Insight

Investing in Portside.aero

Original Investment: April, 2020

If you asked me six months ago to invest in software for aviation, I would have said you are crazy. I would also have been wrong.

Keith Rabois once tweeted: “Formula for startup success: Find large highly fragmented industry with low NPS; vertically integrate a solution to simplify value product.”

Portside has nailed this strategy.

While consumer travel has taken a digger during the pandemic, business and government fleets kept flying and even grew. While I can book a commercial flight from my iPhone, business and government flyers and operators are back in the stone ages with telephones, faxes, and spreadsheets. The pandemic pulled forward the modernization of the technology stack for these fleets and Portside is the leader in this segment. Portside grew 3X in 2020, is profitable and we invested with strategic angels prior to the recent Tiger Global led Series A.

Portside reminds me of the power of a counterintuitive thesis.

Portside: The Operating System for Business and Government Aviation.

What Portside does and why it is important

There are over 120,000 private commercial and government airplanes in the world that serve passengers. During the pandemic, while public transportation languished, these private operators saw demand increase. While public commercial airlines are highly concentrated into a handful of airlines who are highly regulated with advanced technology platforms, these private airplanes are owned by tens of thousands of operators all operating on different technology stacks. Whenever an airplane flies there is a myriad of regulatory filings (flight plan, weight, and balance, etc.), customer interactions (ticketing, scheduling, document checks), maintenance checks (upgrades, regular maintenance, etc.), and other issues. These aviation operators use a hodgepodge of self-developed tools, aviation software from the ’80s, spreadsheets, fax machines, and more to manage their businesses from booking to operations to maintenance and more. These systems are very people-intensive, expensive and do not provide operators or customers a modern flight or aircraft management experience. Portside brings a modern SaaS solution for all aspects of commercial and government aircraft operations reducing costs, increasing compliance, and increasing customer satisfaction. Current modules include:

Portside currently manages over 1,000 aircraft on its platform across 50 customers and 25 countries. Operators who implement Portside have seen a 5-10% improvement in operating margins very quickly and a significant increase in customer satisfaction. None of the customers I talked to wanted to go back to spreadsheets and fax machines.

Portside’s platform enables these aviation operators to upgrade their technology stack quickly to a level they could never be able to do in-house or with a mixed environment. This is important to their immediate bottom line and the continued growth of their businesses.

The Story

As a tech entrepreneur, I am always shocked when having to interact with an organization way behind the curve. Like the DMV with their paper numbers and lines. Or the doctor’s office with the clipboard. And taking a charter or private airplane. My assistant will spend hours organizing on the phone and fax, I usually get a paper ticket (if any at all) and operations seem haphazard. Private aviation is a very large capital intensive industry, virtually untouched by modern technology.

The first time I received the Portside deck, I said no without reading the whole thing. Aviation software during a pandemic seemed like a bad idea. Then the CEO sent me a list of the investors. I noticed an investor who was a friend and one of the smartest people I know. I gave him a call. He gave me a rundown of their traction, especially during the pandemic, customer raves, the resilience of the management, and the opportunity ahead. It became clear that Portside was benefiting from the pandemic as operators pulled forward their technology upgrades to improve margins and customer service. There seemed to be a clear path to $100M revenue with less than 5% market penetration. The more I dug in, the better the opportunity looked (this usually doesn’t happen with startups)

Why I am Investing

Despite all the tech innovation around us, there are still industries left behind, big ones. The trick is finding someone with the right industry experience who also understands how to build modern technology. The management of Portside is that team. Portside is the clear leader having created this niche of SaaS management for commercial and military. They have achieved a worldwide scale with impressive partnerships and customers on very little capital (<$2M). Portside is profitable, reaching profitability after less than two years of operations, and intends to grow profitably from here on out. In these heady times, I am usually investing in tech companies with traction, but 2-4 years from profits. When I find a profitable, fast-growing SaaS company, like Portside, I write the check as quickly as possible.

Trends I am betting on

SaaS for the laggers. Highly regulated, capital intensive industries tend to be technology adoption laggards (think Autos, Healthcare, Government, Aviation, etc.). They tend to wait for a forcing function (Tesla to Autos) or a critical mass (Cloud infrastructure) before adopting new technology. The pandemic created another forcing function which caused huge industries to re evaluate their operations and look for opportunities for cost reduction and new growth, often through new technology adoption. This had led many aviation operators to Portside. As these operators improve their margins and customer service I am betting it will push more laggards to upgrade as well.

Why this deal is Incisive

Portside ranks very highly in key areas of our Meta Themes.

Disruptive innovation creates new markets. In 2021 it is counterintuitive to think booking a flight on your phone is disruptive innovation, but in commercial and military aviation it is. So is the cost savings to the operators improving margins by 5-10% very quickly. Being a high-margin business allowed the industry to be complacent, but the pandemic has pulled forward the need to upgrade. Portside is the clear leader and creating a new market for a SaaS solution that didn’t exist before. When you create a new category, the leader takes most of the spoils.

Americans are lazy. We want convenience in everything we do and jared when we don’t get it (DMV, Doctor, etc.). Portside brings modern convenience to their segment and the customers love it (NPS of 91).

Great founders figure it out. Legacy industries are hard to disrupt from the outside. Alek and Alek are insiders having provided value before. They have also been very resilient through a pandemic which would have killed a weaker management team. Management figured out how to grow and achieve profitability in an unloved sector of the economy during a pandemic. Enough said.

Software Eats Everything. Software has already eaten the phone and fax machine in most industries, commercial and government aviation is next. A single integrated suite to run the business which is standard in most industries is now available for the first time with Portside. The software delivers value far in excess of it’s cost to those who implement it and gives them no reason to go back to clipboards and faxes.

Invest with other smart people. The early seed funds focus on this kind of disruption of traditional industries with software and have helped the company immensely. It is also exciting to see very high level executives in aviation as investors and customers. Strategic early stage investors including I2BF , Builders Capital, Quiet Capital and SOMA Capital are joined by industry angels from Volaris, AirFrance, Microsoft, Net Jets, and more. I couldn’t ask for a smarter group of co-investors for this particular industry.

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Investing in IfUIWill

Every now and then a very smart guy who I have known a very long time calls me up with a crazy new idea they are working on. I love these calls and am humbled when they call me first. This happened a couple weeks ago when my longtime friend (and former Microsoft colleague) Peter Mansour gave me a ring from Majorca. The Universe (ok Instagram/Twitter) connected the dots as he is passionate about solving a problem I have been very public needs solving. After a couple of weeks of digging into his traction, team, product approach, and market entry strategy, I am happy to be leading the Pre-Seed in IfUIWill .

IfUIWill: Do Together.

The Story

This may come as a surprise to you, but I struggle with getting everything I want to do done. Even when I start off well with something, the weight of distractions can pull me in all directions. This is especially true for new habits, learning something new, or anything that requires a commitment over time. The most effective method I have found for sticking to commitments over time has been the challenge framework, especially with your friends. I have tried a bunch of different systems for this and even invested in a few (@Spar) but have always found them limited in some way (one type of challenge, work stuff only, lack of integrations, etc.). When I was running Upgrade Labs, we wanted to sponsor a sleep challenge integrated with Oura. It took us over a month of custom program development to create our own challenge. I have influencer friends who run challenges for their audiences with custom mash ups of Shopify, Instagram, GumRoad, Excel, YouTube and bailing wire. While people love challenges and organizations see amazing engagement with them, all this one-off development creates a lot of friction. Why hadn’t anyone created a software platform optimized for multiple challenge types across multiple categories, especially one which could scale to the Enterprise? I wanted this so badly, I toyed with doing it myself, even hiring a CTO to do some scoping work. And then Peter called me.

Peter and I worked together at Microsoft and again after I left and started Tippr while he was running Local Offers and Coupons as GPM of Bing Local. in 2017 Peter moved to Majorca to be Chief Product Officer at Hotelbeds Group. We shared our favorite bike rides there as Majorca is on of my all time favorite road bike places. We also enjoyed trading start-up ideas. Peter likes having interesting problems to solve like I do. He got interested in challenges after doing a couple fitness challenges on the internet and being frustrated by the tools. He decided to build a better one, one that he would love to use himself. Peter launched version 1.0 of the IfUIWill app in Nov. of 2019 and worked iteratively with early adopters. The app has now been used by thousands and is on version 4.7, all bootstrapped with his own resources.

