A couple notes: first, I’ve featured a longer list of startups in the recent funding announcements section but full Q&As have only been included for the first half. The remainder will be included in next week’s newsletter.
Second, while seed and Series A rounds seem to generally take between 6-8 months to close, Craft Ventures, the SF VC firm founded by David Sacks, can move much quicker. Sendoso and Dray Alliance (both featured in this week’s newsletter) didn’t waste any time getting to know Craft Ventures. Sendoso met Craft Ventures during the 3-month process of raising its $10.7M Series A round and Dray Alliance knew the firm for only two weeks prior to raising their $3.5M seed+ round.
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Future Funding Rounds 🔮
Deeplite, a Montreal-based provider of software to make Deep Neural Networks more efficient and faster, raised $800K (CAD) to date and plans on raising 3-5x that amount in a seed+ round within the next 6-10 months, said Davis Sawyer, co-founder. The next round of capital will be used, in part, to bring on seasoned leaders in SaaS and B2B enterprise software to build high-value relationships with new customers in the AI market. Deeplite is currently preparing to bring on a seasoned CEO. The company’s closet competitors include DarwinAI (CAD $3.9M raised), Xnor.ai ($14.6M raised), DeepScale ($18.5M raised), and Pilot AI.
What’s the TAM you’re going after?
There are two metrics here: bottom up and top down. Top down – we are looking at the current market value and CAGR for AI software in our target verticals. This figure is roughly $19B USD, with consumer devices being the bulk of the market value. However, CAGR mainly comes from automotive and mobility, as this market matures rapidly. We’re looking at a TAM that roughly doubles in the next couple years.
Bottom up, we look at things like number of devices, number of processors and particularly the demand for edge computing over the coming years. These figures are like the top down numbers but give a more organic view of the kind of revenues we can achieve by disrupting incumbents, like moving AI inference from GPUs to ASICs and FPGA with our optimization software. This can also be calculated by looking at the number of devices our customers ship and multiplying that by a potential share of purchase price.
Recent Startup Funding Announcements 💰
MedStack, a Toronto-based privacy and security compliance solution for healthcare apps, raised its recent $2.4M seed at around a $10M valuation. The company actively worked on the deal for 9 months. MedStack received 1 term sheet, from lead investor Telus Ventures, and spoke to approximately 20 investors, before choosing 2 additional participants for the round. The company is most often compared to Datica ($14.8M raised), ClearDATA ($80.4M raised), and Aptible ($12M raised). MedStack has raised a total of $2.3M to date.
Ossio, a Woburn, Massachusetts-based orthopedic fixation company, identified 50 prospective investors for its recent $22M capital raise. Of the 50, the company narrowed the list down to 6 to 8 investors and received 4 term sheets. Ossio knew the led investor, OCV Partners, for 2 years prior. The company will look to launch several new products in the US and grow its valuation to between $400M-$500M in the next 3 years.
Destacame, a Santiago, Chile-based personal financial management platform, took approximately 8 months to raise its recent $3M Series A round. Valuation after the round is between $10M-$20M. The company will look to use capital raised to 3x its current user base, which would bring it to 3 million users. The company has raised approximately $5M to date.
Dray Alliance, a Los Angeles-based logistics startup, devoted 3 months to raising its recent $3.5M in seed+ round. The company spoke with 10 potential investors and received 1 term sheet (from Craft Ventures). Dray Alliance knew Craft Ventures for 2 weeks prior to receiving a term sheet. Competitors include NEXT Trucking ($124M raised) and Cargomatic ($55M raised).
Sendoso, a San Francisco-based sending platform, spoke with 15 potential investors and received 2 term sheets for its recent $10.7M in a Series A round. The company spent 3 months raising the round and just met the lead investor, Craft Ventures, prior to closing the round. The competitive landscape includes Alyce ($5.3M raised). Total amount raised to date is $13.2M. – (Kris Rudeegraap, Co-founder and CEO)
Fairygodboss, an NYC-based career community for women, took 5 months to close its recent $10M Series A round. The company had approximately 50 discussions prior to the round and received a few term sheets. In the past 2 years, Fairygodboss has seen 30x user growth. The company has 100 corporate customers and expects that number to grow to 350 by year end. Capital from the raise will, in part, be used to double staff headcount by year end. Fairygodboss knew GSV Accelerate, co-lead in this round, for two years prior, as they invested in the seed round. The company met Signal Peak, the other co-lead, last summer.
