Here at The Cap Table, our mission is to help you get (and stay) on the capitalization table.
SWARM’s big acquisition in 2014 💰
The “aha” moment for building Electric ⚡️
The #1 quality to look for when letting people onto the cap table ⺇
Advice for first-time angel investors 👼🏽
What NYC will look like in 2021 🍎
TCT: You’re a 3x founder with two exits to date, including SWARM Mobile (acq. by Groupon in 2014). What was going through your mind when Groupon first approached you? Were you ready to sell?
We were certainly at a decision point.
We had a new product and distribution strategy that enabled us to book several million dollars in ARR in the span of about 8 months. We were fired up about how well things were finally going. We could have easily raised a lot more money. The problem was, the market wasn’t going to get bigger - we just couldn’t see brick and mortar independent retail growing as a sector. We also knew that passively tracking consumers without their consent wasn’t a smart thing to rely on. That latter point sounds ridiculous now, but in 2014 the privacy conversation wasn’t there yet!
Once we sat down with Eric Lefkofsky (Co-founder of Groupon) in Chicago and saw where we fit into the strategic vision of Groupon at the time, it made total sense. Thankfully, we had only raised ~$3M in total and our revenue growth justified a compelling valuation - the combination of those two things made the deal make a lot of sense. At that point the conversation changed from “Sell to Groupon?” to “Sell to Groupon!”
You’ve mentioned in the past that the inspiration for building Electric stemmed from your own painful experiences of managing IT solutions. When was the “aha” moment?
At Swarm, we raised our Series A in 2013, which if you can believe it, was only a $2.2M round. (yes, $2.2M Series A!).
Times have changed.
In any event, we raised the money and had to hire a dozen people. I spent the whole weekend setting up laptops and figuring out how to provision software, and how to get the security side of things right. It seemed crazy that there wasn’t a piece of subscription software that would make basic IT management easy - SaaS, laptops, networks, basic security etc.
We’re seeing a rise of new solutions like Electric that are an SMB first product. What’s the opportunity within the SMB & Mid-market space right now? Has it been overlooked?
SMB is a big category, but it's actually composed of a lot of smaller sub-categories. That nuance is important.
Our customer is a company in an office with budgets and leadership. Our customers are not what people typically think of as “SMB” - thed shop on the corner, the lawn care service. So, even though the 25-500 FTE (Full Time Employee) sweet spot we sell into is technically “SMB”, the selling motion looks a lot more like a mid-market business. The segment is historically overlooked because it’s hard to make the economics work on high volume/low ACV contract structures. Which is a totally fair and correct reason to avoid a category.
In our case, the economics mean that we can do it because they work well and continue to get better. For us, there’s 250,000 businesses that have no great solution other than us, so that’s a very exciting space to play in!
You purposely HQ’ed Electric in NYC over SF. Do you have any regrets and can you explain why you made that choice?
No regrets at all. The reality is, it was a personal decision first - my wife (girlfriend at the time) was here so no matter how you slice it I was coming back to NY! But, I love this city. I love the hustle. I love the diversity. The tech community is great because everyone roots for each other here. We knew we’d build offices outside of NYC for cost reasons (which we’ve since done), so overall it’s worked out really well.
What has been your most memorable experience to date with Electric?
The business was two months old. There were four of us.
We had two customers and ~100 users that we had just gone live with. After the end of the first week, we were flooded with tickets and realized “this is going to work! People need this!”
Some companies chase product-market fit for a long time and us seeing it a week into launch was truly amazing.
What type of qualities do you look for in investors that want to join Electric’s cap table?
Culture fit, first and foremost. You’ll probably be involved with us for a while and I really need to get excited about you as a person. I don’t really care how big the name is at the firm or what company you sold before.
Are you a good person?
Are you someone we want to spend time with?
Can you really be helpful?
I find that if we start there the rest works itself out later on!
What recommendations would you give to first-time founders thinking about bringing in their first institutional investor(s)?
People first, but only to a point.
If push comes to shove your job as a founder is to make sure you don’t run out of money. So if it comes to it, take the check.
But, for the most part, companies with talented founders and a good story have options when they raise so make it a people-first game.
Do not take money without doing backchannel references!!! (yes, with three explanations).
The references they give you will of course be positive. Find your own and really see what these people are like. Think of the best boss you ever had - that’s the bar you should set for an institutional investor early on.