The current consumer product makes creating and managing any kind of challenge fun and easy. Peter had tried @SPAR (where I am an investor) and was frustrated, like me, with the fact that it only supports one use case – The kind where you agree to pay money if you don’t complete the daily video checkins. There are many other challenge formats which don’t include daily checkins or require fines. One of their most engaged early customers was PAWSwalk which challenges you to walk your dog daily and compete others on hours and miles walked. By supporting flexible challenge design and accountability, IfUIWill is building a more generalized platform which can address a much larger set of use cases. They have built templates for the most common challenge formats and are adding more. This reminds me alot of how Survey Monkey took the general idea of a forms generator and used a common back-end infrastructure to support multiple us cases from academic research, to audience surveys, to contact forms and more. Much of the one-off integrations I had to build at Upgrade Labs to make my own challenge, are now baked into the IfUIWill platform saving me tons of development time. Shared back-end infrastructure with multiple front-end low variable use cases, that is the essence of a great Platform.

A couple months ago, Enterprise customers started calling and asking Peter if the platform could be used for employee engagement and meeting internal goals around health, wellness, training, etc. While they have plans to monetize the consumer app, Peter always felt the real monetization would be in the Enterprise. He knew going to the Enterprise would require significant scaling up, so he gave me a call.

One reason I put out to the Universe problems I want solutions for is that every now and then, you get something back. Someone else is as passionate about the problem and is going to off and solve it. I am excited to be leading this scaling round with Peter.

Why I am Investing

Peter is solving a problem I have been looking to solve for some time. I know him and his execution abilities well. Peter has has been a start up CEO before and has experience in multiple big tech companies. He has gotten a very long way on his own and is ready to scale into the Enterprise. Very excited to be the first check in as lead.

Trends I am betting on

Remote is the new normal. Regardless of the pandemic, we are going to have less in person time across all areas of our lives than before. Connection with those we don’t see every day has become more important than ever. Challenges are a great way to stay connected and stay in community with people around the world.

Competition and community drive goal achievement. When I am the only one looking at my to-do list, it can get stale. When I am in a community, that accountability keeps everyone on track to a much higher degree. People are 65 percent more likely to meet a goal after committing to another person. Chances increase to 95 percent when they have partners to check in on their progress. This trend also drove my investment in UNLU where their class completion rate was 2X Masterclass due to the community aspect of their platform.

Why this deal is Incisive

IfUIWill ranks very highly in key areas of our Meta Themes.

Great Founders figure shit out. Peter is a second time founder with an impressive track record from big tech companies as well. Having managed large teams, he understands the value of employee engagement and has a great network of HR managers as potential customers. He has shipped over 100 versions of the application in the last 10 months, responding to user feedback, pivoting, and building value. He knows how to refine product/market fit.

Disruptive Innovation creates new Markets. How big was the forms generator market before Survey Monkey? or ride share before Uber? How big can the challenges market be if there is a simple scalable platform that makes it easy for anyone to create and manage challenges? With the reduction in challenge friction enabled by the platform, I believe at least 100x larger.

Platforms Win. Custom software development sucks. Build once, use many wins. Challenges are stitched together today mostly with duct tape and bailing wire. In the early days of any feature there is a lot of coding. But today web sites are build by builder platforms (WordPress, etc.) not by hand. A challenge platform will create and drive the demand and use of challenges faster than every possible before.

Invest with other smart people. The other angels in the round are also long time friends of Peter and have had impressive careers as operators and investors. I am excited to partner with this group of people.

How I think about Follow On Investments

As an angel investor you invested in a company very early. They do well, you pat yourself on the back. Now they are raising more money. Fork meet road. To follow on or not to follow on, that is the question.

I have heard a lot of Angel investors say “I never do bridge rounds” or “I’ll just take the markup and save my capital for more shots on goal.” Another view is “Double down on your winners.” Which strategy is superior? In a market where power laws apply and the “winners” deliver the vast majority of the returns at all stages, it is important to have a framework to decide (at every stage) “is this one a winner?”. In my investment career, I evolved from an “early only” to a “double down on your winners” investor. If you are an “early only” investor today, I encourage you to read on. You may think differently about follow on investing. Or not, this is my model, you need to figure out your own.

Over decades of early stage investing I have stood at this fork dozens of times. Here are a couple of concepts I have found helpful over the years standing at this kind of crossroad.

Are KPIs growing faster than Valuation?. One of the big fears of early investors in this frothy market is that there is lots of “dumb money” out there marking up deals to crazy valuations. While in practice I have rarely encountered “dumb money”, nobody wants to be a part of it. Early in a company’s life (when you invested as an angel), the story and the founders are what matters. KPIs not so much. In follow on rounds, as soon as the Series A, valuations should start to track with KPI growth. As KPIs (revenue, customers, downloads, engagement, etc.) grow, so should valuation. For now, I will leave aside the question of what “multiple” is “fair” on these KPIs because that is an area of great debate and judgement for another time. To simplify things, just have a look at the growth rate in KPIs vs Valuation between the financings. In my experience, if KPIs are growing faster it is a positive, equal neutral, and Valuation growing faster, slightly negative. I recently invested in a company where the KPIs grew 400% and the valuation grew 25%. The last round may have been priced a bit high, but they blew away expectations, and this round is definitely a better relative value to the last round. Easy decision.

What is the notional capital raised plus debt?. While I have tweeted before that if you are optimizing for downside protection in angel investing. you are playing the wrong game, at this crossroads, it is a good time for a gut check. The notional (total capital) raised plus repayment of any debt is the absolute hurdle rate the company must receive in an acquisition or liquidation for investors to receive their capital back. I slapped my head in amazement at A16Z’s recent $100M investment at $3B valuation recently in Clubhouse, barely out of diapers. Was the company really worth $3B this early? Then I did the math on notional capital. The company has raised approximately $150M total capital (which has a preferred return) and I am assuming they have zero debt. This means investors are in the money at $151M sale price, not $3.15B. What is the probability that one of the hottest consumer companies with $100M+ in the bank (basically infinite runway) is worth more than $151M? 100% in my book. If they sell for $600M, the press will call it a disaster versus their last round at $3B, but investors will make 2-3X their money (depending on the preference stack). If this number (notional capital plus debt) is < 10% of the Valuation I see it as a positive, between 11-50%, neutral, and over 50% negative. If a company has preferred investor preferences for over 50% of their valuation it means they have been very inefficient in value creation with the capital they have raised.

Is management on top of the game?. After your first check, how has management execution and communication been? As a small investor, you may not have information rights, but you can see how the company is executing in the market, on their blog, etc. Is it the first time you hear from the CEO when they need more money? Have they been transparent about the challenges and pivots they have made? Do you still trust them with your money? What I want to see here is Management doing THE RIGHT THING as challenges come up between financings. Challenges always come up. Did management stick their head in the sand, stay too long on a loosing strategy? Wait too long to cut bad investments? Respond to market opportunities? This is more of a feeling than a quantified measurement. “On top of the game” is a positive. Anything else, especially “Meh” is a negative. There is no zero ratings for this one.

Are there SMART goals for this funding window?. Money = Time in startup land. But time to do what? For every fundraising I ever participate in, I want to know what the SMART (Specific, Measureable, Attainable, Relevant, Time-based) goals are that the company hopes to achieve in this funding window (before the money runs out). Those goals must deliver a valuation increase supported by KPI growth. That valuation increase is either another round of financing, profitability (no more financing needed), or a liquidity event. I am often frustrated (and pass) when I hear “dumb” goals for the financing. “Dumb” goals include “hire some developers”, “get an office”, “buy some ads” and my least favorite “hire a lawyer.” I also want to know how much “wiggle room” they have in the budget. For seed or pre-seed investment, I typically want to see a CEO raising at least 2X the budgeted capital for a shortlist of SMART goals. If they have SMART goals and are raising 2X the budget it is positive, 1X the budget, neutral (assuming they meet the goals), and “dumb” goals, or less relevant goals or underfunding the goals is negative.

Is this one going to “break out”? When?. Since “winners” deliver the vast majority of the returns, at every financing round ask yourself, if this one is on the path to being a “winner.” Risk adjust the probability and understand the time scale. I recently invested in a 5 year old SaaS company which was break even and growing at 30% Y0Y. Good, but not a “break out” clear winner. They were raising money to build a new product based on their core technology for a new market which could deliver “break out” revenue growth within 12 months (the funding window). I wrote the check. I was also asked by a company I was invested in for a bridge financing to “get to a Series A in the Fall” without material changes in KPIs, or any break out products between now and then. I passed. If the answer to this question is “Yes” and “soon”, I view it as positive, “Maybe” is neutral and Not in the this funding window is negative.

