Applied AI: Beyond The Algorithms

One of the primary areas of focus for Flybridge over the years has been to be the first institutional investor behind companies looking to transform the enterprise technology landscape with modern software.  Given the explosion in the volume of data being generated globally, this theme has led to investments in companies such as MongoDB (databases) and Nasuni (storage) that operate at the data infrastructure layer of the enterprise tech stack.

More recently, we have been investing in further advances in data management, analytics, machine learning, and artificial intelligence.  While the potential for artificial intelligence has been written about extensively, what is less well understood is that the algorithms and underlying tools are only a fraction of the value and are unlikely to be a source of long-term differentiation.  Fully realizing the power of AI requires a deep understanding of the domain and the specific workflows that AI will seek to improve and optimize. In other words, the application layer of AI ultimately drives the business value. And we believe the window of opportunity for the AI application layer is now.

This evolution from platform to applications is not an uncommon one: when a new technology platform is immature and not well understood, there is a lot of room for innovation at the underlying technology layer, but as the platforms mature the application layer is where value accrues.  For example, in the PC era, once Windows and its associated tools were well developed, apps accumulated a huge amount of value; and similarly in the early Internet era, once the browser, server, and app server infrastructure were well established, apps became super valuable.

This “Applied AI” investment thesis resulted in four new investments by Flybridge in 2018: Aiera, which is using AI to drive fundamental equity analysis; Kebotix, which is using AI to discover and create advanced chemicals and materials; LogoJoy, which is an AI-powered graphic design platform; and Proscia, an AI-powered digital pathology solution.  We also made follow-on investments in our existing, scaling, Applied AI portfolio companies Bitsight, Bowery Farming, Datalogue, and DataXu.  

Given the breadth of this emerging portfolio, we thought it would be helpful to expand on what we look for in Applied AI companies and some of the keys to success in building a company in this exciting field.  We believe that it is important to:

