Where Do Deals Come From — 2022
You should all know the deal by now, because this is the EIGHTH edition of this annual post.
Prior years can be found here.
Alpaca now has a couple different vehicles, so we’ll limit this rundown to our core Seed fund, in this case Alpaca VC Fund III. As usual, I will share the behind-the-scenes stories of each deal, alongside some higher level insights. My hope is that this is helpful to three constituencies:
- Founder — by getting a glimpse into a VC’s process and where they find the deals they actually do should help founders better understand ‘where to hunt.’
- Investors — learn more about Alpaca, our processes and preferences, to better share dealflow.
- Us — as a data-driven team, we continually look back at this type of data to optimize our time.
As Alpaca has continued to evolve and bring on new partners, we have gotten more and more comfortable as thematic, research-driven investors.
We execute on this via our Field Study program, a scalable and repeatable process in which we identify a catalyst or rapidly accelerating trend that aligns with our interest, and form an internal pod to:
- Go deep into the space
- Gather expertise
- Form opinions and frameworks
- Publish/share with the market
This creates recurring inbound dealflow in the sectors we are ready to move aggressively on, along with purpose-built networks that are of value to us in diligence as well as to founders in business development.
Some of the 2022 Field Studies included:
Global Supply Chain (Parts 1, 2, 3, 4 and 5)
Future Trends in Rooftop Solar Energy
While I’ll categorize each of the 12 deals below by the actual source, an * indicates the investment also related to a Field Study.
Pack Digital (Founder*)
Aubrie was sent this deal by Dylan Whitman, founder of Alpaca portfolio company Inveterate, whom she has known for years as her company, Bow & Drape, used his previous company, BVA, as their digital marketing agency. Superior products win market share, and that is why we backed Pack Digital. They are building the superior front end-as-a-service product for mid-market and enterprise brands going headless. When we backed them, they had already won business away from the well-funded competitors Nacelle and Shogun, and our thesis was this was because the product was just better. We were also excited about the team’s ability to build and win business with little to no funding. The business built early relationships with high growth ecommerce platforms like Cuts and LIQUID-IV with no churn, and processed over $50M of transactions their first holiday season. Their ability to bootstrap and build demonstrated a focus on execution and readiness to focus on partnerships and growth.
Nectar (VC Referral)
Nectar was sent over by McKeever “Mac’ Conwell, a fellow VC. Believing in his ability to spot very early stage companies that fall outside of Alpaca’s traditional dealflow, Alpaca partners had made a small investment into Mac’s Fund I (Rarebreed) in 2021. Mac often looks to us as downstream capital, especially for PropTech related deals.
Our view on Nectar was quite simple: traditional real estate financing has not evolved in decades. When looking at other businesses and asset classes, you have seen evolutions of traditional financings to become more creative. Coming off the success of Pipe in financing venture capital-backed SaaS companies’ revenue streams, we thought this evolution could be applied to the real estate capital markets providing owner/operators a new type of fast, flexible, non-debt, cash-flow based financing.
PlaceHolder (VC Referral)
We were sent this Canada-based opportunity by Andre Charoo of Maple VC (disclosure: as part of Alpaca’s Diversity Commitment, Alpaca partners are LPs in Andre’s fund).
The total leased warehouse market is $88B, and 75% of that space is utilized for activities beyond 3PLs, which is where most e-commerce competitors play. SMB’s need swift access to warehouse space in the short and medium term for varied reasons; Placeholder provides an opportunity to find competitive pricing, convenient locations and month-to-month rental options, all with a concierge-style service model. COVID-19 has accelerated the need for smaller, more flexible space and created more opportunity for e-commerce related businesses to exist that may not need a full 3PL or office, but may require additional flex space.