Outside lead or inside round?. I am not of the opinion that all inside rounds are bad. Insiders have an asymmetric information advantage. I recently participated in a small inside round at $16M pre while the (profitable) company was negotiating a term sheet for a follow on round which came together at 3x the valuation within two months. Why did the company do it? It was a small raise for strategic investors at favorable terms to reward their strategic value. When the company has a clear set of KPI’s they believe will drive valuation in the next round and they need a small amount of capital relative to dilution to ensure they meet those KPIs, that can also be an interesting opportunity. Who is leading the round is a Secondary signal versus the Primary signals of how the business is going. I tend to weight primary signals much more highly, but in the case of follow on investments, this is one time where I super weight a Tier 1 VC investment. I recently invested in a small SAFE in a company doing $40K MRR to expand team and infrastructure to support signed customer contracts which would deliver +$100K MRR within three months. At over $100KMRR, the universe of investors grows substantially. I wrote the check. I view view inside rounds as neutral and outside priced rounds as positive with a Tier 1 VC as a Double positive.

What % of my reserves is the ask?. Typical Venture funds reserve about 20% of their funds for follow on investing. Many Angel investors I know don’t really have a coherent plan for follow on investments, certainly don’t think about “reserves”, and therein lies two problems. Not having a plan and not thinking you have reserves. Follow ons are going to happen, you must have a plan. As an angel, your “reserves” are all your investments in assets outside the early stage, public markets, real estate, etc. Since my personal balance sheet allocation to early-stage investing is low single digits, I technically have > 90% “reserves” on my balance sheet for follow ons. Here is my plan for follow ons. It is to stand in the fork and decide each time with a bias toward doubling down on the winners. If the follow-on asks amount (the reserve) is sitting in another asset (say the public market), I ask if that asset or the follow-on has a higher probability of a higher return. When the % of my reserves that the follow-on ask is < 10% I view it as positive, 10-30% neutral, and > 30% negative. I don’t want to put too much of my reserves in the high-risk basket.

Being a nerd, I have a spreadsheet where I score each follow on investment on a scale based on these categories. You can find the spreadsheet here.

KPI’s growing faster than valuation?KPI > Val = +1, KPI <> Val = 0, KPI < Val = -1
Notional capital + debt as % of Valuation< 10% val = +1, 11-50% of Val = 0, > 50% of Val = -1
Management “on top of the game”“Yes” = +1, IDK or “NO” = -1, no zero option
SMART Goals with adequate funding windowSMART + >2x funding = +1, SMART + 1x funding = 0, Dumb goals or < 1x funding = -1
Will this one “Break Out” and when?Yes, soon = +1, Maybe within 12 months = 0, Not in next 12 months = -1
Inside or Outside lead roundInside = 0, Outside = +1 Tier 1 VC +2
What % of my follow on reserves is the ask?< 10% = +1, 10-30% = 0, > 30% = -1
IV Follow ON Decision Matrix

How I use this matrix

  • I immediately write the check for 5-8
  • I usually write the check for 3-5
  • I rarely write the check for < 3

While I can’t share the detailed data (confidentiality), a recent conversation with the data team at Angel List confirmed the “double down on your winners” strategy. The team was curious if data supported the conventional meme that “bridge rounds are bad”. Angel List tracks investments, returns and markups for every manager on their platform. What they saw, to their surprise, was that the early managers (pre-seed and seed) with the best returns were plowing money into bridge rounds of their fastest growing companies that subsequently raised capital from top tier VCs at much higher valuations. The early investors, when they had an asymmetric information advantage in a fast growing company, were doubling down on their winners. While I don’t know the model everyone else is using to figure out the “winners”, you now have mine.

Investing in Morpheus XR

VR/XR has created amazing fantasy worlds for individuals and gaming. I am not a gamer. I live in the real world and have lots of things to do in the here and now. I have often daydreamed about a killer VR/XR enterprise app (yea I know, nerd alert) that could help me connect with people and get stuff done. The founders of Morpheus XR and I have geeked out on this shared vision for hours. I am excited to be joining a great group of leading angels as the last check in this first round of funding.

Morpheus XR: A VR based platform for team connection.

The Story

Like many of you, I am burnt out on Zoom. The world in 2D is simply not as engaging as 3D with real humans. And we know remote work is here to stay. In fact, in many ways, remote work has broken down geographies and opened up new opportunities to work with the best people anywhere in the world. Despite the valiant attempts of Zoom happy hours, trivial pursuit, etc., I still come away from those events with a very shallow feeling. The question for many of us is how to create deeper personal connections during remote interactions. This problem is amplified in the enterprise where employee engagement and satisfaction was already a problem before the pandemic and remote have raised new challenges for corporate culture. A thought occurred to me: “How could meetings and events be 10x better than Zoom?”

I am not a gamer and was not an early adopter of VR. My first deep dive into VR was with Tripp (we invested) when the CEO told me it was 30-50% better at raising HRV (getting you to calm down) than Headspace. Oh, something I already do that can be done BETTER on the new platform? Ok.

I first met Jeffrey Chernick from Morpheus XR a couple of months ago just days after he started the company. We had mutual friends from Burning Man. He and others from Morpheus were part of the team the build Burning Man in VR in 2020. We bonded over frustration with Zoom and the upgraded experiences in a place like Burning Man. “I think we can provide an upgraded connection and culture experience for the enterprise in VR,” he said. “Ok, so why hasn’t anyone done it?” I asked. He noted a number of barriers and how Morpheus was going to reduce friction in enterprise VR adoption including:

Access to Headsets. While anyone can buy a headset, they are not standard corporate equipment today. Like the early days of Blackberry’s and laptops, most employees are waiting for the company to provide them. For a whole team to benefit from a VR experience, they all need headsets, not just the gamers that happen to have one already. For a sales team to do a VR presentation to the client, the client needs a headset. Morpheus handles this by operating its own headset rental business. The price of the headset rental is bundled into the application costs.

VR Expertise. Very few enterprises have the in-house resources to build VR applications and manage VR experiences, especially at scale. Most corporate helpdesks would not know how to set up a user on an Oculus headset. Morpheus provides concierge user onboarding and full app development and event management turn-key.

Branding. Enterprises want the VR experience to reflect their brand and culture. Setting up in someone else’s world doesn’t allow them to control the brand experience. Morpheus creates a virtual HeadQuarters with conference rooms, event halls, and whatever the company wants that are in line with their brand.

Controls and scale. Existing VR platforms were built around individual experience. The largest VR room is about a big as the smallest Zoom room. Basic access control, user validation, compliance and management reporting, and other standard enterprise features are largely missing. Morpheus has built these enterprise features as apps on existing platforms and is building its own Enterprise First platform VHQ.

The problem was pretty clear. Employee engagement already at low levels tanked even further during the pandemic. Our band-aid of Zoom has soured for many. With the prediction that up to 1/3 of employees staying fully remote from 2021 going forward, everyone was scrambling for new solutions.

While very early, traction is well above average for companies this young. The company has some initial traction with teams at Facebook. They also have headsets going to a dozen other companies including Google, Signal Brands, RideAmigos, Commvault, and others. They are eating their own dog food and having many first meetings in VR (sending the headset ahead of time) with a close rate much higher than Zoom. They added some very high leverage investors including Dave Gaspar, Founder of Gather.io, Andy Dunn, Founder of Bonobos, Fisher Capital (One of the larges NYC real estate developers), Ari Zweiman hedge fund manager at 683 Capital Partners, Jason Rimokh, founder of Signal Brands (Guess, NineWest, etc.) and more from Facebook, Microsoft and others.

Turns out, their approach has been able to break VR into enterprises you would expect had already adopted it. I mean Facebook? They own Oculus! Morpheus provided a smooth concierge onramp including the headsets for these teams within a corporate event budget they already had. Since their solution is turn-key within an existing budget, the sales traction has been greater than I usually see in this stage and is accelerating. They have established early counter positioning power as an upgraded Zoom experience for teams.

As they deliver value today to the enterprise, Morpheus has to work around the limitations of existing platforms. These customer requirements are being fed directly to their development team that is hard at work on their Enterprise First platform VHQ. They are building all the features they learn their early customers want into the new platform to which they will port all users. If they are able to establish a critical mass in the Enterprise, they may be able to leverage the network effects, scale, and switching cost power to make their platform the standard for enterprise VR. CTO, Anselm Hook has build VR platforms before with @XeroxParc, @Mozilla, and @makerlab. They have platform ambitions and it is early with good traction.