  1. Go Old School. Opportunities for Applied AI companies lie outside of the markets targeted by traditional web-scale companies.  As Andrew Ng recently observed, “a lot of the stories to be told next year [2019] will be in AI applications outside the software industry”.  Many of these markets, such as Real Estate, Finance, Healthcare, Oil & Gas, Agriculture, Manufacturing, and Logistics, have the advantages of being A) extremely large, B) where innovative AI driven approaches can drive massive levels of improvement versus the status quo, C) where potential customers may not be able to access AI talent on their own, such that build versus buy is less attractive, and D) not being an area of focus of the Googles and Baidus of the world where their massive troves of data can be a source of significant competitive advantage.  
  2. Combine Talents. The most successful teams in Applied AI will have a unique combination of an understanding of the domain and the technical capabilities to realize the vision.  Even more specifically, it is doubly helpful if one of the founders was formerly a practitioner in the field. For example, Dawson Whitfield, the founder of LogoJoy, was previously a top-notch graphic designer himself; Ken Sena, was a top-ranked equity analyst before founding Aiera, and Kebotix co-founder Professor Alan Aspuru-Guzik holds a Ph.D. in Chemistry and is a leader in the field of computational chemistry. In other words, AI experts will do better when teamed up with someone that comes from the field in which they are seeking to operate.
  3. Drive continued technical innovation.  Given how quickly the field is advancing, a deeply technical co-founder who is up to speed on, and willing to continually learn about the latest advances in AI, and see the application of new approaches to the problems their company is seeking to solve is essential.  Whether it is “few-shot” learning approaches, ensemble models, GANs, CNNs, transfer learning, explainability, and a myriad of other developing techniques, knowing and understanding the strengths, weaknesses, and applicability of different approaches is critical. We often see the domain expert mentioned in point 2) renting or borrowing their AI expertise in the form of advisors and part-time experts, but this approach is not good enough given the need to have a tight feedback loop between market-driven customer needs and the AI-driven technology insights and art of the possible.
  4. Create Data Network Effects. The most successful companies will have a clear understanding and angle on how to start and continue to spin the data network effects flywheel.  Generally, this requires having access to initial datasets that can begin the model building process, and a well thought out and focused strategy on how to increase the quantities of data available for analysis.  The initial data sets, which Proscia refers to as “inorganic data”, might be acquired, and are used to overcome the cold start problem of training a new model from scratch. In contrast, “organic data” that comes from the ongoing use of the platform can help hone and refine the algorithms over time.  Taken together, this means the cost of data should decline over time because organic data is typically free (or even negative if you can get users to pay you for the service delivered while the data is collected). In the pursuit of data, it is important to remember that the sheer volume is not always inherently better. Yes, size matters, but quality matters more.  The data should reflect the real-world variance and dimensionality of the problem space and a data strategy should incorporate input from domain experts to identify the logical gaps that exist and how to fill those gaps. Further, when assessing a technical team (per point 3), we believe it is important that they know how to build an AI infrastructure that can be monitored for changing performance and updated accordingly as the scale and scope of the datasets increase.  For example, when Aiera first started making buy-sell calls on stocks, they only did so on 16 companies based on a model that analyzed 10,000 documents a week from 300 data sources. Today, they cover nearly 2,000 securities with a model that analyzes 500,000 documents a week from 22,000 data sources. Perhaps not surprisingly, the accuracy, breadth, and duration of their buy-sell calls increased significantly over this time.
  5. Absorb The Algorithm. The specific algorithms and AI techniques themselves are not the sources of defensible value so the most successful AI companies will instantiate the models into a broader application that fits into customer’s broadly defined workflows.  We call this “Absorbable AI”, which means customers can incorporate the AI into their business and realize the benefits of the operational insights. Successful AI Applications need to not only explain why the model is generating certain results (and, importantly, explainability also helps understand and highlight bias such as gender-based or racial bias), but also integrate into the customer’s business in a logical and systematic way.  It’s also important to manage expectations along the way, as many Applied AI use cases falter based on overselling the potential and customers expecting too much when in reality improvements come incrementally over time. These application and process skills are often found coming from the more traditional application development space in fields such as UX, visualization, workflow/BPM, and integrations.
  6. Craft the Business Model. Thinking through the business model of a company is critically important.  Depending on the domain, the openness of customers to new approaches, their willingness to pay for innovation, and the scale of the level of AI being incorporated, the best way to realize the value of an Applied AI company could be by selling an application that makes human work more efficient and accurate–an end-to-end automation stack that replaces humans–or it could be by selling a complete product.  For example, our indoor farming portfolio company, Bowery, leverages a significant amount of AI to drive efficiency and quality in their operation, but they decided the best way to realize the value of that AI was to sell incredibly tasty, locally grown, pesticide-free green vegetables versus selling an AI-powered Farm Operating System to other growers. A similar example would be Tesla, where the vision is the sell a complete, AI-powered, autonomous vehicle, as opposed to say Cruise, which chose to realize the value in selling the application (and the company) to other automobile producers.  

Points 5 and 6 can be better visualized in the following matrix:

Slide1

With the continued explosion of data availability, advances in AI techniques, and the accessibility and performance of computing (GPU) cycles, we believe the trend of AI as the next great application enabler will continue for some time, and we look forward to finding more Applied AI companies with passionate domain experts and technical founders to invest behind in the coming year.

Thanks to my partner Jeff Bussgang, our advisor Harini Suresh, David West of Proscia, and Bryan Healey of Aiera for their input and insights in developing these thoughts.

Female founders: Digging into the 2018 investment numbers

This month, Crunchbase released 2018 funding stats for companies with female founders under the encouraging headline; “2018 Sets All-Time High For Investment Dollars Into Female-Founded Startups”.  While that statement is factually accurate — $38.9 billion was invested in companies with a female founder in 2018, up from $19.8 billion in 2017, which represents a 3 point increase in the percent of total dollars invested from 14% to 17% —  a deeper look is less encouraging.

If you remove the $14 billion Ant Financial financing, just one investment, the dollars decline to $25 billion and the percent of total dollars declines to 13%, which is down year over year. Similarly, by the total number of investments, there was a decline from 15% to 14%. The data from Pitchbook, by way of Fortune, tells a similar story of limited progress.   