You’re an investor and hands-on advisor (Stadium Goods, Blackbird, Anchor Worldwide). What do you look for when investing in companies? As an advisor, what is the #1 thing you bring to the table?
It’s cliche but the team is everything. No idea is worth much in the wrong hands.
It’s taken a while for me to experience enough to know what “excellent” really looks like.
But, now that I have become a much better judge of talent, and can also evaluate the business as an operator, I can make thoughtful, process-driven decisions around investing. I avoid stuff where I can’t be helpful unless it’s such a spectacular opportunity or team that I can’t ignore it.
Having built three companies from scratch and made a ton of mistakes, I am the most helpful with: fundraising, team building, problem-solving, and to a lesser extent sales and distribution. Getting your team right and the goals calibrated will make or break a company early on and that’s where I can really help.
What’s your biggest cap table mistake?
Thankfully I haven’t had anything truly terrible at any of my companies, but like anyone, there are always one or two investors who have given you basically no money and added no value who hit you up all the time for information or questions.
I had one at Electric early on and I thought “Ah, I’ve seen this movie before” and just bought them out in a later round.
What advice would you give to a first-time angel investor?
Just don’t do it unless you really have money that you are OK with never seeing again.
Learning money. I got lucky and had two big returns very quickly but that is atypical.
Do it for the right reasons, making money only comes into the picture after you get good at it (or lucky), and in most cases both take time.
What does NYC look like in 2021?
NYC looks like it did pre-COVID though hopefully a place that embraces equality in a bigger way than it does in some respects now. My hope is that the city continues to reinvent itself. People forget that a lot of folks who live in the city don’t live here because they have to, they live here because they want to. New Yorkers stand up for what they believe in and I don’t see that changing.
What are your favorite productivity tools you use on a daily basis?
I de-tooled myself a while ago. I email notes to myself at night or in the gym. I move stuff from email and yellow legal pads into trello and that’s it. Professional minimalism.
TCT: Thank you for your time and thoughts, Ryan. We look forward to the continued success of you and Electric!
Deal News 6/1-6/12
Deal of the week:
Lili raises $ 10,000,000 led by Group 11 | Lili empowers freelancers with financial services and tools to balance work and life in one account.
Overjet raises $ 7,850,000 led by Crosslink Capital | Overjet combines deep learning of dental images and data science to empower dental providers and payers to deliver the best patient care.
CAST.AI raises $ 7,664,035 led by | Multi-cloud SaaS platform to deploy, operate, and cost optimize containerized applications in any combination of clouds simultaneously
Flatfile raises $ 7,600,000 led by Two Sigma Ventures | Flatfile is the developer of a database software designed to import, map, and normalize customer data.
ClassTag raises $ 5,000,000 led by | ClassTag is a parent-teacher communication platform that allows teachers and parents to easily engage with one another and share resources.
NS8 raises $ 123,000,000 led by AXA Venture Partners, Lightspeed Venture Partners | NS8 is a fraud prevention platform that combines behavioral analytics and real-time scoring to help businesses minimize risk.
Verve Therapeutics raises $ 63,000,000 led by GV | Verve is focused on discovering and developing therapies that safely edit the genomes of adults to confer protection against coronary.
Prilenia raises $ 62,500,000 led by Forbion Capital Partners | Prilenia is a provider of biotechnology services.
CereVasc raises $ 44,000,000 led by ATON Partners, Perceptive Advisors | CereVasc is a company focused on improving the treatment of patients with hydrocephalus.
Transcend raises $ 25,000,000 led by Accel, Index Ventures | Transcend is the data privacy infrastructure that makes it simple for companies to give users control over their personal data.
Glyscend raises $ 20,500,000 led by Medical Research Commercialisation Fund (MRCF), Sante Ventures | Glyscend develops a revolutionary approach to treating type 2 diabetes.
Alpha Health raises $ 20,000,000 led by Andreessen Horowitz | Alpha Health provides revenue cycle management (RCM) teams at health systems with Unified Automation.
NFlection Therapeutics raises $ 20,000,000 led by F-Prime Capital, venBio Partners | NFlection focuses on the development of novel therapies to address the needs of patients with neurofibromatosis type 1.
Ezra AI raises $ 18,000,000 led by FirstMark | Ezra AI provides early cancer detection by combining advanced medical imaging technology and AI research.
Haus raises $ 15,750,000 led by BlueRun Ventures | Payless, live more. Fair and flexible ownership, designed to fit your lifestyle.