I have rarely seen this level of execution and adoption this early. The team is executing very well and the customers are responding. We are very excited to be one of the last checks into this round.

Why I am Investing

I invest in passionate driven founders who have a unique way to crack a big nut. Employee engagement in a remote world is a big nut. I have been impressed with the team’s early execution on all fronts (investors, product, customers, platform, etc.). I am excited to start using the platform to meet you all in VR.

Trends I am betting on

XR becomes an enterprise tool. Sometimes new technology starts in the enterprise and filters out (Blackberry). More recently the trend has been for consumer tools to be integrated into the enterprise after enterprise features were added (smartphone, personal laptops). The enterprise is currently managing remote connections with 2D technology (Zoom, phone). XR offers an upgraded connection experience that will help enterprises achieve their employee and customer engagement goals. The move to the cloud has given enterprises confidence to partner with technology companies for significant portions of their infrastructure. I am betting that enterprises will continue to partner with experts in new technology platforms (XR) to achieve their goals at scale.

The magic of human connection wins. The pandemic suddenly took away the opportunity for human connection outside our family from most of us. It is often not until something is taken away that you realize its value. The new normal is going to include much more remote connections. How to make those connections as authentic as possible is a challenge XR is uniquely positioned to meet. I am betting that people valuing the magic of connection will adopt technologies that enable that connection. Even if they are not “gamers” or “early adopters.”

Why this deal is Incisive

Morpheus XR ranks very highly in key areas of our Meta Themes.

Software Eats Everything. Email and messaging ate the phone and physical mail. Zoom ate the in person meeting. I am betting VR will eat Zoom. The VR software enables upgraded remote experiences that are many times not even available in the real world. In that sense it can be an upgrade to physical meetings. Why have an in person meeting if the VR meeting is BETTER?

Great Founders figure shit out. The Morpheus team has gotten more traction between day one and day 90 than any company I have seen recently. They figured out a product major companies would buy in large quantities in the first 30 days. They have both deep product experience as well as market connections to generate revenue. Between the management are 9 company formations. This is a very high level of experience and execution that is not common in very early-stage companies. These are the right founders to figure it out.

Disruptive innovation creates new markets. VR has been around for a very long time, but the enterprise had not adopted it. Morpheus is bringing innovations which could unlock enterprise demand for VR. This will be a whole new market segment for VR.

Platforms Win. The current VR platforms were built for individual gaming, not the enterprise. The company that brings to market an enterprise VR platform will lead adoption in that market segment. Morpheus is currently leading in this niche and will deliver its enterprise platform. Platforms become valuable when the value created for the platform members exceeds the cost of the platform itself. This has already tipped for things like cloud computing. Morpheus is using its early customers to drive platform requirements. If they are able to reach scale and attract app developers and integrations the platform could be very valuable.

Invest with other smart people. I have seen a trend recently of CEOs raising from high leverage individuals versus venture funds. This is very smart because individuals tend to engage much more deeply. I would rather have 10 highly engage individuals versus one seed fund that assigns a junior associate to the board. This has been the strategy Morpheus has taken. Investors have already delivered customers, lead lists, and business development which is evident in the quick traction. I am very excited to be part of this group of very smart people.

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Investing in Sensate

I don’t invest in many consumer hardware companies. Every now and then I spend a lot of time with a CEO who is amazing, their product is damn good (I use it myself) and they growing so damn fast that I write the check. That happened with the Oura Ring ($143M funding) and I am now writing a check for Sensate.

Like many of you, this past year for me has produced a supersized helping of stress and anxiety. Fortunately, I have been on a 10-year search for the best tools to attack these forces and have spent thousands of dollars on dozens of practices and devices. The Sensate is one of only two devices still in my daily toolbox. I have gotten to know Anna, the CEO over the last two years, and am excited to be able to join Unlock, ExpertDojo, and TenOneTen in investing in the company. We are investing in a very limited inside round ahead of the imminent Series A in the fall.

Sensate: Turning the tide on the global anxiety tsunami.

The Story

“Almost everything will work again if you unplug it for a few minutes, including you.” [[Anne Lamott]]

Since suffering a debilitating bout of depression after the IPO of my first company (TED talk here), I have been on a decade long journey to find solutions that actually work. I started with therapy (fail), Prozac (fail), and spent tens of thousands on every product or service that claimed to work. Most masked symptoms but didn’t address the root causes. As I dug into the literature, a common theme emerged. Those with depression, stress, and anxiety tend to be in a high state of alert, sometimes called “Fight or Flight”. When your Autonomic nervous system (ANS) is in fight or flight, everything seems like a life or death situation. The proprietary combination of specific sounds and vibrations in the Sensate device reliably relaxes the Vagus Nerve, the main nerve in the ANS which becomes overstimulated during fight or flight. Sensate “unplugs” the Vagus nerve in a 10-minute session. No conscious effort is required by the user, there is nothing “to do”. Sensate “just works.” This reset, like the reset of a computer, allows your nervous system to come back online and handle more. After 7 years of therapy trying to figure out why I was in fight or flight, in 10 minutes of Sensate, I was out of it.

I met Anna Gundmundson, CEO of Sensate, two years ago when she was going through the ExpertDojo accelerator. At the time I had tried over two dozen products that claimed to “get you out of fight or flight.” Of course, being a nerd, I had a quantitative way to measure this, increase in Heart Rate Variability (HRV). A 10-minute session with Sensate gave me the best improvement in HRV of any product I had tried so far. The business model at the time was focused on selling individual devices and they had just completed a very successful Indigogo campaign. Concerned about long-term margins in a device-only business, I passed at the time while introducing them to UnLock Venture Partners where I am an LP and frequently co-invest. The partners at UnLock dug in, were impressed by the customer response, technology, and saw a path to a higher margin subscription business so they led the Seed round in 2020 (so I am a Sensate investor through Unlock). Sales took off during the pandemic as people sought new ways to combat stress and anxiety. The company ran out of inventory and had to rework the supply chain to meet demand.

About six months ago I gave one to my wife and two daughters (10 and 5). “Life-changing,” my wife says for herself and our children. Everyone is noticeably less stressed. We have since purchased over 20 for friends and family and referred many more. When UnLock partner [[Sanjay Reddy]] called last month saying they wanted me to join a very limited inside round, I called Anna immediately. She walked me through the impressive 2020 progress and the plan for 2021 which includes the addition of a premium software subscription in Q3 (YEA for higher lifetime value!). Sensate is currently a UK company and Anna is from Sweden, but has moved to Los Angeles to focus on US expansion and the company will transfer to a US company in Q3. Given the reduced product/market risk and the upside of the subscription model, I decided the time is right to invest in Sensate.

Why I am Investing

At Incisive Ventures, we focus on categories where we believe we have some kind of information or insight advantage. Stress and anxiety reduction is something I have been looking into for over a decade. Sensate is one of the few products to have bubbled to the top of the list. I have seen the product’s impact in my own life as well as the impressive market validation and investor validation from other smart investors. My network of health and wellness contacts built as CEO of Upgrade Labs is a perfect compliment for Sensate. I have already connected them to Dave Asprey (father of Biohacking, founder of Bulletproof), who is a big fan of the product and has driven substantial sales their way. Given my personal experience with the product, long-term relationship with CEO and investors, the traction in 2020, and the improved business model in 2021, I am excited to support Sensate.

Trends I am betting on

Self Care eats Healthcare. If you are healthy you don’t need healthcare. The healthcare system was built and all the incentives are designed to fix people when they break, not to keep them in good working order so they break less often or less severely. Traditionally self-care (fitness, nutrition, wellness, etc.) has taken a shrinking share of wallet to spend while healthcare share has exploded. Awareness of the ROI to self-care spending was growing before the pandemic and accelerated by orders of magnitude as people’s access to healthcare was cut off and they searched for ways to stay healthier during it. The trend of wallet spend shifting from healthcare to self-care was pulled forward. The pandemic brought new stress into our lives. And it also opened up space to reassess priorities and try new things. Especially anything you could do at home without a special facility or professional service provider. We were mostly cut off from “the professionals” so people had to figure out what they could do themselves and for many, this was very empowering. Spending on all sorts of self-care from home gyms to meditation apps to devices like Sensate exploded. I believe this sense of personal empowerment and the wallet share dedicated to self-care will continue to grow over time.