These industry-wide stats are in contrast to the investment opportunities I saw in 2018:

  • 125 of the 260 companies I met in 2018 for a focused “new investment pitch”, were with a company with at least one female founder. That’s 48%. Not quite parity, but very close.
  • 100% of the 16 new investments made by XFactor Ventures in 2018 were in female-founded companies.  XFactor Ventures was created in July 2017 in conjunction with an amazing team of women who are currently leading successful venture-backed businesses. It is our collective goal to invest in early-stage female founders pursuing billion-dollar opportunities.  Of these 16 companies, 9 have all-female founding teams and in 13 of the 16 companies, the female founder is the CEO. If this data was included in the Crunchbase article linked above, XFactor would fall as the second most active venture investor in female-founded startups — below NEA but above Founders Fund, Social Capital, and Sequoia.Slide1.jpg
  • 40% of the new investments Flybridge has made in the last 18 months (since the launch of XFactor), have had a female founder — an increase of 13% from the preceding 18 months.

While the available data shows it was not the case for the industry as a whole, for me, it’s clear that 2018 was a strong year for female founders. For new investments, venture capital has always been a network, relationship, and focus business but since the launch of XFactor, we’ve noticed a shift — our networks have expanded, driving a significant increase in the volume and diversity of the investment opportunities we’ve seen. In 2019 we expect this momentum to continue and even pick up speed.  Also, stay tuned for more from XFactor as we are actively expanding the investment team and will announce a second, larger fund in the early coming months.

It Started with Eight

Along with our friends at Alpha Edison, Flybridge and XFactor are excited to have helped create the #StartWithEight initiative.  #StartWithEight is a simple commitment – take meetings with 8 women from outside your networks in the month of March – with an ambitious goal – to build parity across the venture ecosystem.  

On some dimensions the idea that meeting with eight women outside your network could change the diversity of the venture ecosystem seems crazy, but my personal story would suggest it’s not.  For me, Eight led to 25,000 which led back to Eight, which led to more than 60% and over 700, which has resulted to date in 17.

I #StartedWithEight in November of 2016 when I joined up with Anna Palmer, the Co-Founder and CEO of Fashion Project, and more recently, Wondermile, my partner Kate Castle and 6 other women to launch SuitUp, a grassroots organization focused on identifying concrete solutions to issues women confront in their communities.  We built a network of over 25,000 women and those conversations resulted in a 100 Day Plan for Women, but also brought into sharp relief for me just how screwed up the funding dynamics are in the venture ecosystem.  

So those 25,000 led to another Eight, when Anna, Kate and I, in partnership with the entire Flybridge team, took an idea from the 100 Day Plan for Women and created XFactor Ventures with an amazing team of eight other partners, all of whom are female founders of venture backed companies.  Notably – more than half of the XFactor team were not women “in our network” prior to starting XFactor.   

One of the questions I somewhat naively wondered about prior to launching XFactor was would we see enough investment opportunities, as prior to the launch female founders made up only 10% of my personal “opportunity flow”, a fact I typically rationalized to being a result of my primary investment focus on B2B software companies.  But as we noted in our #StartWithEight medium post, “Startup land is a network-driven place”, and changing your network can have powerful results.  

For me the powerful results of #StartingWithEight are an “opportunity flow” that has transformed from 90/10 male/female to more than 60% female, well over 700 new investment opportunities I would not likely have seen otherwise, and 17 new investments.  

For everyone joining #StartWithEight this month, thank you for your support and commitment.  It has been amazing to see our friends in the venture community sign onto this initiative including 8VC, Accomplice, Bain Capital Ventures, Cosimo Ventures, First Star Ventures, G20 Ventures, Material Impact, New England Venture Capital Association, Pillar, Rethink Education, Rethink Impact, TenOneTen, Tectonic Ventures, Canaan Partners, Fika Ventures, Foundry Group , Genuine VC, Glasswing Ventures, Brilliant Ventures and The Engine.  You never know where it will take you, but it will be someplace good, someplace more diverse, and through that diversity, more effective.  If you are interested in adding your firm or company’s voice as a committed signatory to #StartWithEight, contact us at signatory@startwitheight.com.

As for us, we are #NotStoppingWithEight and feel like we are just getting started.  So we welcome more suggestions for amazing founders, joiners, advisors, board members, investors and potential investment partners from your networks with whom we should meet.  