Concourse Labs raises $ 15,200,000 led by ForgePoint Capital | Concourse Labs is a company that accelerates enterprise digital transformation through automated cloud governance. 1touch.io raises $ 14,000,000 led by Jerusalem Venture Partners (JVP), National Grid Partners (NGP) | Network Analytics-Based Personal Data Discovery for Regulation and Network Security.
Ethyca raises $ 13,500,000 led by IA Ventures | Ethyca is a privacy compliance platform enabling businesses to implement comprehensive privacy management processes.
Drop raises $ 13,300,000 led by Alpha Edison, Morpheus Ventures | Drop is the leading smart kitchen platform specializing in recipe and kitchen appliance technology to connect the whole cooking journey.
C2i Genomics raises $ 12,000,000 led by Casdin Capital | C2i Genomics is provides cloud-based cancer diagnostic services to pharmaceutical and diagnostic organizations.
Whatifi raises $ 10,000,000 led by Andreessen Horowitz | Whatifi provides a new way to watch movies on your phone with friends.
Bonusly raises $ 9,000,000 led by Access Ventures | Bonusly offers companies a web platform to reward and motivate employees by using peer-to-peer bonuses.
MabPlex International raises $ 500,000,000 led by DT Capital Partners, Huajin Capital | MabPlex International is the second professional CDMO company Athira Pharma raises $ 85,000,000 led by Perceptive Advisors | Athira Pharma is a clinical-stage drug development company.
Autobahn Therapeutics raises $ 76,000,000 led by ARCH Venture Partners, Cowen Healthcare Investments | Autobahn Therapeutics is a developer of regenerative medicines to restore hope for people affected by CNS disorders.
M1 Finance raises $ 33,000,000 led by Left Lane Capital | Invest for free in a custom portfolio
Yugabyte raises $ 30,000,000 led by 8VC | Yugabyte is an open-source distributed SQL database for customers in industries such as cybersecurity, financial markets, IoT.
Wave raises $ 30,000,000 led by Maveron | Wave focuses on interactive virtual experiences with a mission to help artists make money at the intersection of gaming and entertainment.
Squire raises $ 27,000,000 led by CRV | Squire is a barbershop management and point of sale system software that connects people with barbers nationwide.
PlushCare raises $ 23,000,000 led by Transformation Capital | PlushCare is a tech-enabled concierge primary care practice built for the modern world.
Tovala raises $ 20,000,000 led by Finistere Ventures | Tovala is a smart oven that sits on your countertop and is paired with a companion meal delivery service.
Inky raises $ 20,000,000 led by Insight Partners | Inky is a cyber-security company that secures email against phishing.
Cloud9 Technologies raises $ 17,500,000 led by UBS Investment Bank | The company intends will enable the company to grow its business to meet industry demand.
Postman raises $ 150,000,000 led by Insight Partners | Postman is an API development platform that offers a platform for developers to build, test, and debug their APIs.
Hyperscience raises $ 60,000,000 led by Bessemer Venture Partners | The world's first Software-Defined, Input-to-Output Automation Platform
PatientPing raises $ 60,000,000 led by Andreessen Horowitz, F-Prime Capital, GV, Transformation Capital | PatientPing helps us build better, stronger relationships with ACOs in the market,
Headspace raises $ 47,700,000 | Headspace is a digital health platform that provides guided meditation sessions and mindfulness training.
Varo Money raises $ 241,000,000 led by Gallatin Point Capital, Jeffrey S. Skoll, Paul Hewson (Bono), The Rise Fund | Varo Money is a mobile banking business that helps customers cover their expenses, pay their bills, and build their wealth over time.
Vacasa raises $ 108,000,000 led by Silver Lake Partners | Vacasa is a vacation rental management company that helps homeowners buy, manage, and sell their vacation homes.
Locus Robotics raises $ 40,000,000 led by Zebra Ventures | Locus Robotics is a warehouse robotics company that manufactures autonomous, mobile robots to support e-commerce.
Domino Data Lab raises $ 43,000,000 led by Highland Capital Partners | Domino Data Lab provides data science teams with an open data platform for enterprises to manage and scale data science.
DNAnexus raises $ 100,000,000 led by Northpond Ventures, Perceptive Advisors | DNAnexus combines expertise in cloud computing and Bioinformatics to create a global network for genomic medicine.
Sources: Crunchbase, Google, LinkedIn.