“Just works” wins. Most approaches to Mental Health generally and stress reduction specifically are very “active.” They require people to “do something.” Go to counseling, build new habits, breath a certain way, sit on a cushion for hours, exercise, etc. All of these approaches have very low success rates because they depend on willpower, time, and “doing it right.” While drugs are “passive” they come with many well-documented side effects including “zombie mode.” The body’s nervous system that produces the stress response has an on/off switch. What if you could just turn it “off”? Allow the body to unplug and reset to handle more stress later? That is what the Sensate does. Products that “just work” will be preferred to those that can fail from “user error.” With products like Sensate we are finally providing solutions around Mental Health that “just work” without the side effects of drugs, I am betting customers will prefer this category of solutions.

Why this deal is Incisive

Sensate ranks very highly in key areas of our Meta Themes.

Disruptive innovation. There is a huge unmet need for stress and anxiety management. Current products have a spotty record working for some people and not for others. Sometimes the innovation is that a product “just works”. Sensate has patented a combination of vibration and sound frequencies that are science-based but “just work” as far as the user is concerned. The high use rates for Sensate and massive customer referrals are unlike any other product in the category as far as I can tell.

Americans are lazy. One of my friends called Sensate “Lazy man’s meditation.” Anything which requires practice, or belief, or multiple sessions has friction between the customer and the desired outcome. The fact that Sensate “just works” without any physical or mental effort on my part removes all the friction between me and the outcome (calm). Sensate allows me to get what I want and be lazy at the same time.

Invest when I can be helpful. I have already been very helpful to the company introducing them to investors and influencers because of my personal experience with the product. I have seen the value of the product in my personal life and my family. We have the opportunity to invest in this round only because the current investors and CEO understand the value my network brings and have invited Incisive Ventures into this very limited opportunity.

Invest with other smart people. Unlock Venture Partners is currently my best performing Venture fund (out of 12). They have an impressive track record of investing early in game changing companies and adding value growing the businesses. Sanjay and I have worked closely with Anna to design the premium subscription product which will significantly improve margins in the business. I am also excited to continue to invest alongside ExpertDojo and TenOneTen.

Investing in BizzTM

I have looking for a way to invest in social commerce for a couple of years. A friend was an early investor in Mesho which recently became a Unicorn. He told me one of Meesho category leads had identified a huge underserved market with a superior business model and had started a company. BizzTM is that company. BizzTM is how I am betting this wave of social community commerce.

BizzTM: Community Buying platform for home and personal needs

The Story

My wife grew up on a farm. Neighbors would get together once a year and buy a cow from the local rancher, splitting it between them. Group buying has been around for a very long time. In the 80’s Sams Club and Costco brought group buying to scale through large retail stores. About a decade ago, Groupon and others extended group-buying with technology to primarily retail services and experiences (restaurant and hospitality). I was the founder and CEO of a white label group-buying technology platform during this time called Tippr. While e-commerce and social media have become ubiquitous they are still largely focused on individuals making discrete purchases through expensive physical distribution networks. Social is becoming the driver across commerce categories.

While the Groupon wave cohort has mostly stalled in services, I have continued to search for the right physical goods group-buying model that can scale. What I have been waiting for is someone who has mashed up the power of social with local, more efficient distribution and the leverage of group buying for physical goods, preferably frequent use repeat purchase items. Oh, you don’t daydream about perfecting business models for decades? Welcome to my world.

A couple of months ago, I read about Meituan and Pinduoduo transforming remote Chinese towns with community buying and sent the article to Hershel Mehta who runs 2AM ventures in India (where I am an LP) with the note: “Is anyone doing this better in India?”. His response “We have a few deals in the social commerce space, stay tuned :)”. A couple of weeks ago he emailed me, “I think we have a winner, BizzTM, we are trying to lead the round, it is very competitive.” Last week he called me with “We have a signed term sheet and given your experience in the area, we want you in.”

The founding team was part of the Groupon wave (Snapdeal – India Groupon) and saw firsthand the limitations around physical products. They were also part of the recent social commerce wave (Meesho – apparel) and saw the limitations in that model for additional product categories. The team identified a number of key features for the platform that would crack this problem at scale including:

  • Convenience. Most home and personal needs items are purchased from the 15M small shops around every corner across India. BizzTM had to be more convenient (or improve service for the local store) than a 10-minute walk to the store.
  • Sufficient Local leader economics. To harness the power of locals to organize their neighbors into groups, there had to be sufficient economics to reward their work either part or full time. Their operational cost had to be mostly variable to compete with the fixed costs of the shops. Or the leaders need to extend an existing customer base they already have on a fully variable cost basis (for example existing local store owners)
  • Better prices. Prices had to be the same or better than the local shops and e-commerce. This can only be done by shortening the logistics chain to the end consumer substantially.
  • Wide Assortment. Local shops have shelf space limitations. There is a sweet spot between a local shop and Amazon where the assortment is very wide, but the cost to carry the assortment does not overburden the distribution system or lead to expensive delivery options. Local shops that can better serve customers with a wider assortment on a variable cost basis could be big advocates.
  • Technology leverage. Be an app on a device consumers and leaders already have. In India that will be WhatsApp first. Mobile native. The platform must also provide all the back-end for logistics, messaging, accounting, and compliance for the local leaders to make group management a breeze. Group-specific features need to be built versus e-commerce 1:1 design.
  • Not MLM. Scalable, mass-market community buying cannot smell like Multi-Level Marketing. There is too much blood in the water in that category.
  • Local is different that “social commerce”. Social commerce today is primariarilly a “reseller” model where a company (for example Meesho in India) handles sourcing and distribution of products by recruiting individuals as resellers. Resellers use social media, email, etc. to market products to their audience at a mark up. The sponsor company provides a back end and handles individual shipments similar to a traditional ecommerce platform. What is new with social commerce is that “influencers” get a margin when they resell the product. But fulfillment and distribution still consumes approximately 18-22% of the average cart and deliveries are to discrete individuals. This model works best for branded or high margin products. It does not work well when “value” is the primary purchase metric.

In India 85-95% of wallet spend is local. In India 92% of shopping time is spent in research and price comparison (including online). Especially in rural or second-tier markets, “Value” is the primary purchase metric. To deliver value products at scale you must solve fundamentally shorten and reduce overhead in the supply chain in some material way.

BizzTM’s model fundamentally shortens the supply chain and reduces capital costs within the supply chain. BizzTM aggregates community demand for a curated list of products (more than local shop, less than Amazon) from local leaders collecting money for purchases upfront. One community leader serves 2-500 local families within a 300M radius of their home. BizzTM aggregates all demand across their network and orders products direct from the manufacturer for bulk shipment to their central warehouse. Many of the value-based product manufacturers are locked out of current distribution due to the thin margins available to the current multi-tier supply chain. Products are batch shipped to local leaders consolidating individual shipping into a community shipment. The local leader handles distribution to end consumers (typical pick-up from their location). Other than their time, the local leader requires no capital investment to participate in this model. This leads to an individual shipping cost of 2-4% of cart size instead of 18-22% in e-commerce or the reselling model. This two-tier distribution (BizzTM – Local leader) supply chain compares to a 4-6 tier traditional supply chain in India. It is also much more flexible, responsive, and capital efficient. BizzTM collects customer money upfront and typically has payment terms from manufacturers resulting in a very positive cash flow model. BizzTM spends money recruiting local leaders who already have customer relationships so the end customer CAC is very low as well.

The BizzTM team built an MVP of their product during their time at the Lightspeed Extreme Entrepreneurs accellerator. The attracted leading India seed investor Axilor. They have onboarded over 1,000 local leaders (70% owners of local shops) (Bizz Owners) who manage thousands of consumers in groups, and are processing tens of thousands of orders per month. 2AM Ventures is leading the pre-seed round and I am excited to partner with them to build BizzTM.

Why I am Investing

The problem BizzTM is solving is a problem I have been thinking about for a long time. The team has deep subject area expertise and has thought deeply about how to build a better mousetrap. The initial traction is impressive and there is a clear path with this round to a 5-10x increase in all key metrics. They are enabling mass entrepreneurship across India through BizzTM Ownership. I am excited to partner again with 2AM Ventures who know the Indian market and founders well. I believe BizzTM will be a leader in a new community buying wave for physical products.

Trends I am betting on

Value and Efficiency win the mass market. While brands may get the headlines, the largest part of monthly wallet spend tends to be value driven. This is especially true in developing markets like India with significant rural populations. It is also true for categories with frequent use like personal care and home items. Walmart built a very big company by obsession over consumer price. Amazon upped the game with a very efficient highly scaled distribution system and massive selection. To continue to deliver consumer value, fundamental changes must be made in the supply chain, specifically much shorter chains, much more capital efficient. By leveraging existing local leaders with customer relationships and shipping in bulk, BizzTM has the opportunity to deliver on this value and efficiency.

