Tech Between The Coasts 021 | Wednesday, September 25, 2019
Revolution’s Ecosystem Playbook, Missouri’s sleeping tech giant, Kickstarter vs. VC, a WeWork “exit,” ending animal testing, Sprout Social’s secret
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TL;DR
What We’re Thinking: “Chicagohenge” & news overload
What We’re Reading: Revolution’s Ecosystem Playbook, Missouri’s sleeping tech giant, Kickstarter vs. VC, a WeWork “exit”
Deals & More: Penguin insurance, ending animal testing, “Zen and the Art of Starting a Small Business,” Sprout Social’s secret
What We’re Thinking
No column this week, because there’s an overload of great articles (below) I felt I had to share. This was has been such a slow news week (ha), I’m sure everyone is looking for more to read. Onward!
What We’re Reading
Revolution has published the 2019 Edition of their Rise of the Rest Ecosystem Playbook, subtitled “Place Matters: Ten Innovative Real Estate Developments Driving Startup Hub Growth.” They categorize four different approaches to cultivating startup ecosystems they’ve seen work: Anchor Tenant, Innovation District, Vertically Integrated, and Work-Live-Play. Anyone interested in ecosystem building should give the whole report a read.
Laura McCoolidge from the Sofia Fund — a Minneapolis- and Kansas City-based angel group focused on women-led startups — offers her thoughts on convertible notes in the Midwest.
Techstars is returning to Kansas City after a brief hiatus.
This is a few weeks old, but this week I came across a great profile of two of Missouri’s most successful tech entrepreneurs: Jim Kavanaugh and David Steward of World Wide Technology (WWT). Many people might not immediately recognize the name, but you’ve probably interacted with WWT at some point and not known it: in 2018 the company made $11.2B in revenue with profits of ~$700M. As the article points out, “[f]or some perspective, Steward’s $3B stake […] makes him the second-wealthiest African-American in America, richer than Oprah ($2.6B) and Michael Jordan ($1.9B).
A couple months ago, The Walton Family Foundation published “The Most Dynamic Metropolitans” — original research on how various regions #BetweenTheCoasts and beyond have fared economically in recent years. Midland, TX; Midland, MI; Elkhart-Goshen, Indiana; St. George, Utah; Austin-Round Rock, Texas; and Greeley, Colorado are all #BetweenTheCoasts metros showing up on their Top 10 list. Their primary takeaway is that continued development of the “knowledge economy” in the middle of the country metros is crucial to continued success:
“Investors must be willing to support early-stage firms, and more universities need to embrace commercialization as a critical part of their mission and educational attainment, particularly in science, technology, engineering and mathematics (STEM) for economic progress in the Heartland and throughout the nation.”
Brookings has released some fascinating new research on the discrepancy between crowdfunding, which can be thought of as “democratized venture capital”, and traditional VC. They look at the comparison from a number of interesting angles, but one conclusion stuck out to us:
“The five largest metro recipients of venture capital accounted for 81 percent of the nation’s investment. By comparison, the top five metropolitan areas captured 46 percent of successfully pledged funding on Kickstarter — still a relatively high share but much less concentrated than venture capital.”
Last but not least, I had to include something about the latest developments in the WeWork debacle, including but not limited to the firing of CEO Adam Neumann. In so many ways, this saga exemplifies everything we see as unhealthy about the state of big, late-stage venture these days: massively massive rounds, hugely inflated valuations, a lack of board oversight, little to no financial discipline, distraction from the company’s mission, … I could go on for a while, but I digress.
Deals
Provo, UT-based Dental Intelligence — a dental practice analytics and workflow optimization platform — raised $34M from K1 Investment Management.
Columbus-based Bold Penguin — a commercial insurance sourcing and matching platform — raised $32M from investors including Hudson Structured Capital Management, Lightstone, Guggenheim Insurance, and Lockton.
Chicago- and Silicon Valley-based Vouch Insurance — an early stage startup-focused platform for business insurance — raised $24.5M co-led by Ribbit Capital and SVB Financial Group; other investors included Y Combinator, Index Ventures, and 500 Startups.
Boulder-based Denovo — managed IT services and enterprise resource planning consulting provider — raised $18M from CIT Group.
Austin-based Smarter Sorting — a startup building an AI-driven platform for consumer product chemical-level composition, aimed at replacing traditional animal testing — raised $17M led by US Ecology; other investors included RTP Ventures.
Austin-based Tethr — an AI-powered conversation intelligence platform — raised $15M led by IAG Capital Partners; other investors included GroTech Ventures, MissionOG, and Falmouth Ventures. We previously mentioned an $11M raise from Tethr in August (issue 014); I assume this is the final close of that round, rather than an incremental $15M.
Austin-based ZenBusiness — makers of a new small business launch platform — raised $15M led by Greycroft; other investors included Lerer Hippeau, Rise of the Rest, Rosecliff Venture Partners, Interlock Partners, and Recruit Strategic Partners.
Atlanta-based Drum — an on-demand network for sales and promotions — raised ~$11M from investors including Propel Venture Partners, Felicis Ventures, BlueRun Ventures, American Express Ventures, GroTech Ventures, Wildcat Venture Partners, BoxGroup and SV Angel.
Atlanta-based Nview Health — a tech-enabled behavioral health software company — raised $4.7M million in funding, from BIP Capital.
Funds
McLean, VA-based Blue Delta Capital Partners — a growth stage venture fund focused on companies building government solutions — raised $150M for its third fund.
Chicago-based KB Partners — an early stage venture fund focused on fitness and sports startups — raised $40M for its Myriad Opportunity Fund.
Boulder- and Minneapolis-based Matchstick Ventures — an early stage venture fund focused on the northern US and Rocky Mountain regions — raised $30M for its second fund, including an investment from Foundry Group.
Exits & Acquisitions
Denver-based Ping Identity — an enterprise digital identification verification platform — raised ~$188M in its IPO last week. On opening day, the company’s stock closed about 30% higher than its opening price of $15, and is currently hovering around $18. The company was acquired by Vista Equity Partners in 2016.
Chicago-based Sprout Social — a social media management platform — has reportedly confidentially filed for IPO.
Not exactly a venture deal, but Champaign, IL-based Jimmy John’s has been acquired by Inspire Brands, the parent company of Arby’s. Jimmy John’s is one of my frequent guilty pleasures — particularly guilty given the penchant of the eponymous Jimmy John to hunt elephants.
Events
Events
Twin Cities Startup Week runs from October 9–16 across the Minneapolis-St. Paul area.
Memphis’ 7th Annual Startup of the Year Competition & Summit is happening October 14–16.
The 12th annual Venture Atlanta conference, which brings together tech companies and investors from the Southeast and beyond, will be held in Atlanta from October 16–17.
The 2019 Northwest Arkansas Technology Summit will be held in Bentonville, AR from October 20–23.
This year’s Startup Connection, which facilitates informal interactions among early stage startups, investors, and other members of the innovation community in the St. Louis region and beyond, will be held in St. Louis on November 6. The event, in its 11th year, is the anchor event of the inaugural STL Startup Week, which runs November 1–9.
