Sourcery (9/18-9/22)
Discover more from Sourcery
Sourcery (9/18-9/22)
Intro to LA HardTech + ChatGPT ☀️ Openly, Mapbox, Cato Networks, Writer, MotherDuck, JOKR, Dragos, Hyperjar, Mesh, Authentic, HealNow, Corti, Diligent Robotics, Medeloop, Mural
The New Epicenter of US Tech & VC Funding..
Intro to LA HardTech with Xander Oltmann
Context: We’ve recently added a new section to Sourcery under the label HardTech. This is a rapidly evolving market in LA spurring from the talent maturing out of SpaceX, Anduril, Tesla, etc. They’re creating companies tackling some of the hardest problems in America across defense, aerospace, manufacturing, climate, energy, and more.
LA HardTech Leaders (Shared in Sourcery last week + more)
Aerospace: SpaceX, Varda, Relativity, ABL, Skyryse
Manufacturing: Hadrian, Machina Labs, Epsilon3, First Resonance, Freeform
Energy/Climate: Tesla, Radiant Nuclear, Universal Hydrogen, Parallel Systems
Is Cake Required After Dinner?
This past weekend Xander GP of Commodity Capital (“CC”), my colleague Jacques & I hosted a dinner in Venice with founders & operators from Hadrian, Senra, & a ‘stealth’ LA-based manufacturing startup.. and I have to say, this group is built differently. For starters, multiple people at the dinner table shared that they crack raw eggs into their smoothies, require cake after dinner (Seinfeld clip), & also debated if it's weird to put salt on your morning oats (I think not). Wild stuff.
Anyways, here’s more from Xander on what to know about LA HardTech & this growing investment thesis in the world of VC. (PS Jacob Helberg is a Venture Partner & Advisor in CC)
Companies to Watch:
Hadrian, highly automated precision component factories across the US to enable Space & Defense manufacturers get parts 10x faster
Memo: Hadrian: Ex Machina Ad Lunam, Packy McCormick of Not Boring
Meet the Anti-Decline Company Building to Keep the Solar System Free
ICYMI: CEO Chris Power boldly stated "90% of VC-backed companies could go away and there would be no impact in the world." (..😅) Watch full clip here
Fun fact: Despite loving America so much, Chris is actually Australian & once hacked into Australia's Billboard charts forcing a retired boy band go back into business.. they’re still playing to this day.. Chris gets zero royalties.
Varda, creating products that defy gravity’s constraints on Earth by using their spacecraft as a manufacturing and test platform in space
Memo: Varda: The Space Drug Factory, Packy McCormick of Not Boring
Expanding the Economic Bounds of Humankind, Starting Today
ICYMI: Varda’s team went viral with LK99 experiments over the summer, thanks to the live tweeting by their 1st employee & Engineer Andrew McCalip
Fun fact: Despite loving America so much, Co-Founder Delian is actually Bulgarian, recently got his pilot's license & once treated Xander & I for a round trip up/back to Santa Barbara for dinner (..it was also my bday ..& somehow I ended up paying the full bill 🤦🏻♀️ )
Conversation with Xander
What made you interested in HardTech? Why is it so important right now? How did we get here?
After building and scaling two enterprise software companies (hiQ Labs in 2012, Scope in 2019) I saw a very scary trend happening & that was the flow of invested dollars going to sales & marketing, not research & development. Specifically, software is getting so easy to build that the only moat is distribution which just means a race to the bottom & a lack of differentiation in the market between products.
The good news is that because software is getting so easy to build the second order effect is that vertical integration get’s a lot easier in complex industries with very large TAMs, ie. manufacturing and all of its subsectors. That’s what led me to launch Commodity Capital - a Pre-seed/Seed stage fund investing in New Industrial Base startups like Hadrian, Varda, Albedo, & more.
What are the biggest macro challenges facing the American Industrial Base?
This would be more mid-macro (between micro & macro) but the number of funds that are interested in writing checks to Series C companies that are focused on this sector is small, but quickly growing, so there’s still a lot of education that’s going on.