Trust matters. While trust in fully digital ecommerce has improved over the years, it can only go so far. The company that can deliver prices in line with the best prices in ecommerce and big box retailers with the additional service and trust of a small retailer or neighbor will not only be able to halt the march of ecommerce giants, they may be able to turn the tide. I am betting that we are coming to a time where local trusted sellers can be enabled by technology so they can compete at scale. I am betting that trust will matter when price is comparable.

Why this deal is Incisive

BizzTM ranks very highly in key areas of our Meta Themes.

Software Eats Everything. Getting a price advantage in group buying requires aggregating demand and reducing distribution costs. Software is particularly good at aggregating demand, especially when that software is on a person all day (WhatsApp, mobile apps, etc.). Traditional physical product distribution efficiencies were gained through heavy asset investments in retail (Costco) and/or distribution (Amazon). BizzTM has the opportunity to deliver exceptional consumer value in a VERY asset-light model for their Bizz Owners. The most asset-light model yet. Software has the opportunity to eat physical goods distribution.

Great Founders figure shit out. The founders have been dreaming about solving this problem for over a decade (like me) and learned the ropes in some of the leaders in adjacent categories. Having multiple early start up experiences, they know it isn’t going to be a straight line and are agile enough to respond to the challenges as they come. I love backing second and third time successful founder like this team.

Disruptive innovation creates new markets. Disruptive innovation delivers unexpected value to unexpecting consumers. Who knew they need their own personal driver until Uber came along and offered one for cheaper than a taxi ride? Early surveys of BizzTM group consumers reveal they are discovering unexpected value. They may have not been looking for an alternative to local shops or ecommerce, but when they started getting higher quality products cheaper and with more variety very conveniently from a local leader (many times their trusted local shop owner) they trusted, they have become very loyal. BizzTM has created a new market for consumers as well as for BizzOwners with their asset-light model.

Platforms Win. Buying a cow from the rancher neighbor doesn’t require a platform. It also doesn’t scale. And you can’t buy anything other than a cow. By building a purpose-built community buying platform to serve consumers, leaders, and manufacturers, the value of the platform increases as more of each are connected. There are network effects and scale effects. The platform can also expand from its initial beachhead of home and personal needs over time. A platform designed specifically for local community buying will win over a 1:1 designed platform.

Invest when I can be helpful. I have been thinking about this space for over a decade. Even had an early company in the space. We have been invited into this round by the lead due to that experience and network. This is one I hope to spend an outsized amount of time on.

Invest with other smart people. Investing across boarders is hard. Having some of the smartest people on the ground, 2AM ventures makes all the difference.

Investing in Goodable.TV

Goodable.TV: Where good things happen. AKA Headspace for News.

Goodable.TV is a pre-seed technology company building an AI-powered application to deliver positive and inspiring news stories. The News Sucks. 90% of the news is driven by fear and negativity and > 40% of people currently suffer from anxiety and depression. While many wring their hands, Goodable is bringing technology and business model innovation which promises to deliver good news at scale. Goodable is not a media company, it is a technology company bringing advanced technology to the media market. Early beta traction is impressive (85,000 Fans) with very low CAC demonstrating strong consumer interest. This funding round builds infrastructure for public launch and securing distribution partnerships. We are investing alongside OnDeck and C-level angels from Reuters, LionsGate, Nextdoor, etc.

The Story

The human brain is wired to pay greater attention to negative signals. The news business knows this and exploits our fight or flight response to support their attention-based model. Reading the news you would not know that the data shows the world is getting much, much, much better. Like many, I have turned off the general news and rely on carefully curated feeds on specific topics. A couple of years ago my family and I started a gratitude practice at dinnertime. Everyone goes around the table and says what they are grateful for that day. Our own attempt to combat negative news and an endless, incomplete to-do list. It has changed the character of our days completely. It is amazing how 5 minutes of focus on the good can break the fight or flight response. Much more effective than another cat video. Occasionally I share some good news during gratitude (like the graphs above). It occurred to me that good news prompts could be helpful to many people battling the negative news-driven stress onslaught.

On Deck is a modern learning platform with aspirations to be “The Stanford of the Internet.” Earlier this year I was part of their Writing Fellowship (is it working?). I met Mohammad (Goodable CEO) who was in OnDeck’s flagship program for start-up founders during that fellowship. As he shared his vision, it struck a chord with me. Having seen a couple of efforts in this area before, my primary concern was how are they going to scale and make money with a business model that was exactly OPPOSITE of the entire current industry. Paul Graham recent wrote “Crazy New Ideas” in which he warns against dismissing implausible-sounding ideas from reasonable domain experts. I have also written about the power of a Counterintuitive thesis on investment returns. When you make a bet that most people think is crazy, and you are right, the rewards are outsized on the upside. I have found the trick to betting a counterintuitive thesis correctly is to find a credible team paired with some kind of unique insight and/or innovation that enables fundamental disruption.

Goodable has unique insight and is innovating in two areas that I believe will enable them to fundamentally disrupt a significant portion of news and attract customers at scale.

Technology innovation. There is good news out there, the problem is finding it and delivering it to the right people at the right time. Goodable deploys advanced AI with sentiment models to identify good news from hundreds of sources. Advanced categorization and tagging algorithms enable them to deliver targeted good news across geographies and interest areas to various customer segments across multiple devices. They have cracked the code for creating a structured good news database at scale.

Business Model innovation. While pre-revenue today, Goodable threw out the attention driven ad model and intends to monetize through:

  • Subscriptions. Community, enterprise, healthcare (to treat depression), and personal at an average of $5 per month per subscriber.
  • In-Platform transactions. Product purchases, donations and other calls to action to support good things in the news. Average 8% transaction fee.
  • Partnerships. Brands, OTT carriage partners and others will pay for good news feeds. Estimated at $1M+ per partnership.
  • No Reporters. Previous good news efforts have invested heavilly in original content prior to getting revenue scale and have typically run out of runway. Goodable’s tech based approach changes the business model in a very positive way.

The product is pre-MVP with a strong email list and following already from PR and the private beta. This is the first round of capital for the company and is oversubscribed. We have the opportunity through my OnDeck relationship and my personal passion for the category. I personally look forward to adding the good news feed to my information diet. Goodable’s technology and business model innovation could crack this nut which many are looking to consume.

Why I am Investing

I have personally experienced the value of adding a focus on good news. Mohammad has identified technology and business model innovations that have a good chance of disrupting the news model at scale. The technology innovation should allow Goodable to scale in a way prior efforts in this area have not. This is a solution that almost everyone I talk to wants and is not able to find. OnDeck sees a lot of company ideas through their Founder fellowship and only invests in a very select few. The validation from C-level angel investors in the business is another major vote of confidence. I am excited to be a very early supporter of this one.

Why this deal is Incisive

Goodable.TV ranks very highly in key areas of our Meta Themes.

Disruptive innovation creates new markets. The news business model is broken and is unlikely to be disrupted from the inside. Muhammad initially took his idea to CNN and they turned it down. Using AI sentiment and a new business model to deliver good news is just the kind of innovation that might work. What is the market size for good news today? What was the market size of ride sharing before Uber? What was the market size for digital contract signatures before Docusign (one of my early investments)? The innovation will create the opportunity for people to consumer good news at scale, a whole new market segment.

Americans are lazy. Today I have very little control over my news feed other than opting for various editorial filters (which have their own slants built-in). What if there were a “sentiment dial” on every feed that I could adjust to improve my mood during times of stress? That enables me to be lazy. Goodable is building the infrastructure for that.

Great founders figure it out. Goodable management has over 40 years combined journalism experience. They have first hand experience of being pushed toward fear based news as both a producer and consumer. Muhammad has spent over a decade trying to crack the good news problem. Recently with the maturation of AI sentiment technology and growth of paid news subscriptions, it is possible for Goodable to deliver on that vision. Given his platform and vision, the company has delivered a level of customer interest I rarely see at this stage of product development. Management is definitely figuring it out.

Software Eats Everything. Most news even online is basically broadcast pushed. Personalization algorithms are tuned for more attention not sentiment today. Goodable would not have been possible 5 years ago, the sentiment software was not good enough and no one was paying for news. Software advances in AI and content subscriptions and transaction software enable Goodable to deliver their product today. Sentiment software will enable further eating of the old broadcast and echo-chamber news models.