Placeholder is a technology-enabled commercial warehouse brokerage company. They source, screen and list commercial, non-3PL spaces online and leverage intelligent matching to create the best possible deals and utilize excess capacity. Placeholder will support a deal through to its close and maintain an ongoing relationship with the customer on behalf of the landlord to improve the customer experience. Importantly, this includes using their own technology to process monthly rent, including their take rate. Founder Ramit Kar brings with him nearly two decades of infrastructure and supply chain experience as an operator, venture investor and consultant. During his close to four years as General Manager at Uber, Ramit secured the first set of ride-sharing regulations in Canada and launched and scaled all Western Canadian Uber markets; responsible for BC, Alberta, Saskatchewan, and Manitoba.
Upstream (VC Referral*)
Upstream is a Web3 infrastructure company focusing on DAO tooling, specifically making it easy to create and run a Decentralized Autonomous Organization. David had already released a Field Study on NFT Infrastructure, which included a thesis on tooling. Aubrie later dove deeper into the space with a DAO-specific Field Study. David had known Alex Taub (Founder/CEO of Upstream), for a couple of years, first through the New York tech ecosystem and then Miami’s, as both relocated there around the same time. David had followed Upstream’s pivot from Web2 community to Web3 tooling and was compelled by the early adoption the platform was picking up, as well as by Alex’s personal brand in the space. In fact, David and Alex are in a Web3 Investing DAO together, one of Upstream’s first customers to ‘dogfood’ the platform.
Venly (VC Referral*)
David was introduced to Venly by Kai Bond of Courtside Ventures, whom sits on the Board of Directors with David at Swoops, a Web3 gaming company. Venly sells tools to Web3 partners, including a crypto-lite social-sign in wallet.
As we built our conviction as a firm on the gaming use cases of Web3 and made an investment through Alpaca’s Built World Fund into gaming leader The Sandbox we were able to look at their data and see the enormous amount of onboarding that was coming from users creating wallets using their Google or Twitter logins, effectively entering a Web3 ecosystem without ever having to engage with it. This data set excited us and helped us build conviction around how everyday (non-Web3 native users) would interact with the blockchain, essentially how the masses would be onboarded to this ecosystem.
Carbon Title (Personal Relationship*)
Carbon Title is a simple, transparent, cost-effective way to neutralize your buildings’ climate impact. Carbon Title’s platform empowers building owners, developers, and contractors to easily understand a building’s C02 emissions over time, purchase high-quality carbon credits, and apply carbon credits to achieve verifiable carbon neutrality. Daniel was introduced to the co-founder, Miles Haladay, in 2020 and the two spent months brainstorming ideas around the Alpaca Field Study The Intersection of FinTech & Construction. Miles brought his close friend and FinTech veteran, Trevor Dryer, into the fold. Ultimately, they landed on Carbon Title, which perfectly leverages Miles’ and Trevor’s complimentary skillsets in construction, FinTech and Climate Tech.
Amplio (VC Referral*)
This deal was shared with Aubrie by fellow VC Rachel Holt of Construct Capital, given their shared interest in supply chains.
Explosive demand for electronics and parts are crippling supply chains, which exist in an analogue, pen-and-paper-and-phone-call world. In 2021, chip shortages cost the auto industry alone $210B.
Amplio drives supply chains to be more resilient by providing every actor in the supply chain the data visibility and tools to make better decisions and avoid shortages like those we have experienced.
The Amplio platform is an all-in-one solution where users can procure components optimized for availability and price, connect to diverse sources of supply, execute the full PO lifecycle, and manage procurement to meet production goals. From contract manufacturers to tiered suppliers to OEMs, it works with stakeholders on all sides of the supply chain to ensure there does not have to be a trade-off between resilience and cost.
Alpaca has been impressed with the Amplio team’s early ability to execute large enterprise contracts as well as increase its flow of new pilots over a brief time period. We also love that Trey and Taha have worked together successfully in the past inside the industry. Often, insiders can see and fix problems fastest.