 

Reflections on MongoDB’s IPO

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A month ago our portfolio company MongoDB went public. The stock priced at $24.00 per share and closed the first day of trading at $32.07 per share. While an IPO is merely a financing event in the trajectory of a successful company and, in the words of the company’s super talented CEO, Dev Ittycheria, “NOT an end but rather a new beginning for MongoDB”, it’s still an important milestone and one worth celebrating and reflecting upon.

My association with MongoDB has been an absolute pleasure, having served on the board since Flybridge led a $3.4M financing in the company at a $12M post-money valuation ($0.66 per share) in October of 2009. In that month, MongoDB had 2,563 downloads for its nascent product. Today, it has had over 30 million. When we announced the investment, I wrote about what led to our decision to support the company: a phenomenal team, a large market with trends in the company’s favor, and a great product that customers loved. What strikes me upon re-reading that post 8 years later, is how simple, but true, that analysis was.

Since the beginning, under the leadership of co-founders Eliot Horowitz and Dwight Merriman, MongoDB has had one of the most talented, creative and driven technical teams I have had the pleasure of working with. Further, throughout the company-building process, the company benefited tremendously from the advice and guidance of Kevin Ryan, the company’s third co-founder and Chairman. Our market thesis was that the database market was large, growing (at the time, $30B in annual revenue; in 2016, $44.6B) and trending towards more special purpose solutions rather than the legacy, one-size fits all relational database model. This market insight has played out broadly. In addition to MongoDB, alternative datastores like Hadoop and its derivatives in the analytics market have thrived in the market. Finally, on the product front, MongoDB has continued to be loved by developers for it’s simplicity, flexibility, scalability and the fact it can run in any environment from the company’s database as a service offering, Atlas, to the cloud, on-premise or in hybrid environments.

What we did not write about publicly, but discussed in our internal analysis, were three additional observations:

  • MongoDB is a classic disruption story. When we were conducting diligence on the company, many of our friends and experts with deep expertise in the relational database market were quick to point out all the product’s shortcomings and the features it lacked. These objections failed to recognize that user’s desires to (1) develop software in a more agile, iterative manner; (2) deploy databases in horizontally scalable cloud architectures; and (3) utilize a product that was easy to access and allowed for immediate productivity gains all created benefits that more than compensated for the product’s supposed shortcomings at the time. Today, this “nice toy” of a database, as one of these experts called it, sees 30% of it’s new paying customers come from applications migrating off of relational databases (the other 70% comes from net new applications).
  • Developers are the new King of IT. When we first invested, it becoming apparent that the proliferation of software applications across all enterprises coupled with the rise of of the cloud, and more distributed architectures, was making the developer the new “King of IT”. This allowed, and continues to allow, MongoDB to go-to-market with a very developer-centric approach and then leverage this grassroots adoption into paying customers over time. I have written much about this developer adoption strategy in general, and as it applied to subsequent investments we made in companies such as Firebase, Stackdriver and Crashlytics (all successful investments and interestingly, all now owned by Google), but the approach of building a passionate user base prior to selling into a large enterprise has proven to be a successful one.
  • Land and Expand is a powerful business model. The flip side of a grassroots adoption first model is that when you do land a paying customer, you often land them for relatively small dollars. But, with a recurring revenue model and a product that delivers on its promises, over time these small customers renew and expand and this can build a large and growing recurring revenue base as shown in the chart below. In the case of MongoDB, this led to annual revenues that grew from $40.8M in FY 2015 (Jan) to $101.4M in FY 2017; in almost 300 customers that now spend in excess of $100K per year, up from 110 in early 2015; net ARR expansion rate of over 120% for each of the last ten quarters; and, annual cohorts that show, in the case of 2013 for example, 4.1x expansion over 4 years (i.e $5.3 million in FY13 grew to $22.1 million in FY17).

Of course getting the investment thesis right only matters if the company is able to execute. And the team at MongoDB has executed exceptionally well. Along the way, the founders were joined by Dev Ittycheria, who to no one’s surprise given his track record of success, has proven to be a remarkable, strategic, focused and results oriented, leader. He is also an exceptional recruiter and under his guidance the company has added well over 400 employees, including Michael Gordon, an extremely adept CFO (who after the IPO process is in need of a good night’s sleep), Carlos Delatorre, CRO who has built a world-class sales team, and Megan Eisenberg, CMO who has the unique talent in a marketing executive of being to drive both high level corporate marketing and a demand generation machine. Under Eliot’s leadership as CTO the company has also built a world-class, deeply technical, enterprise software team in New York City (which many thought was not possible, but it turns out to be a distinct advantage), including Cailin Nelson, SVP Cloud Engineering, Dan Passette, SVP Core Engineering, and Richard Kreuter, SVP Field Engineering. A hat tip to all of these executives, plus the 800+ other employees at MongoDB, on what they have built together.