Invest when I can be helpful. Goodable is a product I want for myself and my family. I have a reasonable network with content sites and large news aggregators. I will spend an above average amount of time with this investment.

Invest with other smart people. Investing in an OnDeck graduate could be 10 years from now like investing in a Stanford graduate today. Their OnDeck fund is very selective in investments and their endorsement speaks volumes. When C-level executives from the companies soon to be disrupted (Reuters, etc.) invest, those are the smart people I want to be investing with.

Trends I am betting on

Personal Wellness/self-care. What good is meditating if you immediately get triggered from your Facebook feed? The pandemic has refocused most of us on the importance of wellness and self-care. I am betting this attention will extend to mental wellness and include some tactics for improving our information diet. Those who want to change their information diet today don’t have many choices. Like supermarkets in the 70s packed with processed foods. It was hard to find anything organic if you wanted to – it was not a choice available at scale.

Efficiency wins.. The need and desire for more good news have been around and recognized for a very long time. The problem has been the business model to deliver it at scale. Bad news simply sells better, especially in an ad-supported environment. Today’s AI technology enables good news to be found and delivered an order of magnitude cheaper than any time in history. There are additional ways to monetize attention today as well (subscriptions, transactions, sponsorships, etc.). If there is an efficient way to deliver something lots of people want, the value will be created.

Investing in Unlu

Why we Invested in Unlu

Unlu: Celebrity driven full stack learning and engagement platform.

Unlu is the leading celebrity-driven learning platform in India for the creator economy. By combining celebrity-created classes, community engagement, live events, and career opportunities, Unlu is delivering a full-stack solution to aspiring creators. The celebrity leverage has enabled amazing traction with very low CAC. They have a backlog of celebrities to onboard and we participated in the very limited Seed+ extension to accelerate traction.

The Story + Product Thesis

I have been poking around online learning startups for over a decade, way before it was fashionable as part of the “remote everything” trend. Early efforts were not much more than videos of classroom lectures. While some knowledge was transferred, there was very little LEARNING going on. Even today, video-based platforms like MasterClass and even Teachable (slightly more engaging) suffer from embarrassingly low completion rates. When it comes to Skills, learning from someone who has demonstrable credibility with the skill in a community of learners becomes extra important. I recently participated in a Writing Fellowship through BeOnDeck where they use a combination of proven industry experts, fundamental skills training, cohort-based communities, and ongoing community engagement. The experience was transformational and not only did I complete the full course, I learned more than in any course and have relationships that will likely continue (just like college). While I passed on BeOnDeck’s recent Series A for valuation and stage reasons, I kept looking for an earlier stage company that is taking a similar transformative approach to online learning that actually leads to learning.

I have been involved with the ExpertDojo accelerator in LA for over a year and funded both YuvaPay and Suavei with them. On a recent surf trip to Los Angeles I asked Brian (the CEO) “If you had to pick one company in your portfolio (currently over 100 companies) to break out 10X in the next six months, which would it be?” “Unlu, since you already invested in Suavei and Yuva.” Brian said. I called the CEO that afternoon.

CEO Vipul Agarwal went to the best business school in Europe, INSEAD after receiving math and statistics degrees. After two successful start-ups in India, he started thinking about what India could be like if everyone had the opportunity to learn from the best of the best in the world with a community around them like he did at INSEAD. Having taken classes on MasterClass and Teachable he had experienced firsthand the low completion rates. He also noticed a striking lack of skills training for the emerging creator economy. Unlu was born.

His first courses came from his personal relationships with leading actors, singers, and writers. He realized very early that to raise completion rates, the platform had to have multiple engagement points. That led Unlu to have a class platform, a vibrant community platform, live events, as well as placement opportunities for students to monetize their newly learned skills. This full-stack approach has led to an enviable 80% class completion rate (vs < 40% on MasterClass) and students buying multiple classes as well as adding on live events and other services. Unlu has also innovated class production (three-camera shoots) and cost ($20K) which allows them to pay back their investment in a new class in under 2 months. Customer acquisition is growing like crazy in part due to the celebrity leverage the instructors bring. Unlu has also found paid advertising channels that return 2.2 dollars for every dollar spent so they can scale efficiently with paid acquisition when they need to.

In February the company raised a Seed round and has seen a crush in demand in Feb and March leading them to need to expand the team more aggressively than originally planned. They have a backlog of celebrities and courses to create. This led to the opportunity to invest in a very limited Seed+ round with select investors led by Expert Dojo and Nexus.

Why I am Investing

I have personally experienced the value of learning from the best in the world as part of a community that stays connected over time. I want that for all learners. Stanford doesn’t scale. Unlu has identified the creator niche and has solved the major scaling problems to deliver learning for the creator economy. Their efficient class production costs paired with the celebrity reach and an engaged community has solved the completion problem systemic in most prior platforms. While laser-focused on creators in India today, I do believe there are global expansion and category expansion opportunities to solve the completion problem at scale across geographies and verticals.

Why this deal is Incisive

Unlu ranks very highly in key areas of our Meta Themes.

Disruptive innovation creates new opportunity. The high failure rate with existing learning platforms is an opportunity for innovation. Solving the completion problem with an engaged community, celebrities, live events and work opportunities in one platform will unlock pent up demand in the market from learners who have failed to make progress. I believe Unlu will continue to innovate on the cost and engagement side to scale their solution into new geographies and content verticals over time.

Platforms Win. Platforms increase in value over time and with scale of members. Unlu has already grown this way. People learn in different ways, through different experiences. MasterClass is recorded celebrity classes without a community, no live events nor any work opportunities. By combining the various ways people like to learn into a single platform, Unlu has largely solved the completion problem and is moving toward true value creation for their learners. When people get more value out than they spend, the buy again. Customers are rebuying now at a 1.8x rate and management is focused on getting this up over time. As learners stay engaged with the platform over time, there will be new monetization opportunities. Learn to sing, then learn to podcast, then learn something else. In learning, I see platforms winning.

Great founders figure it out. Management is mission-driven to deliver a very valuable product at scale. They started focusing on the celebrity monetization side of things then realized their customers were really the learner. They pivoted their focus to delivering value to the learner and solved the completion problem while maintaining the value to the celebrities. Management has been involved in operations and investment in multiple startups and they have shown they understand how to deliver customer value at scale.

Software Eats Everything. Software eats an industry when you can reduce costs and increase access by an order of magnitude both ways. Unlu is delivering that for the creator economy in India. A kid in a rural village can take a whole singing course from the top pop star, participate in a learning community and get work opportunities for less than the cost of one live event ticket for that pop star.

Invest with other smart people. When investing far afield it is important to have partners on the ground who have deep experience with the market and the management. ExpertDojo has spent months with Unlu management during their accelerator program. Nexus is a leading investor in India and has multiple successful companies in related industries. These partners know the landscape well. I am excited to partner with them.

Trends I am betting on

Lifelong learning. Back in the “normal times” many of us felt too busy with work or life to learn anything new. With all the “pandemic time” we had on our hands, many started checking of the “learn that someday” list. Many also realized that their old jobs may not be there and were faced with learning new skills in short order when schools were closed. Thankfully on-line learning platforms were there for many of us. Consumer demand for life long learning was pulled forward 5-10 years during the pandemic. I am betting this is a trend that holds over the long term. Especially as online learning platforms become more robust and cheaper. Unlu is on the frontier of this trend.

Learn from the smartest people. It is always best to learn from the best anything you want to learn. Traditionally general availability to experts has been gated by access (time, scheduling, reach) and cost barriers. There has been a wide gap between the value of (and access to) an expert’s time and the cost someone is willing to pay for that as well as a lack of structured learning versus “broadcast” of a subset of ideas. The best online learning platforms will shrink this gap and enable anyone to learn from the best at a reasonable deal for both of them. As more experts embrace the lower (consumer) cost platforms and access increases, the flywheel will spin faster. I am betting the demand to learn from the best only accelerates as the best make themselves more accessible.

Minimalist CEO update for investors

In my startup investment portfolio, I have found a strong positive correlation between CEOS that regularly communicate with investors and company performance. As a CEO myself when I felt “too busy” to provide regular updates it was usually a sign of avoidance and focusing on the wrong things. The #1 job of an early-stage startup is to NOT RUN OUT OF MONEY. Here is a quick template that I recommend for early-stage portfolio CEOS (up to Series A) and should take less than an hour to create.