Mayple (VC Referral*)
Aubrie was sent this deal by fellow VC Jess Peltz (both are part of Joan DAO). We have had a strong thesis that the next trillion dollar opportunity in commerce is cross-border, as detailed in our Global Supply Chain Field Study. With the rise of social media and the now 50 million creators globally, it is easier than ever to discover interesting content and commerce from all corners of the earth. There is a halo effect, in particular, for US brands shucked by internationally recognized celebrities like Bella Hadid, Emily Ratajkowski, and The Kardashians (just to name a few) who help people all over the globe discover the latest lifestyle and beauty trends. However, if you’ve ever ordered something from an international store and dealt with customs delays or a lack of end-to-end tracking information, then you probably know cross-border e-commerce has room for improvement. As the world becomes more global, so must the e-commerce supply chain. Cross-border e-commerce is growing at 2x the rate of domestic eCommerce per Accenture. Mayple stands to help small and mid-market brands solve this by creating an easy Shopify plug-in and Dubai-based fulfillment workflow that allows retailers to ship two-day air to 50 countris in less than a month’s time, with cheaper rates than the incumbent US carriers.
EarlyDay (Founder + VC Referral)
David was originally introduced to one of the EarlyDay cofounders (Emma Harris) by David Fano, CEO of the Alpaca portfolio company Teal. All three had recently made the move to Miami, so the connections were natural. David was fond of the team and the business, but as an idea-stage company, they couldn’t get to full conviction. However, David was re-introduced about a year later by Adam Besvinick, who had invested in EarlyDay’s pre-seed round, and he was quite impressed with what was accomplished and de-risked in that period of time. This ultimately led David and Alpaca to lead the company’s seed round.
Intramotev (VC Referral)
Aubrie was sent this deal via Flybridge and the XFactor network, where Aubrie is a deal partner. We got interested in rails as we explored the Global Supply Chain and uncovered two core insights:
- There is a continued focus on solving visibility, especially intermodal transparency
- There is greenfield opportunity in rails, which constitutes >$100B industry.
Combine these two factors with the extreme tailwinds of automation, electrification, and carbon removal from supply chains, or a decarbonization super-cycle, and you have the railroads as a modality poised to introduce more green, cost effective solutions for short- and medium-haul routes.
We got excited about Intramotev’s potential to replace locomotives and cut both cost and emissions. Rail transportation is 80% cheaper than trucking per mile; 4x more fuel efficient than trucks; and 9.35x less emitting. In the U.S. alone, over million railcars do not move at all each day as they wait for locomotives to link up chains of hundreds of boxcars. By leveraging Intramotev’s TugVolt technology, smaller chains could be made at cheaper, faster speeds. We were instantly impressed with CEO Tim’s ability to articulate and execute a large-scale vision for electrifying railroads here in the States, as well as abroad. With very minimal funding, the team has produced a working box car prototype, hired a strong bench of engineers, and signed three major LOIs in the mining space, their initial wedge into the market. We believe railroads could prove an attractive alternative to transportation via truck, as fuel costs rise and pressure for a lighter carbon footprint extends across the freight industry.
Stealth Consumer Fintech (VC Referral)
Not much can be shared yet on this company, but they are playing at the intersection of Fintech, Insurance, and Retail Investing.
Stealth Consumer Fintech (VC Referral)
Just as with the previous stealth deal, not much can be shared about this company at this time, but they are here to save the American dream of homeownership.
Takeaways:
- Thesis-driven investing continues to be a differentiator for Alpaca. While historically it has helped us uncover deals before they are in market, what we’ve seen this past year is the marketing flywheel paying dividends, as we are now top of mind with other investors for a very specific sector or thesis.
- While deal volume and valuations were down a bit in 2022, the ‘best’ deals were still getting done very quickly. So it is imperative for any investor to work quickly, confidently, and intentionally…all while maintaining standards of diligence. In Alpaca’s case, our research driven approach lends well to this, as much of the work (and time) is spent upfront before we even meet a company.
- There will always be a place for the Opportunistic Investment, where a founder inspires us and educates us towards a sector or model that we were not looking for or aware of.
Want to appear on this list next year? Reach out at David@alpaca.vc.
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