Welcome friends! Despite Matt’s best efforts to hijack this month’s newsletter and spend a few hundred words on this thrilling Celtics playoff run we’re witnessing, we’re keeping it C2V-focused this month with all kinds of exciting portfolio company news to share. Seriously though, how about this Al Horford performance so far? To play like this at 35 is the equivalent of a founder starting the next Apple at 80.
We realized recently that we have yet to share our core investment thesis with our loyal readers. We’re not sure how that happened, but it’s well past time to fix this oversight, so let’s get right into it.
Dirty, Dull, Dangerous & in Desperate Need of Upgrades
While much of the venture world (along with the startup press and VC Twitter) dives headfirst into NFTs, Web3, the metaverse, the multiverse, the nachoverse (okay we made that last one up, but who wouldn’t be fired up to visit the nachoverse?), we have been and will remain firmly focused on the mundane.
This isn’t to say that some of the NFT/Web3/Metaverse plays out there won’t become huge successes, but it’s definitely a mixed bag (to put it gently) and there are a whole lot of unknowns. Certainly, the inbound NFT/Web3 deal pitches we’ve received are all over the place, ranging from “That might actually work” to “I don’t get it” to “Is this founder trolling us?” (this latter group includes a recent submission from a founder pitching his virtual cockfighting company called, not kidding, Metacock).
On the other hand, by far the coolest product we own in our core thesis is a robot that cleans public restrooms. But here’s the rub – public restroom cleaning is a massive industry, with massive issues (labor shortages/turnover, rising costs, quality issues, etc) and it’s perfectly suited for a sophisticated robotics solution.
Boring to some, positively riveting to us.
America Has a Productivity Problem
Commercial bathroom cleaning is far from alone here. Despite a litany of transformative technological advancements (ecommerce, smart phones, machine learning, computer vision, virtual assistants, etc.), overall U.S. productivity growth has been in decline for nearly 2 decades and companies of all sizes in nearly every industry vertical remain woefully underinvested in technology solutions.
In fact, this is such a widespread problem that our fourth investment in Fund II (Olive Technologies) is software built to streamline the procurement of software. One Olive customer we spoke with, the Head of Innovation at a mid-sized roofing contractor, summed the macro situation up nicely:
"We’ve been underinvesting in IT for the better part of a decade… I don't see a lull in the next 5-10 years where we won't be active in software procurement”
An illuminating assessment to be sure, but what struck us even more than his comments was the fact that a mid-sized roofing contractor had hired a Head of Innovation in the first place.
No Sector is Immune
We’ve lost count of the number of times we’ve heard from portfolio company customers that they’re managing huge, fundamental tasks manually, and it’s consistent across every sector we’ve looked into.
A Fortune 500 transportation company told us, “Our pricing system is a mess. Our legacy software is so limited that the majority of our analysis is done with manual data dumps and spreadsheets.”
We’ve heard the phrases “huge cost saver”, “administrative nightmare” and “we were flying blind” from companies in the legal, medical, retail, B2B services, utility, and several other industries.
The commercial trucking insurance industry is such a mess that despite increasing premiums every quarter for 9.5 years (and counting), the combined cost of underwriting and claims has exceeded policy premiums by 14%, in the aggregate, since 2008. That’s an entire industry losing money for the past 13 years despite raising prices 4 times a year for the past decade.
Bottom line, the market for productivity enhancing SaaS and robotics platforms is massive (in the trillions of dollars annually, in the US alone), and we expect tech investment in these sectors to continue growing rapidly for years (if not decades) to come.
ROI & Products That Sell Themselves
Perhaps our favorite feature of these old economy productivity tools, and a key differentiator from products focused on the latest trend, is that their value propositions are instantly obvious to nearly every potential customer.
Our companies’ potential customers are well aware of where their inefficiencies lie, as well as the immediate and substantial ROI that a product that solves one or more of these problems will provide. So our companies need only demonstrate that their products work (i.e., the products sell themselves).
When we asked him about ROI, a customer of our retail tech company, OneShop, even went so far as to tell us:
“They should charge more for this."