SpyCloud, an Austin-based account takeover (ATO) prevention platform provider, took 6 months to raise its recent $21M Series B round. The company knew the lead investor, M12, Microsoft’s venture fund, for 4 months prior, however some of the company’s board have known the firm for years. Capital raised will be used, in part, to expand within Europe.
Synqy, a Pleasant Hill, California-based provider of a new retail media solution for retailers to compete with Amazon advertising, took 8 months to raise its recent $1.2M in internal funding round. The company is growing revenues at over 30% CAGR and has won nearly 40 new accounts.
Modulate, a Cambridge, Massachusetts-based machine learning startup providing total control over voice, took 6 months to close its $2M seed round. The company met 2Enable Partners and Hyperplane Venture Capital, co-leads in the round, during the process of raising this round of capital; it took a single meeting to reach the point where Modulate saw them as great candidates to lead the round.
Alto, a Nashville-based technology platform for investors to add alternative assets to their IRAs, spoke to over 150 investors over the course of a year for its recent $2.8M seed round. The company knew the lead investor for a decade prior to the close of the round. One milestone the company is looking to hit is 5,000 customers by year end. The company has raised a total of $3.8M.
MedStack (Balaji Gopalan, Co-founder and CEO)
MedStack, a Toronto-based privacy and security compliance solution for healthcare apps, raised $1.8M (CAD $2.4M) in a seed round in February.
Recommended rule to live by: Efficiency and quality of communications are so critical for us, because we work on in a fast-paced, but highly-sensitive volume business, and we're a remote located team. So the one practice we push on really hard is the notion of reporting individual work plans, what we're working on now, where we're stuck, and what we're planning on doing next, by when.
Recommended book: Zero to One had a big impact on me, and many of Thiel's ideas on competition and building a product for the future help us guide our decisions day to day.
Thoughts on work-life balance: I'm definitely not fantastic about it, but at the same time I have clarity on what defines my life: my work, my family and kids, my music and a little exercise. The key is to fill and schedule in time in a non-negotiable manner (eg. other people are invested too so you can't let them down) with activities that are very different than what you do the rest of the time. While I could definitely do better, the company as a whole places a high premium on balance. We encourage our team members to take "think" / no-interruption days, to always place family first and leverage the flexible time working environment we have to address their personal commitments.
How long did the round take to close: This was, as they often are, a complex, convoluted process but a necessary one, as both our lead investor and us spent a long time in deep diligence with each other to ensure that this strategic relationship was properly defined and made sense. We worked on it actively for about 9 months, and it was definitely a large portion of my day during that time.
What capital will be used for: We see our future very clearly laid out; the thesis for this round was go-to-market and product scale, so we are investing in product, sales and marketing support for our proven platform, while accelerating the final development before the public launch of MedStack Control, our next-generation interface, and planning broad brand and demand generation activities to coincide with it.
Comment of valuation after the round (e.g. between USD 10m-USD 20m): We have come closer to $10M USD.
Number of investor conversations and terms sheets: TELUS Ventures really initiated the round with us. We'd been speaking with many investors but the round only became serious when they kicked it off. So theirs was the only negotiation that went as far as a term sheet. But we spoke with many others to fill out the round, probably close to 20 before we mutually settled on the two additional participants.
Seems as though the process of raising money isn’t efficient. Your thoughts: Oh I have so many lessons learned, I could write a book. Probably the two most important takeaways for me have to do with the management of the legal process (ie the company's counsel should be co-leading the process with the founders) and being firsthand in decisions and not going on the word of second parties: be collaborative, but double-check everything.
