Tech Between The Coasts 022 | Wednesday, October 2, 2019
The future of manufacturing, M25’s Startup Cities ranking, the consequences of “cheap money,” Silicon Valley activity in Indy, a trio of Austin exits
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TL;DR
What We’re Thinking: the future of manufacturing
What We’re Reading: M25’s Startup Cities ranking, the consequences of “cheap money”, AI implementation challenges, renewed dual class share skepticism
Deals & More: Silicon Valley activity in Indy, a trio of Austin exits
What We’re Thinking
Unless you were asleep all day, you probably noticed the markets took a significant tumble today, finishing at a five week low. This was likely at least partially driven by reporting that US manufacturing had its weakest quarter in a decade. It remains to be seen whether this is a blip or a warning sign of the much prophesied upcoming recession, but either way…not great.
As venture investors, we’ve been keeping our eye on the troubled manufacturing sector for a long time. While it’s increasingly clear that the manufacturing economy of yesteryear is gone, we believe there is a massive opportunity for America to take a leading position in the manufacturing economy of tomorrow — ”Industry 4.0”. And we think the middle of the country is positioned to be a huge part of it.
Just as #BetweenTheCoasts workers were responsible for putting in the blood, sweat, and tears that led to the golden era of manufacturing in prior decades, #BetweenTheCoasts startups can be responsible for ushering in a new golden era. Startups in Detroit are building technologies that will enable widespread electric and autonomous vehicles. Companies in Ohio and Pennsylvania are building robots and cobots that promise to massively improve assembly line productivity. And startups in the “airline capital” of Atlanta are innovating new solutions in virtually every aspect of air travel and logistics: production, fleet management, route optimization, and much more.
It must be said that many, if not most of these “Industry 4.0” technologies involve automation, which can make people (and politicians) a bit squeamish. We certainly don’t think it’s prudent to dismiss those concerns. But we think it’s best to try to decouple the conversation about the future of the American worker from the future of manufacturing. We need to think creatively about what the future of work looks like. Otherwise, we may be resigned to an economy that slips further and further behind.
What We’re Reading
Midwest-focused early-stage VC M25 has published their 2019 Startup Cities rankings, which breaks down midwest startup ecosystems based on deal activity, general business climate, and resource accessibility.
Anne Sraders at Fortune muses what the recent spate of lackluster 2019 IPOs might mean for valuations as we close out the year. This quote from Renaissance Capital principal Kathleen Smith pretty much sums it up: “This growth at all costs only works in the cheap money era.”
In his weekly “Eye on AI” Newsletter for Fortune, Jonathan Vanian summarizes FedEx senior data scientist Clayton Clouse’s comments on the state of AI implementation in modern businesses (not as significant as you might think) and how employers can successfully integrate AI into their workflows without “pissing off a lot of people.”
Connie Loizos writes at TechCrunch on the increased scrutiny of dual class share structures, in the wake of the WeWork fiasco:
“[A]t Lyft, for example, Logan Green and John Zimmer hold high-voting shares entitling them to 20 votes per share not until each is dead but both of them. […] The same is true over at Snap, where co-founders Evan Spiegel and Bobby Murphy have designated the other as their respective proxies. Accordingly, when one dies, the other could individually control nearly all of the voting power of Snap’s outstanding capital stock. Unbelievably, that’s not the worst of it. Many dual-class shares are written in such a way that founders can pass along control to their heirs.”
Deals
Indianapolis-based Zylo — an enterprise SaaS management platform — raised $22.5M led by Menlo Ventures; other investors included Bessemer Venture Partners, High Alpha, Revolution’s Rise of the Rest Seed Fund, Salesforce Ventures and the Slack Fund.
Austin-based Fetch — a platform for off-site package delivery (think apartment buildings) — raised $10.5M led by Signal Peak Ventures; other investors included Silverton Partners and Capital Factory.
Indianapolis-based Edify Labs — a customer engagement and team collaboration platform — raised $10M led by First Round Capital; other investors included Anorak Ventures, Pathbreaker Ventures, Morado Venture Partners, Bling Capital, Bonfire Ventures, SeaLane Ventures, and Liquid 2 Ventures.
Chicago-based Paro — a platform connecting businesses with freelance financial professionals — raised $10M from investors including Sierra Ventures, Revolution Ventures, KGC Capital, and Tom Williams.
Salt Lake City-based Evernym — a credentialing platform focused on data privacy — raised $8M from Barclays Ventures and Overstock.com’s blockchain arm Medici Ventures.
Indianapolis-based Kenzie Academy — an online and in-person coding school — raised $7.8M led by ReThink Education; other investors included Revolution’s Rise of the Rest Seed Fund, Strada Education Network, LearnStart, Peak State Ventures, Flat World Partners and Kelly Services.
Cincinnati-based Astronomer, — a managed Apache Airflow “as-a-service” platform — raised $5.7M led by Sierra Ventures; other investors included Bain Capital Ventures, Refinery Ventures, Frontline Capital Ventures, CincyTech, Wireframe Ventures, and Grand Ventures.
Denver-based BurstIQ — a HIPPA-compliant blockchain platform — raised $5.5M from Elsewhere Partners.
Chicago-based NOCD — an OCD-focused digital behavioral health platform — raised $4M led by Chicago Ventures; other investors included 7Wire Ventures, Meridian Street Capital, and Hyde Park Angels.
Cleveland-based Axuall — a digital real-time identity verification network — raised $3M led by JumpStart; Zapis Capital Group, M25, North Coast Angel Fund, Kettledrum Ventures, and Drummond Road Capital also participated.
San Antonio-based CyberFortress — a cybersecurity insurance platform for e-commerce companies — raised $3M co-led by LiveOak Venture Partners and Greycroft.
Charlotte, NC-based Cloosiv — a mobile ordering platform for small coffee shops — raised $1M from Y Combinator co-founder Paul Graham and other angel investors.
Funds
Indianapolis-based HKW — a mid-market growth PE firm — raised $365M million for its fifth fund.
Austin-based Silverton Partners — an early stage VC firm — plans to raise $125M for its sixth fund. It is also raising an opportunity fund targeted at $20M.
Grand Rapids, MI-based Grand Ventures — an early-stage, midwest-focused VC firm — closed its debut fund at $28M.
Austin-based Capital Factory — an early-stage, Texas-focused VC firm, coworking space, and accelerator — plans to raise $20M for its sixth fund.
Atlanta-based Valor Ventures — an early-stage VC firm focused on startups addressing financial inclusion — held a first close on $8M in commitments for its second fund, targeted at $25M.
Exits & Acquisitions
Austin-based Avianis — an aircraft fleet management platform — was acquired by private aviation company Wheels Up.
Austin-based Hangar — an enterprise drone workflow automation platform — was acquired by airspace/drone intelligence platform AirMap.
Austin-based Threatcare — an “attack simulation”-centric cybersecurity platform — was acquired by ReliaQuest.
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.