By contrast, companies selling into a hot new trend need to first convince customers that they need this new type of product in the first place, and only then can they move on to selling their particular version. It may not sound like much, but that extra step makes a huge difference in terms of the degree of difficulty in scaling and the overall likelihood of success.
Speaking of companies that address big inefficiencies and provide immediate ROI (in the hundreds of thousands of dollars annually) to an old-economy industry… (crushed that segue)
We couldn't be more proud of founders, Kristen Sonday and Felicity Levey (Conrad), two of the best operators we've had the pleasure of working with. The round, led by World Within Ventures, was more than 50% oversubscribed, well-deserved validation for Kristen, Felicity, and their team's ingenuity and hard work.
Paladin’s SaaS platform has empowered law firms and corporations, including Dentons, Clifford Chance, Dell, and Verizon, to provide tens of thousands of hours of pro bono work. This raise will allow Paladin to accelerate product development for its existing customers' growing pro bono needs and fuel their continued growth in the US and internationally.
We participated in the round, as did other existing investors Mark Cuban, Hyde Park Venture Partners, the American Family Institute for Corporate and Social Impact, and Concrete Rose. Also joining the round were Vamos Ventures, The 98, and Engage VC.
Matt interviews Chris Heard, Founder of Olive Technologies, about what it has been like to be a founder. The lessons he has learned, and what he would do differently in the future. Find out which C2V Partner Chris chose to live on a deserted island with.
Guest Interview - Andy Dunn
Andy Dunn, Co-Founder of Bonobos, just released his new book - Burn Rate: Launching a Startup and Losing My Mind. When we think about incredible entrepreneurs like Andy, it is hard to believe that they can be so successful while battling such dark times. In this episode, we hear about the human behind the entrepreneur. Andy shares his tumultuous journey and how his mental illness has shaped the way he creates his future businesses.
Live Event with Chris
Chris will be one of four venture capitalists to participate in the PrimeTime VC live Barclays Rise event in New York on Thursday, May 19, 2022. To get live tickets and see Chris in person, visit this link.
C2V By The Numbers
Here are this month’s stats across our venture practice. We added some different data that we think you will find interesting and fun.
Vice Media tests software to automate order management. Processing insertion orders and campaign reconciliation between buyers and sellers has been an often tedious and mostly manual process.
To reduce the strain on its ad ops staff, Vice Media is testing integration between the sell-side order management platform Boostr and Prisma, Mediaocean’s digital advertising campaign management offering. Read more here.
Driver Technologies wins InsurTech Hartford’s Pitch Contest. The AI-based mobility tech company that delivers a safer driving experience, announced that they were selected as the “judges’ all-around favorite” at the InsurTech Hartford Symposium’s pitch contest.
Tarform offers the first public test rides of its electric motorcycles. Adrenaline was flowing, minds were blown.
In response to the looming potential shift, the founders of digital health startups spoke up about how the overturn will impact women. For many startups, especially those explicitly focused on women’s health, the future could directly clash with the mission they’ve raised millions and spent years trying to scale: expand access to healthcare across the board.
Nathalie Walton, the chief executive of Expectful, said that restriction “to women’s access to safe abortion services will lead to adverse health implications for countless women.” Walton took her post at the helm of Expectful after herself going through a pregnancy that almost killed her. The haunting experience made her an example of a reality she had long known: to be a pregnant Black woman is to be at risk, regardless of economic background. Read more here.
Blutag supercharges eCommerce retention using a voice engagement solution that connects directly with a brand’s eCommerce platform and helps increase customer retention by leveraging the fast-growing voice assistant ecosystem.
Retention revenue accounts for $570B for eCommerce in the US. Given the new privacy and tracking laws, the costs of advertising for brands have significantly increased. At the same time, the performance of existing strategies to retain customers is rapidly declining, putting brands at risk of survival. Blutag delivers the only in-market solution that can scale for retail and has proven to help brands such as FreshDirect, Copper Compression, and Vanity Planet increase retention revenue. Watch the video.