Length of relationship with lead investor: We'd been curating a relationship with TELUS Health for a year and a half, as an invited participant in their FirsTep program. Their leadership had become informal advisors and collaborators which naturally led to the investment discussion.
Total amount raised to date: This round of $2.4M CAD ($1.8M USD) adds to a previous $500K USD raised via convertibles over 3 years.
Competitive landscape: DevOps automation, and integration of built-in data security and privacy protocols is a new space, especially as intersected with digital health. We are most often compared to Datica, ClearDATA and Aptible, and we've built MedStack based on customer feedback on what works well and where gaps are with those offerings. However, most of the market remains untapped (eg. those competitors don't operate in Canada, like we do) and many prospects (digital health early stage technology companies) we work with are deciding between using a vendor such as us or trying to build the requirements for health data privacy themselves, from scratch, on top of AWS or another cloud provider that doesn't have these configurations built out of the box. We see this as a tremendous opportunity to build new practices, and a new community around those practices. The available market ecosystem is enormous.
Macro trends: MedStack's business proposition has emerged from the intersection of several broad trends: in healthcare, the increasing average age of the population, coupled with the quotient of the industry focused on chronic disease management (cancer, diabetes, heart conditions, mental illness) has placed a capacity constraint on services like never seen before. A solution is required and the discussion is unavoidable. Meanwhile, the emergence of bleeding edge digital technologies such as wearables, AI, mixed reality and Blockchain have particular exciting potentials in healthcare. Consumers (patients) are more ready than ever to consume healthcare services and products in a digital fashion and this is reflected in an increasing number of accelerators and venture funds naming a dedicated digital health category (the amount raised by digital health startups in 2018 was more than double what it was in 2017). We are capturing these trends to enable the ecosystem to collaborate easier, and to invite more participants into it.
Ossio (Brian Verrier, CEO)
Ossio, a Woburn, Massachusetts-based orthopedic fixation company, closed a $22M equity round earlier this month.
Recommended rule to live by: There are a few: acquiring the best talent in the industry for key strategic roles, setting a strategic vision, building a plan and staying disciplined and keeping the customer top of mind with everything we do.
Recommended book: I have always respected the “Innovators Dilemma” as it highlights how success can create complacency, ultimately cause some of the best innovative companies to fail.
Thoughts on work-life balance: Balance is important because family is most important. Having said that, I have never seen this as real because work-life balance is only an issue for those who are not clear and disciplined to the things that will create the most value. In other words, most often life balance is impacted when spending too much time on non-productive things. We are “all-in”, in more ways than one, on the company and we look to hire the best people who are as passionate and committed to opportunity as we are. The entire team is incredibly focused on value creation.
How long did the round take to close: We started the effort about 18 months before we closed the round.
What capital will be used for: This round will enable us to fuel all of our key strategic initiatives such as talent acquisition, pipeline execution, scaling manufacturing and commercialization.
Number of investor conversations and terms sheets: We identified and spoke to over 50 different investors, which quickly was narrowed to 6-8 that we spent a lot of time with and eventually received 4 legitimate term sheets.
Seems as though the process of raising money isn’t efficient. Your thoughts: There is no easy way to raise money. Investors, even private investors, are very sophisticated and smart about their diligence. Importantly, raising money is about developing a capital strategy that combines both the need for money with the partners who will help to create value. So it should be a comprehensive process that begins with thinking about the right investor DNA for the stage of the company, where once identified time is spent on developing the relationship with the actual close of money being the output.
Length of relationship with lead investor: From the time we first met to close it was almost two years.
Milestones to be achieved with new capital: We will grow in all areas of our business, we will launch several new products in the US market over the next 3 years, we will access key markets outside the US, we will build a very large portfolio of clinical data and our objective is to build Ossio to a $400M - $500M company in the next 3 years.
Macro trends: Healthcare is a great space because of the constant need to improve the quality of treatment, outcomes and patient experience while at the same time lowering the cost of the care continuum. This said, demographics (increasing population and life expectancy) are the strongest macro trends as delivering the best care possible and reducing the cost burden in the system will continue to provide opportunities for small innovative technology companies.