With that being said, rounds are getting done and existing funds are allocating dedicated strategies around hard tech and new funds are getting created. I.e. I just spoke with someone the other day who is well on their way to raising a new $500m fund solely focused on later stage growth investments in the space.
Who are you betting on? What are they solving?
Hadrian, automated precision aluminum parts
Varda, simplifying the manufacturing process in a zero gravity environment
Albedo, delivering aerial quality imagery in hours not days
Senra, automating the wire harnessing process bringing lead times down from 90+ days to 2 weeks
How are these businesses built differently? Why is their model advantageous today?
These companies tend to be vertically integrated which is a massive operational advantages allowing them to completely dominate their given markets. This is critical because it reduces complexity, allows for quicker feedback loops, and allows you to push the limit on what the market thinks is possible. For example, Tesla’s 17% EBITDA margin compared to Ford’s EBITDA margin of 7.7% is a clear example of the benefits of being more vertically integrated.
Another interesting comparison that redefines the definition of “venture scale”, is Tesla and Snowflake (see below for comparison). Historically, companies in the capex heavy bucket, like Tesla, were not thought of as investable categories. These startups are changing the status quo on what it means to be “venture scale” because of vertical integration.
Musings:
HardTech
Hardware Lottery, Sarah Hooker
TLDR: Software follows hardware. So who’s going to build the next big hardware machine or device that we haven’t even thought of yet?
The desire of most companies to increase resilience in their supply chains, coupled with the digitisation of industry, has led to a boom in areas like additive manufacturing and materials science, but also sensors, robotics, artificial intelligence & logistics software.
The Gang Captures Washington, Not Boring by Packy McCormick
Fighting Back Against Regulatory Capture for a Better Future
3D Printing Could Reduce Inventory Costs By 10% At Ford, Ark
VC
20VC Roundtable: Is the Venture Model Broken?
The Biggest Disconnect Ever Between TVPI and DPI, Why Market Sizing is Dangerous, Why “Go Fast” is Dangerous Advice, The Dangers of Raising Large Rounds at High Prices and Why Next Year Will See the Biggest Hiring Spree in Tech
AI
OpenAI releases third version of DALL-E, The Verge
DALL-E 3 integrates with ChatGPT so users don’t have to think of prompts anymore.
New Research Suggests That GPT-4 Will Boost The Productivity Of Knowledge Workers Significantly
Building Applications with AI - Lessons from LangChain, Hearth, & Context.ai, Tomasz Tunguz
. . .
Last Week (9/18-9/22):
Relevant deals include the 60+ deals across stages below.
I've categorized the deals below into five categories, FinTech, Care, Enterprise & Consumer, HardTech and Sustainability, and ordered from later-stage rounds to early-stage rounds. Highlighted deals include Openly, Mapbox, Cato Networks, Writer, MotherDuck, JOKR, Dragos, Hyperjar, Mesh, Authentic, HealNow, Corti, Diligent Robotics, Medeloop, Mural, Secoda, Lastmile AI, Rocket.chat, Afterparty, Metaloop, Boxbot, Rain, ARX, Plan A; Cisco/Splunk, Bird/Spin, Babbel/Toucan, Crowdstrike/Bionic, Roblox/Speechly; Klaviyo
Final numbers on Early Stage gets Alpha at the bottom.
Deals
Fintech:
- Openly, a Boston, Mass.-based homeowner insurance provider, raised $100 million in Series D funding. Eden Global Partners led the round and was joined by Gradient Ventures, Clocktower Technology Ventures, Trinity Capital, and others
- ZayZoon, a Scottsdale, Ariz.-based payment platform for employers and employees, raised $34.5 million in Series B funding. Framework Venture Partners led the round and was joined by Export Development Canada, ATB Financial, and existing investors.