There are five sections, all focused on NOT RUNNING OUT OF MONEY. Given a starting amount of money (investment round), there are only three levers to pull that affects the cash-out date: Revenue, fundraising, and expenses. CEOs should focus on telling investors which of these levers are being pulled, how it is going and how they expect the lever pulling to change in the near term.

  • KPIs
  • Product/Market Fit
  • Traction over time
  • Lowlights
  • Outlook/Asks

KPIs

Cash = Time for a start-up. Every company has a cash balance and growth objectives. Cash is spent to grow. Monthly KPIs tell you how you are doing toward those objectives and how much time (cash) you have left. Primary KPIs directly measure time and secondary KPIs are early indicators that should translate to cash and growth.

Update on all relevant KPIs for business as relevant along with MTM % change.

Primary KPIs

  • Cash balance
  • Monthly Burn
  • Total Revenue
  • revenue by segment if important (product vs subscription)
  • Gross Margin

Secondary KPIs

  • NPS
  • Customers
  • Traffic
  • Social followers
  • Search rank, keyword rank

Product/market fit

Every company starts off with a thesis around a product that can reach a big market. Once customers are engaged, the company responds to customer feedback and invests in product features that customers say they want. Tracking this iterative process is what this section is about.

  • product development updates
  • customer adoption/engagement trends
  • competitive landscape update

Traction over time:

Very few things are always growing up and to the right. By showing monthly graphs over time for key traction metrics, the company can communicate bumps in the road. There are always bumps in the road. The important thing is how do you respond to the bumps? By communicating the bumps to investors, management can get a wider view of them and potentially some additional action options they may not have considered.

  • MTM cohort data for relevant traction metrics.
    • Include Revenue, customer usage, web traffic, transactions, waitlist growth, etc.
  • Partnerships and impact
  • Software, operations, other department traction.

Lowlights:

Many CEOs are hesitant to say anything negative to investors. As an investor, this may be the most important section. It tells me management is self-aware and not problem-avoidant. It opens opportunities for me to help where I can.

  • What is not going well? What are you going to do about it?

Outlook/asks:

This is another opportunity for the CEO to engage investors. At Incisive Ventures, I have the rule to take at least one action to support company goals immediately after receiving each monthly report. Sometimes that is a hire reference, or a business development connection, often it is an additional investor connection. When I know what is coming up, there is always something I can do.

  • CEO commentary on traction, areas for improvement, major upcoming milestones or goals.
  • Asks from investors including hiring, business development, finance leads, etc.

PRO TIP: Try a tool like VSBL.IO to make your updates easier.

Investing in OtherSide.AI

Investment Thesis

It seems like everyone wants to “invest in AI” these days. Nearly every pitch deck I see these days have “AI” in the deck somewhere. “AI” has been the “next big thing” for decades and in the last couple of years has jumped the shark in investor interest. To develop an investment thesis in a complex new technology area like this, my first step is to separate the “picks and shovel” (infrastructure/core technology) companies from the “prospectors” (those using the tools to deliver value).

Prospectors can’t create meaningful value before the infrastructure has reached a critical mass. AI investing has “jumped the shark” because certain infrastructure components have reached critical mass. In AI there are many different kinds of picks and shovels for different jobs with each of these categories on its own development track toward “good enough.” The trick to investing in prospectors is to wait until the specific picks and shovels are “good enough” and then bet on an aggressive team with unique insight into a particular customer problem area where huge value can be created. Last summer with the release of GPT3, it looked like natural language processing picks and shovels had reached “good enough” so we went looking for prospectors.

A great prospector will be smart, tenacious, and have some unique insight on “where to look” for the jewels. The founders of OtherSide.AI are all this and more. They are “looking” for GPT3 applications that will improve daily writing tasks we all have to do like email, blog posts, and more (areas where I personally want solutions). As a pre-seed investor, one has to be willing to make meta bets which allow for pivoting over time into a product that at the time of the investment is as yet not fully formed. The meta bets we are making with OtherSide.AI include:

  • The picks and shovels (GPT3, internet connections, etc.) are “good enough”
  • The team is smart, tenacious, and is looking in the right place.

The Story

Matt Shumer, like many of us, hates email. “I hate email so very much,” he told me on our first call. “I came across GPT2 and immediately I was obsessed with it. I started using it and didn’t sleep for like three days. I built a summarization tool, action tools, writing tools, so much stuff. Because it was fun as hell. I hacked together a bunch of stuff over the next months, but it was not very elegant. Then this July (2020) we got access to GPT3 and ended up building a demo that was, I mean, miles better than what we spent months building previously. Like it wasn’t even a comparison. I posted the email writing demo on Twitter. Chris Sacca loved it and started tweeting about it. All hell broke loose.”

Matt and a handful of early users started using the email tool in late 2020. He estimated it saved him 50-70% of the time in email. The VCs started calling and the company raised a round very quickly in late 2020. Turns out lots of people hate email and Matt’s hacker approach struck a cord. In addition to email productivity, the company has developed HyperWrite.ai to help people writing fiction, blog posts, and more. The company has other GPT3 enabled applications under development as they “prospect” for the best product/market fit. In the early days of prospecting the trick is to stake multiple claims and then mine those that have the best yields.

Why I am Investing

I have been investing in and looking for email and writing improvements for a long time. Back when Spam was the #1 email problem, I was an investor and on the board of Cloudmark, which started in email and moved on to all message platforms quite successfully reducing the signal to noise ratio in messaging. There has been quite a bit of innovation on the client-side to prioritize, categorize, and auto-respond to certain standard email types (Superhuman, Hiri, SaneBox, etc.). While filtering and tagging have reduced the flow, there has been precious little innovation around the time it takes to actually respond to the emails which are important. Many people (including myself) have turned to their assistants to filter the inbox more and respond to standard mails following pre-defined If/Then templates. All stuff that AI can do much more efficiently. I once read a science fiction book about an AI program that could read and reply to emails intelligently in my own personal style. I wanted that product. OtherSide AI has built it.

Other Side AI is earlier than I usually invest. The company was only a couple of months old when we invested and this is their first round of financing. The closed Alpha was released, and they are using that to nail down the most valuable use cases and the go-to-market strategy/pricing. There are three reasons I am investing earlier than usual:

1. Passionate Hacker Founder. Matt is an experienced founder solving very personal problem in a unique and innovative way. He and his co-founders are building something to make their own lives easier, and in the process going to help the rest of us.

2. Innovative solution to a huge problem. Despite all the filtering, there are still emails that must be responded to in a relevant and personal way. This is the first product that I have found which is actually delivering on that promise. It is me, just faster. If the product can deliver 50% improvement at scale, that is an extra 6 hours a week for the average email user. This type of “auto writing” functionality can and will extend to blogs, fiction, and other forms of writing over time.

3. Smart co-Investors. Many of the best investors are actively looking for innovations that create value in very specific markets with specific technologies (like I have been for writing improvements). They have opinions about where technology innovation needs to go and are looking for the best entrepreneurs to drive those companies. This is how I found Other Side AI, as did Madrona Venture Group, Active Capital, Hustle Fund, Chapter One.

Why this deal is Incisive

Other Side AI ranks very highly in key areas of our Meta Themes.

Software Eats. In this case, software eats itself (the email client). And the AI intelligence eats the manual time we spend on writing. OtherSide.AI is mining for applications that can “eat” 30-50% of the time we spend writing today across multiple use cases. This is a significant reduction in friction which gives people back a significant chunk of time to us all.

Smart founders figure it out. When the team is solving a very personal problem and working with passionate early adopters in a very smart way, I have seen great products come out. The explosive backlog while still in Alpha shows demand. In discussions with the team I have been very impressed at their decision process taking this feedback and putting it into the product road map. The hacker mentality enables them to go fast and pivot when needed.

Americans are lazy.. Americans love anything that makes life easier, lets them do less work. But in writing and email, efforts so far (like text expander, and autoresponders) have not been personalized and lack soul. OtherSide allows me to be lazy while preserving my personal style and not coming across as dismissive. This is the holy grail.

Trends I am betting on

AI “picks and shovels” for Natural Language Processing are “good enough.” Windows 1, 2 and 3 were pale barely useful operation systems. With Windows 3.1 things tipped and took off. It became “good enough.” GPT 1 and 2 were very academic and produced some comical results. GPT3 could be the tipping point and I am betting it is. I could be wrong, it could be GPT4, but that is the bet at this time.

Personalized efficiency wins. Everyone likes getting things done in less time, especially email and writing. We also know when receiving a form letter or reading something the writer “phoned in.” I would pay alot for a writing tool that would keep my style and soul while turning it out much faster. I am betting many people would.