Destacame (Augusto Ruiz-Tagle, Co-founder)
Destacame, a Santiago, Chile-based personal financial management platform, raised a $3M Series A round earlier this month.
Recommended book: Assuming that they are entrepreneurs, I would recommend Disciplined Entrepreneurship by MIT's professor Bill Aulet.
Thoughts on work-life balance: Good question, is one that we ask ourselves every week. I'd say that I like better the concept of work-life harmony. When you are entrepreneur, everything is so dynamic and changing that you have to adapt, resulting in that sometimes you have to be there for work and sometimes you just need time for your family or yourself. In the end it is important to be in constant revision so you can find that harmony (which is not static).
How long did the round take to close: For us it took about 8 months.
How many firms did you speak with: We received more than 80 NO's... But you need only one YES to start seeing traction from other potential investors
Comment of valuation after the round: Between $10M-$20M.
Number of investor conversations and terms sheets:
Seems as though the process of raising money isn’t efficient. Your thoughts: I think that it will always depends on the nature of the business. Depends on the cash flow you are generating, the stage of the business and how aggressive you want to be. Usually pre-series A startups are just showing positive unit economics but are generating either negative cash flow or small revenue. It would be easier when you have both (sales and a good unit economic) but it is harder when your plan is too aggressive.
Length of relationship with lead investor:
Milestones to be achieved with new capital: Grow in Chile with more depth in current products, more integrations with FIs and new products. Strengthen our operation in Mexico with new partners and replicate killing products that we have in Chile. Increase our user base by 3x up to 3 million.
Total amount raised to date: ~$2M pre-series A, $3M in series A.
Competitive landscape: Competition is stronger in Mexico, but is still a huge market and opportunity. So at this stage competition is welcomed because helps to increase awareness in FIs. In Chile we don't see some big financial institutions trying to replicate parts of our model, but only for their clients, son in the end we see not much value for the final user as we think they will prefer to find a broader set of options rather than one institution offering just their products.
Dray Alliance (Steve Wen, Co-Founder and CEO)
Dray Alliance, a Los Angeles-based logistics startup, raised $3.5M in seed+ round earlier this month.
Recommended rule to live by: Be fully transparent and have complete trust in the people you work with or don’t work with them.
Recommended book: I recommend reading Sapiens: A Brief History of Humankind. An objective view of history is great to help anyone zoom out and also recognize patterns when zoomed in.
Thoughts on work-life balance: Having a healthy balance is extremely important. I believe we learn not only from working, but from every aspect of our lives. Finding a balance that is right for you is very important for personal growth and efficiency but also to serve as a role model for your company.
How long did the round take to close: We devoted three months to raising our seed round. However, I think startups in general are always raising because the process can take much longer than you expect.
How many firms did you speak with:
What capital will be used for:
Number of investor conversations and terms sheets: We spoke with about 10 investors for this round of financing, since it was a seed+ round and received 1 term sheet from Craft Ventures. I knew Craft Ventures was the right investor after the first meeting. They have been helpful and supportive in every way.
Seems as though the process of raising money isn’t efficient. Your thoughts: There are ways to make a founder’s process more efficient by consolidating meetings to certain days. I don’t think there is a standard way of raising capital, since every investor, every founder, and every startup is different. You just have to find the process that works for you.
Length of relationship with lead investor: I only knew Craft Ventures for 2 weeks by the time we received the term sheet. Everyone on the Craft team is very impressive and perfectly understood our vision.
Competitive landscape: We enjoy having competition. There are many competitors in our space including Next Trucking and Cargomatics. However, the difference is we are 100% laser focused on drayage which allows us to create a differentiated product to address our customer’s specific needs.
Macro trends: Every port terminal is innovating to handle the next wave of globalization and consumer expectation is increasing the speed of delivery. We want to leverage the opportunity to increase the efficiency of all stakeholders (shippers, ocean carriers and freight forwarders). We are ready to put our stake in the ground!
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