- Bastion, a New York-based web3 infrastructure startup, raised $25m in seed funding. A16z crypto led, and was joined by Laser Digital Ventures, Not Boring Capital, Robot Ventures and Alchemy Ventures. https://axios.link/3EIu6BW
- Hyperjar, a London-based digital payments startup, raised $24m in Series A funding from Susquehanna Private Equity Investments and the Healthcare of Ontario Pension Plan. https://axios.link/466ebcm
- Mesh, a fintech OS focused on digital asset transfers and account aggregation, raised $22m in Series A funding. Money Forward led, and was joined by Galaxy, Samsung Next and insiders Streamlined Ventures, SNR.VC, Hike VC, Heitner Group, Arash Ferdowsi, Valon Capital, Matt Ocko, Florida Funders, Altair Capital, Network VC and Gokul Rajaram. https://axios.link/3rrATwI
- Flex (fka Flexbase), a Miami-based credit and finance management startup, raised $20m in equity funding. Florida Funders led, and was joined by Home Depot Ventures, MS&AD Ventures and Companyon Ventures. It also secured $100m in debt financing from CIM. www.flex.one
- Allocate, a Palo Alto, Calif.-based platform for managing private investments, raised $10 million in funding from Gopher Asset US, Intera Investments, M13 Ventures, and others.
- Authentic, a New York City-based platform that creates insurance companies for individual sellers, raised $5.5 million in seed funding. Slow Ventures led the round and was joined by Altai Ventures, MGV, Upper90, Clocktower, Commerce Ventures, Mischief Ventures, Core Innovation Capital, and others.
- HealNow, a New York City-based online payments platform for pharmacies, raised $5.5 million in seed funding. Bonfire Ventures led the round and were joined by Walkabout Ventures, Remarkable Ventures, Alabama Futures Fund, Impulsum Ventures, and others
- Truewind, an SF-based accounting startup for small companies, raised $3m in seed funding co-led by Fin Capital and YC, per Axios Pro. https://axios.link/3EHPAyN
- Layup, a Manasquan, N.J.-based challenger bank offering savings accounts for sports fans, raised $2.3m in seed funding from Continental Investment Partners, Chicago Ventures and Entrepreneurs Roundtable Accelerator. https://axios.link/3Zo738R
. . .
Care:
- Corti, a Copenhagen, Denmark-based AI assistant for healthcare professionals, raised $60 million in Series B funding. Prosus Ventures and Atomico led the round and were joined by existing investors.
- Vivante Health, a Chicago, Ill.-based digital health care platform specifically for patients with digestive conditions, raised $31 million in Series B funding. Mercato Ventures led the round and was joined by Health Catalyst Capital, 7wireVentures, Intermountain Ventures, Distributed Ventures, Human Capital, and SemperVirens.
- Inbound Health, a Minneapolis, Minn.-based platform that provides models for health systems to transition to at-home care, raised $30 million in Series B funding. HealthQuest Capital led the round and was joined by existing investors Flare Capital Partners and McKesson Ventures.
- Diligent Robotics, an Austin, Texas-based developer of robotic automation solutions for the healthcare industry, raised $25 million in funding. Canaan led the round and was joined by True Ventures, DNX Ventures, Next Coast Ventures, and Northwestern Medicine Innovation.
- Take Command, a Dallas, Texas-based healthcare benefits platform for employers, raised $25 million in funding. Edison Partners led the round and was joined by LiveOak Ventures and SJF Ventures.
- Summus, a New York City-based platform that connects medical patients with specialists virtually, raised $19.5 million in funding. Danaher Corporation and Sator Grove Holdings led the round and were joined by others.
- Briya, a New York City-based healthcare data exchange platform, raised $11.5 million in Series A funding. Team8 led the round and was joined by Insight Partners, Amiti Ventures, and the George Kaiser Family Foundation.
- Medeloop, a Palo Alto, Calif.-based platform designed to make clinical research and trials faster through the use of AI, raised $8 million in seed funding. General Catalyst led the round and was joined by Maven Ventures, the Ovo Fund, NV Investments, and others
- Mural Health Technologies, a Berwyn, Penn.-based payment and logistics platform for clinical trial participants, raised $8 million in seed funding. Bessemer Ventures led the round and was joined by Virtue VC, Operator Partners, Arkitect Ventures, Correlation Ventures, and Project Mayhem Ventures.