Mongo celebration

It has been my distinct pleasure to work with such a talented team for the last 8 years. But, again, the IPO is just a financing. The company feels like it’s just getting started in its quest to disrupt this massive database market. I look forward to remaining on the company’s Board and continuing the journey for many years to come, building an important, anchor public technology company in New York City.

A Fortnight of Female Founders

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Last Wednesday marked the two-week point since the launch of XFactor Ventures.  We are grateful for, and a bit overwhelmed by, the support and feedback.  We thought there was an unmet market need for female founders investing in female founders, but you amazed us with the volume, quality, and breadth of opportunities that have come into XFactor.  

Over our first two weeks, we received 200 female-founded companies to review.  Obviously, there is a huge pool of talented and creative female founders!  Equally obviously, not all of these investment opportunities are going to fit with our expertise, passion or capacity, and we know that will mean we will end up missing out on some fabulous opportunities.  Given we can’t do it alone, we want to make sure amazing female founders have access to as many resources as possible.  As a result, we are developing an Allies list with whom we can make introductions.  If you’re an angel interested in backing seed stage founders or a fund that is committed to backing women and mixed gender teams, drop us a note to hello@xfactor.ventures letting us know what areas (however you define it) are most of interest to you!

In reviewing these opportunities we are struck by the fact that, apart from the high-quality level, there is no such thing as a normative female founded company.  While the stereotypical beauty/fashion company is a segment within our deal flow, it is nowhere near the most common. The companies we are seeing are diverse, broadly reflective of the venture industry, tech-driven and blow away the myth that female founders only start female-focused companies.  Specifically, 50% are deep tech companies (Software, AI, VR/AR, Networking, IoT, Robotics, Wearables, Other hardware), 20% are e-commerce (mostly B2C, some B2B, in the pet, clothing, beauty, food and home furnishings markets among others), 12% are Biotech (even though it’s not an area of focus or expertise for us at this time) and the remaining 18% are scattered across a variety of categories including fin-tech, ed-tech, marketplaces, content and tech-enabled services.

Nor do female founders always have a female co-founder.  Of the companies with co-founders, 68% have mixed gender founding teams.  This reinforces our belief that diverse founding teams will have a better perspective on market opportunities,  how to define and market products for the widest possible audience,  will make better decisions, and be more successful in attracting and retaining talent.  Interestingly, almost half of the companies have a solo-founder, and while this has always struck me as a harder path, some of the best female-founded companies (StitchFix, LearnVest and The Real Real are three examples that come immediately to mind) have followed this path, so it’s clearly not a determining factor one way or another.

On the XFactor front, since our launch we have closed 3 investments and committed to 2 others. We are extremely impressed with the quality of the first 5 female founders we are fortunate enough to support.  We will follow up with details in future posts, once these companies announce their financings and plans, but the companies are in the AI (2x), Data, Cloud Platforms and Content/Community fields and we look forward to working with these teams as they take on their respective billion dollar market opportunities.

Thank you all again for the support and introductions and for all the female founders we have met for your talent, perseverance, and grit.  As always, if you are interested in speaking with our team, please email us at hello@xfactor.ventures.

Announcing XFactor Ventures: Female Founders Investing in Female Founders

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Today, we are pleased to announce and launch XFactor Ventures, a pre-seed and seed stage venture fund that will invest in 30 new companies with female founders targeting billion dollar opportunities in the coming year or two.  

