categories, Sharegain doesn’t aim to destruct or disintermediate. This is about disruptive collaboration and innovation with purpose. It’s about working with incumbents, private investors and newcomers to unlock the potential of securities lending - for the benefit of everyone.
We’re excited to be leading this new category - it truly is a ‘blue ocean’ opportunity, but this does mean we have work to do educating the market and helping develop best practice.
LetinAR, a Seoul, South Korea-based startup developing a new optical solution for AR smart glasses, raised a USD 3.6m Series A round back in October.
Recommended book: I recommend “The hard thing about hard things” by Ben Horowitz. This book will provide answers for a lot of concerns which CEO may has.
How long did the round take to close: It took about six months.
How many firms did you speak with: At this round, LetinAR only discussed with Korean VCs. Although LetinAR limited the scope only to Korean VCs, LetinAR still had a discussion with more than 20 companies. For next year, LetinAR will open world-wide funding round, and LetinAR is eager to talk with much more companies.
What capital will be used for: Most of the capital will be deployed to R&D and Marketing. R&D includes preparation to co-operate with smart glasses manufacturers. LetinAR will begin providing PinMR™ Lens samples in 2019, making it possible for smart glasses manufacturers to evaluate the potential of using PinMR™ lens for their own products.
Total amount raised to date: USD 4.3m. Based in Seoul, South Korea, LetinAR was founded in October 2016. It has raised $700,000 seed money from Naver, the biggest portal site and search engine operator in South Korea. LetinAR went on to receive $3.6 million in Series A funding from another internet giant, Kakao Ventures.
Competitive landscape: Magic Leap, Vuzix, Lumus, ODG, Atheer, Digilens, Optinvent, Avegant, Meta, Recon are considered as our major competitors. Some may develop their own actual glasses, and some may not. LetinAR is focusing on developing lens modules, not the complete glasses.
Macro trends: AR Industry is changing very fast. The development speed of technology is very rapid, and multiple tech giants are working hard to build their own AR glasses. Although there are no available ‘commercial’ AR glasses in market right now, tons of great AR glasses will be launched in next 3-5 years. LetinAR strongly believes that AR glasses will replace current smartphones, and LetinAR will play a crucial role by breaking down the technical barriers that have long hindered the commercialization of AR glasses.