- Amenities Health, a Dallas, Texas-based platform for health systems to find patients and track patient engagement, raised $6.25 million in Series A funding. MemorialCare Innovation Fund led the round and was joined by Epic Ventures and angel investors.
. . .
Enterprise & Consumer:
- Mapbox, a Washington, D.C.-based location data platform, raised $280m led by SoftBank. https://axios.link/3rsmgJz
- Cato Networks, a Tel Aviv, Israel-based platform that connects employees with company clouds, people, and data remotely, raised $238 million in funding. Lightspeed Venture Partners led the round and was joined by Adams Street Partners, Softbank Vision Fund 2, Sixty Degree Capital, and Singtel Innov8.
- Pryon, a Raleigh, N.C.-based AI platform for optimizing search results and managing company content, raised $100 million in Series B funding. US Innovative Technology Fund led the round and was joined by Aperture Venture Capital, BootstrapLabs, Breyer Capital, Duke Capital Partners, Good Growth Capital, and others.
- Writer, an SF-based generative AI platform for enterprises, raised $100m in Series B funding. Iconiq led, and was joined by WndrCo, Balderton Capital, Insight Partners and Aspect Ventures. https://axios.link/3sY7quO
- MotherDuck, a Seattle, Wash-based data analytics platform, raised $52.5 million in Series B funding. Felicis led the round and was joined by a16z, Madrona, Amplify Partners, Altimeter, Redpoint, and Zero Prime.
- JOKR, an instant grocery delivery startup focused on Latin America, raised $50m in Series D funding at an $800m post-money valuation (down from $1.3b in February) led by Convivialité Ventures, the VC arm of Pernod Ricard. Other backers include Lombard Odier and insiders G Squared, GGV, Balderton Capital, Monashees, Greycroft and Tiger Global. https://axios.link/3PLKJ6b
- Legit Security, a Tel Aviv, Israel-based platform that analyzes an app’s code to detect vulnerabilities, raised $40 million in Series B funding. CRV led the round and was joined by Cyberstarts, Bessemer Venture Partners, and TCV.
- Levelpath, an SF-based procurement startup, raised $30m in Series A funding. Redpoint Ventures led, and was joined by Benchmark, NewView Capital, WiL and Menlo Ventures. www.levelpath.com
- Tabular, a San Jose, Calif.-based platform data analysis and management provider, raised $26 million in funding. Altimeter Capital led the round and was joined by Andreessen Horowitz and Zetta Venture Partners.
- Darrow, a New York City-based AI-powered platform that analyzes legal data to curate information and determine the financial value of a case, raised $25 million in Series B funding. Georgian led the round and was joined by F2, Entrée Capital, and NFX.
- Alcion, a San Francisco-based AI-powered data security platform for Microsoft 365 users, raised $21 million in Series A funding. Veeam led the round and was joined by angel investors.
- Yurts, an SF-based generative AI startup focused on enterprise knowledge management, raised $16m in Series A funding. Nava Ventures led, and was joined by XYZ Ventures, Bloomberg Beta, Mango Capital and Essence VC. www.yurts.ai
- Secoda, a Toronto, Canada-based AI-powered data management platform, raised $14 million in Series A funding. Craft Ventures led the round and was joined by Abstract Ventures, existing investors YCombinator and Garage Capital, and others.
- LastMile AI, a New York City-based platform designed to help engineers integrate AI into their apps, raised $10 million in seed funding. Gradient led the round and was joined by AME Cloud Ventures, Vercel’s Guillermo Rauch, 10x Founders, and Exceptional Capital.
- Rocket.chat, a Wilmington, Del.-based secure messaging platform, raised $10 million in Series A funding from Valor Capital Group, Alexia Ventures, Endeavor Catalyst, Endeavor Scaleup Ventures, Bob Young, and others.