Are you a female founder with the XFactor looking for funding?  If so – we want to talk to you!  Please find us online at XFactor.ventures, follow us on Twitter or reach out via email to hello@xfactor.ventures

XFactor is led by a fantastic investment team of female founders –

  • Bay Area: Danielle Morrill of Mattermark, Erica Brescia of Bitnami, Jessica Mah of inDinero, and Ooshma Garg of Gobble
  • New York: Aubrie Pagano of Bow & Drape, Kathryn Minshew of The Muse, and Liz Whitman of Manicube
  • Boston: Anna Palmer of WonderMile, who while also working on launching her second start-up, was instrumental in co-founding XFactor with me and my amazing partner at Flybridge, Kate Castle.

This team has delivered hundreds of investor pitches, raised well over $100M in venture capital across multiple rounds, hired thousands of employees and generated significant value as they have built and grown the almost dozen companies they have founded.  

XFactor’s goal is threefold:

  1. Supporting and enabling the next generation of female-led businesses.  We invest in companies with at least one female founder – the “X Factor” – who have the insight and drive to build the next billion dollar company. Our investment team are all talented and successful female founder operators that have ridden the company-building roller coaster themselves and will provide connections and “in the trenches” advice and mentorship to our portfolio companies.  Regardless of gender, a team of successful founder and leaders investing in the next-generation of founders is unique and their collective insights will be valuable to the companies in which we invest.
  2. Providing our investment team a platform and mentorship to become successful investors. We hope that, over time, this effort will increase the ranks of female investors in the venture and angel investing community.
  3. Finally, and most importantly, XFactor is focused on generating attractive investment returns by identifying massive market opportunities and backing the most talented ambitious founders (who happen to be female) based on our conviction that diverse teams will outperform in the market.  Said another way, XFactoris not an affirmative action fund with all the negative connotations that implies.  There are few things worse for a female founder than being referred to a female-focused fund with the insinuation that you are not ready for the big leagues of male dominated funds. That’s not us. We are big league entrepreneurs and investors that will hold founders to high standards and support them in building game-changing companies.

I have been a venture capitalist for almost my entire professional career, first as a General Partner at Greylock and more recently as a co-founder of Flybridge.  On a personal level, I have always been surrounded by strong women and recognize the unique value women can bring to the table.  Over the years, when I realized that my male-dominated deal flow and investment activity did not reflect those values, I told myself that it simply reflected the demographics of the B2B tech space in which I invest.  Further, when I heard stories about VCs who would ask female founders what they would do if they got pregnant, or comment inappropriately on their appearance, or get their wife on the phone to help assess an idea that was being pitched to them or, as has become so apparent in the last weeks, inappropriately turn pitch meetings into a dating opportunity, or even more deplorable, an opportunity to leverage their power to sexually harass female founders, I comforted myself by saying that was not me or my partners. Those jerks are the minority of venture investors and not the ones I work with.

But last Fall, it became apparent that being a bystander was no longer acceptable.  I was appalled that the public discourse in the country suddenly turned openly misogynistic.  And when I received a specific comment from my oldest daughter, a tech-focused junior in college, I realized I had to do something to change the venture industry. “Dad,” she groaned, “I am so tired of looking at websites of startups and seeing only men on the management team” Thus, teaming with Kate, the inspirational XFactor investment team, and all of my partners at Flybridge, we set about forming XFactor Ventures.

The venture industry needs to dramatically change.  80% of the companies that receive venture funding have male only founding teams, and only 7% of partners in leading venture firms are women.  The two are related.  Female partners are more likely to back female founders and yet venture firms pull new venture partners from the ranks of successful founders, so the cycle perpetuates.  While the funding statistics are objectively not right, they are, equally importantly, not smart.  Diverse founding teams will have a better perspective on market opportunities, how to define and market products for the widest possible audience. They will make better decisions and be more successful in attracting and retaining talent.  All of which will lead to superior investment returns.

Finally, as no post from me would be complete without a chart, I have been astounded by the change in the gender composition of my “sourcing meetings” since I started working on XFactor, and this is in the last six months while we were quietly working on this initiative.  As shown below, it turns out to find female founders; you just need to look for them.

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The entire team at Flybridge is thrilled to support XFactor and, on a personal level, I am looking forward to working with our phenomenal and unique investment team as we back and support 30 companies started by fantastic female founders with the XFactor!  

Are you a female founder with the XFactor?  Find us online at XFactor.ventures, follow us on Twitter or reach out via email to hello@xfactor.ventures.  

