C2V Feb 2021 Notes from the Trenches
Welcome friends! While it is a bit ironic that only a couple of weeks removed from Groundhog Day, we’re breaking a multi-month streak of opening with commentary on highly sensitive social or political happenings, it’s also a great relief, and we couldn’t be more excited to return to our bread and butter: good old-fashioned venture minutiae (but please don’t stop reading; this will be interesting, we promise).
This month, rather than subject Chris to another of his curmudgeonly takes, Matt decided to let the whole world share in Chris’s pain with a blog post/grumpy old man rant on the increasingly unhinged late-stage venture and IPO markets.
We’d encourage you to check out the full post for additional commentary and supporting data (plus lots of colorful, USA Today-style charts and graphs), but here are some of the high-level questions Matt seeks to answer:
Is the tech IPO market giving off a whiff of that unpleasant 1999/2000 odor? (Spoiler alert: sure looks like it)
Are companies that are years (maybe decades) away from making money already trading at valuations that would qualify them for the S&P 100? (Spoiler alert: ‘fraid so)
Is Matt alone on Incredulous Island? (Spoiler alert: not quite, but it’s definitely a buyer-friendly real estate market)
Are these crazy valuations ubiquitous across the tech sector, or highly concentrated in recently listed, venture-backed companies? (Spoiler alert: the latter)
Is there something nefarious in this? (Spoiler alert: sorry, not touching this one)
What’s driving these excesses? (Spoiler alert: all-time highs in the share of total venture funding allocated to $1bn+ “mega-funds” and $50mm+ “mega-rounds”)
Are SPACs the answer? (Spoiler alert: No! In fact, they’re actually dumping a staggering volume of gas on the fire)
Will this end? (Spoiler alert: it always does; usually not well)
Will this end soon? (Spoiler alert: probably not – VC dry powder is also at all-time highs and the 2021 SPAC class has already raised more than half of its completely insane 2020 full-year total in 6 weeks)
Is there nowhere to turn for value in the venture/tech space? (Spoiler alert: Of course not! The early-stage has never looked better! Seed and Pre-Seed rounds (and funds) are historically underfunded and median pre-money valuations for these early rounds are actually declining!)
Bottom line: The late-stage venture and IPO markets are as crowded a trade as you’ll ever see and crowded trades usually don’t unwind gracefully. Meanwhile, the increasingly ignored and underfunded early-stage might be the only place left to find value in tech.
Are we inherently biased on this topic? Undoubtedly. Does that mean we’re wrong? Well, you tell us, but we think our evidence is pretty compelling.
Portfolio Spotlight: Koffie Labs
Co-founded by Ian White (CEO), a serial entrepreneur and data product specialist, and Mike Dorfman (COO), a 3rd generation executive at his family’s trucking insurance brokerage, Koffie is an insurtech focused on reinventing the $30 billion commercial trucking insurance market. The company came out of stealth mode yesterday, formally announcing their $4.5 million August 2020 seed round (in which we participated) led by Lerer Hippeau Ventures and Anthemis Group.
As regular readers know, enterprise solutions for old-economy industries with outdated technology and stagnant productivity is a core investment focus for C2V, and the commercial trucking insurance space is in as dire a need of technological advancement as any we’ve seen thus far. Over the past decade, legacy underwriting models have failed to keep pace with the actual risk-drivers in the market, leading to consistent losses for insurers. Rather than reimagining their largely heuristic models and leverage advancements in data-modeling technology, trucking insurers have simply raised premiums year after year, squeezing already thin fleet profit margins, and forcing some out of business entirely.
Using a proprietary, real-time data set that includes telematics and advanced safety technology features for 14 million trucks (nearly every truck currently in service), Koffie’s AI-driven predictive models underwrite dozens of safety features, rewarding fleets that invest in safety with discounted insurance premiums, while drastically improving underwriting loss ratios.
Koffie’s streamlined and fully digital platform also condenses the previously cumbersome underwriting process from weeks to minutes (greatly improving both customer service and operating costs) and its models are already built to incorporate emerging risks like self-driving vehicles.
As the third-largest cost for trucking companies (behind fuel and labor), the insurance market is highly price-sensitive, and we expect Koffie’s underwriting advancements to allow the company to quickly and profitability take market share from legacy players.
Superpowers Pod 2.0
We’re back and better than ever! The Superpowers Podcast is back for Season 3, but with an updated look and feel. Chris had an epic two seasons with his friend Bill, who he will miss, but will now take on season 3 solo, meeting with amazing guests to discuss their superpowers and how it has served them throughout their life and career. Head over to the Superpowers website to find our previous episodes and follow us on our socials for updates on the release of the new season.
Just last week, Beam announced they’ve raised $5M in Series A financing. We were excited to lead Beam’s Series A round, which also included The Yard Ventures, Litani Ventures, Obvious Ventures, Camwood Capital, and a group of amazing professional athletes. This news came alongside the launch of their new hydration line, Elevate. Elevate is a powdered stick hydration mix and is Beam’s first non-CBD wellness product category. We’re incredibly excited to see Beam, the fastest-growing direct-to-consumer wellness brand, continue to expand! Join Chris Cunningham alongside Matt Lombardi and Kevin Moran, co-founders of Beam, as they discuss fundraising and investing in startups. Thursday, February 25 at 4 pm PST on Clubhouse.
Press & Social Updates
As AirAsia aims for streamlined revenue management, they’ve enlisted the help of Kambr’s Eddy Software. Eddy is a forward-looking, revenue management software that brings greater flexibility and efficiency. This partnership is only the beginning of a new era for the future of airlines and Kambr technology.
Expectful recently announced they have raised $4.2M. This new funding will go towards fulfilling their mission of supporting new mothers as they evolve the company into a “go-to wellness resource for hopeful, expecting, and new parents.”
Petal Card has shared news that the gender mix among their employees is now 50/50, women and men! Within tech and finance fields gender parity is still rare, but Petal has pushed to change that by actively working to close the gap.
In the latest installment of #InTheTrenches, we discuss maintaining your relationships. More than anything, stick with your relationships through thick and thin. Though they may not serve you at the moment, you never know when that connection will resurface - possibly in a way you never imagined before. Check us out on Instagram for more of the C2V perspective.