- Intento, an SF-based enterprise language translation platform, raised $8m in Series A funding led by Somersault Ventures. www.inten.to
- Paxton, a Portland, Ore.-based generative AI legal assistant, raised $6m in seed funding. WVV Capital led, and was joined by Kyber Knight and 25Madison. www.paxton.ai
- Tamnoon, a Sammamish, Wash.-based developer of an AI-powered cloud security platform, raised $5.1 million in seed funding. Merlin Ventures, and Secret Chord Ventures led the round and were joined by Elron Ventures, Inner Loop Capital, and toDAy Ventures.
- Afterparty, a Los Angeles-based platform for creators to interact with fans and monetize content, raised $5 million in funding. Blockchange Ventures led the round and was joined by Acrew Capital, Act One Ventures, Tamarack Global, and others.
- Sidekick Browser, a San Francisco-based internet browser for professionals designed to increase productivity and reduce distractions, raised $4 million in funding from Runa Capital, Kleiner Perkins, GIVC, S16VC, Recursion Ventures, and others.
. . .
HardTech:
- Dragos, a Hanover, Md.-based cybersecurity startup focused on industrial controls, raised $74m in Series D extension funding led by WestCap (prior close was $200m on a $1.7b valuation, led by Koch Disruptive Technologies). https://axios.link/3sYlDbg
- Metaloop, a Graz, Austria-based marketplace that connects scrap metal suppliers with buyers, raised €16 million ($17 million) in Series A funding. FirstMark Capital led the round and was joined by Silence VC and existing investors Statkraft Ventures and FJ Labs.
- Mojave Energy Systems, a Sunnyvale, Calif.-based developer of energy-efficient air conditioning products, raised $12.5m. At One Ventures and Fifth Wall co-led, and were joined by Xerox Ventures. https://axios.link/46exgsX
- Boxbot, an Oakland, Calif.-based platform that automates the sorting and storage of packages in transit, raised $12 million in Series A funding. Playground Global led the round and was joined by Maersk Growth, Toyota Ventures, and Artiman Ventures.
- qbiq, a Tel Aviv, Israel-based platform that uses AI to visualize real estate space planning, raised $10 million in seed funding. JLL Spark Global Ventures led the round and was joined by 10D, Ocean Azul, Randomforest, and M-FUND.
- Rain, an Alameda, Calif.-based developer of aerial firefighting tech, raised $9.7m in seed funding, per Axios Pro. DBL Partners led, and was joined by VoLo Earth Ventures, Kapor Capital and Convective Capital. https://axios.link/48qL2KG
- Yotta Energy, an Austin, Texas-based solar and storage solutions startup, raised $8 million in funding. Evergy Ventures led the round and was joined by BlueScope, Cricetus Felix Ventures, Copec WIND Ventures, EDP Ventures, Doral Tech Ventures, and the SWAN Impact Fund.
- Kayhan Space, a Boulder, Colo.-based company designing autonomous safety measures for satellites and spacecraft, raised $7 million in funding. EVE Atlas and Space Capital co-led the round and were joined by Initialized Capital, Overline Ventures, and Alumni Ventures.
- ARX, a Munich, Germany-based defense manufacturer of robots and autonomous systems for the defense industry, raised €1.15 million ($1.2 million) in pre-seed funding from Project A Ventures.
. . .
Sustainability:
- Plan A, a Berlin, Germany-based carbon accounting, decarbonization, and ESG software provider, raised $27 million in funding. Lightspeed Venture Partners led the round and was joined by Visa, Deutsche Bank, Opera Tech Ventures, and others.
- Immaterial, a Cambridge, U.K.-based company developing nano-materials designed to improve carbon capture and hydrogen storage, raised $20 million in Series A funding. SLB led the round and was joined by Chevron Tech Ventures, Ultratech Capital Partners, AP Ventures, Energy Revolution Ventures, CEPSA, JERA, and others.
- BoxPower, a Grass Valley, Calif.-based developer of solar panel microgrids, raised $6.5 million in Series A funding. Aligned Climate Capital led the round and was joined by SIG, Technexus, Remarkable Ventures, and Climate Capital.