From DIY to DIFM — Getting the Help You Need, When You Need It

I’ll be the first to admit, there’s nothing better than taking on a do-it-yourself (DIY) project.  I love a challenge and figuring out how to build or fix something can be exhilarating.  The reality of DIY, however, is that at some point you get stuck and the project switches from fun to frustrating.  Stuck and frustrated, I often find myself desperately looking for the “phone a friend” lifeline.  Sound familiar?

Over the past 15+ years, we’ve seen a boom in the number of companies focused on providing DIY technology platforms.  Constant Contact led the movement and has been followed by hundreds of companies that allow people to quickly, easily and cost-effectively deploy web-based products, services and marketing programs without having to spend thousands of dollars and months of development time. And while platforms like WordPress, Squarespace and HubSpot have enabled millions of small and medium sized companies to start and grow their businesses, the reality is that expertise cannot be 100% automated away and even the easiest to use DIY web platforms often leave end users stuck and looking for a DIFM (do-it-for-me) lifeline.

This is why I am so excited to be working with the Lorem team.  I first met Sam and Charlie during Mentor Madness week at the beginning of the most recent TechStars Boston program.  They were two young, smart, scrappy entrepreneurs who had identified and were tackling a problem where there were surprisingly few solutions.  In today’s “on-demand’ world you can get food, car rides, groceries, dog walking and most anything else instantaneously, getting true real-time help when your web platform fails is not really an option.

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I left that initial meeting excited, instinctively feeling that Sam and Charlie were onto something and so, along with the rest of the Flybridge team, we dug in.  

First, we used the product and became a customer.  It was not supposed to happen this way, but one day all the content on a WordPress website we run to provide students with funding to attend industry events (www.stayinma.com) disappeared.  Kate, our exceptional Marketing Partner, spent an entire day banging her head against a wall trying to fix the site herself.  Not her area of expertise and time far better spent working with our portfolio companies or generating visibility for the firm.  This coincided with the visit from the Lorem team, so off we went.  One plugin download and a click of a button and she was connected to a Lorem expert.  The expert took a look at the problem, found multiple issues on the site caused by using out of date versions of WordPress and various plug ins, quoted $40 to fix it and within an hour, we were back up and running.  Kate became the first convert on the Flybridge team, calling Lorem her new “secret weapon” for website fixes.

Second, we scoped and sized the market.  The trend towards DIY platforms was not the question (WordPress alone powers 75 million sites), but competing alternative solutions were.  Simply, we saw two options for customers:

  1. Keep doing it yourself: This has the lowest perceived cost, but that is deceptive as trying and failing, hitting up Google searches and accessing the online support provided by the platforms is wildly time intensive.  This is what Kate first tried and it takes a business owner’s time away from running their business, it is frustrating and leads to a high-rate of dissatisfaction with the DIY platforms (read churn!) and it increases the cost of customer support for the DIY platforms.
  2. Find someone to do it for you.  The logical alternative and there are obviously lots of design and development firms and freelancers with the right expertise.  But none of them are easily accessible for small projects as on existing freelance marketplaces it can take days or weeks to define and execute a project and often with less trusted resources and design and development firms are expensive, charging rates of up to $300 an hour, and not geared up to handle small projects.

None of these options provide instant help when a company needs it and we agreed with the Lorem team that there is an opportunity to provide businesses with trusted, on-demand, in context, quick solutions at an affordable price.  

And then I did the math.  Who wouldn’t pay between $10 to $100 for real-time quick fixes on their website or other DIY tools? With nearly 30 million small businesses in the U.S. alone and Lorem quickly seeing these companies use the platform for multiple jobs and spending $400 a year on average, the market suddenly got much bigger than you would think.

The more I thought about the opportunity and met with Sam and Charlie, the more I fell in love.  As TechStars demo day approached, we knew we wanted to be a lead investor with the company.  At 6:00 a.m. on the morning of demo day, I emailed the team what was their first of several term sheets and we ultimately led a $1.1M seed round in the company along with our friends at Founder Collective (David Frankel) and a few angels including Randy Parker (Founder of Constant Contact) and Fred Townes (author of one of the most popular WordPress plugins called W3 Total Cache).

I could not be more thrilled to be in business with this talented team and look forward to being part of their success.