Acquisitions & PE:
- Cisco (Nasdaq: CSCO) has agreed to buy cybersecurity and observability company Splunk (Nasdaq: SPLK) for around $28 billion in cash, representing its largest-ever acquisition. Legacy tech giants are usually the last to recognize they're being disrupted, but that doesn't seem to be the case with AI. Expect a lot more of these sorts of mergers, even if the target isn't AI-native.
The $157 per share offer represents a 31.28% premium to yesterday's closing price for Splunk shares. The last time Splunk traded above that price was in early 2021.
Cisco says the merger will add around $4 billion in ARR, boosting its subscription and recurring revenue efforts.
It says the purchase price will be financed via a combination of cash and debt, with a final closing expected by the end of Q3 2024.
- Bird Global acquired Skinny Labs (operating as Spin), a San Francisco-based electric bike and scooter operator, from TIER Mobility for $19 million.
- Babbel, a German online language learning company backed by VCs like Scottish Equity Partners, acquired Toucan, an LA-based language learning browser extension that had raised nearly $30m from Spacecadet Ventures, Visible Ventures, Browder Capital, OpenView Venture Partners and Palrecha Capital. https://axios.link/3EIoS99
- CrowdStrike agreed to acquire Bionic, a Palo Alto, Calif.-based platform that tests for and protects against risks to a company’s cyber infrastructure. Financial terms were not disclosed.
- Simpplr acquired Socrates.ai, a Woodside, Calif.-based AI assistant for employees. Financial terms were not disclosed.
- Ares Management invested around $500m into Premier League club Chelsea FC, per the FT. https://axios.link/3EOi89Q
- LesserEvil, a Danbury, Conn.-based maker of organic popcorn and salty snacks, raised primary and secondary funding from Aria Growth Partners. Return backers included Valor Equity, Invest Eco, and Touch Capital. www.lesserevil.com
- Roblox (NYSE: RBLX) acquired Speechly, a Finnish provider of voice chat moderation and real-time transcription. Speechly had raised around $7m from firms like SNÖ Ventures and 10X Capital. https://axios.link/3rnFKze
- Salesforce (NYSE: CRM) agreed to buy Airkit.ai, a Redwood City, Calif.-based low-code platform for e-commerce customer engagement. Airkit had raised over $65m from firms like Salesforce Ventures, EQT Ventures, Accel, Emergence Capital Partners and Valor Equity Partners. https://axios.link/3RuPli8
. . .
IPOs:
- Klaviyo, a Boston-based provider of e-commerce marketing automation SaaS, raised $576 million in its IPO after pricing above its proposed range. There are a lot more SaaS companies in the IPO pipeline than there are chip design or grocery delivery companies.
Klaviyo sold 19.2m shares at $30 per share, giving it a fully diluted value of around $9 billion. It originally filed to sell shares at $25-$27, before raising the range to $27-$29.
It reports $15 million of net income on $321m of revenue for the first half of 2023, and will list on the NYSE under ticker symbol "KVYO."
Shareholders include Summit Partners (21.3% pre-IPO stake), Shopify (11.2%) and Accomplice (5.7%). The company's last private round came in July 2022 at a $9.5 billion post-money valuation.
"Klaviyo's IPO will be an ultimate yardstick for SaaS in 2023/2024. Top growth, top margins, top founders, will cruise past $1B in ARR. Whatever multiple they end up trading at ... You are almost certainly worth less." — Jason Lemkin, CEO of SaaSTR
Early stage gets alpha
The material presented on Molly O’Shea’s website are my opinions only and are provided for informational purposes and should not be construed as investment advice. It is not a recommendation of, or an offer to sell or solicitation of an offer to buy, any particular security, strategy, or investment product. Any analysis or discussion of investments, sectors or the market generally are based on current information, including from public sources, that I consider reliable, but I do not represent that any research or the information provided is accurate or complete, and it should not be relied on as such. My views and opinions expressed in any website content are current at the time of publication and are subject to change. Past performance is not indicative of future results.