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Jon Bradshaw & Peter Harris

Let's look at Seed and Series A deals. Let's look at what is interesting! Peter Harris from the University Growth Fund and Jon Bradshaw review deals from this week that have been funded. Learn what is hot. Find out what the winner is.

Episode 2 of the Venture Capital Podcast

Let’s look at Seed and Series A deals. Let’s look at what is interesting!

Peter Harris from the University Growth Fund and Jon Bradshaw review deals from this week that have been funded.

Learn what is hot. Find out what the winner is.

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Episode Transcript

Jon: So for this podcast, I'm thinking if we focus more on seed and series deals, I mean there's been a lot of like series season beyond.
Peter: Let's just look at stuff, you know, that's interesting, right?
Jon: So let's go like in, in high level. What are your thoughts about the music space? As a venture capitalist, like when you hear that there's a someone who's gamified music, learning. Your initial thought is interesting.
Peter: My initial thought is it feels like a slightly smaller market that's pretty crowded. So I'd be really curious in terms of what their go to market strategy is, how they're acquiring users. Look, we're an investor in a handful of related startups, right? So we're investors in some ad tech companies. We were an investor in Spotify or an investor in Small, which does a lot of music apps that are kind of similar to this.
Peter: So the flip side is like there are definitely like these pockets of communities that are really, really passionate about music and creating content and so on and so forth. So it doesn't surprise me in a lot of ways that they have 20 million users. That's fantastic. Generate 50 million in revenue. Yeah, sounds like a solid business.
Jon: Do you think that's 20 million active users or 20 million total or registered users as.
Peter: Probably Well, it's monthly users. Monthly users. Our monthly active.
Jon: Monthly users grew from 14.5 million to 20 million. Would you say that's common to see that as a venture capitalist? Is that a common number to see?
Peter: Well, like they're raising a series B, so they're a little further along. I'm actually surprised that they're not raising more money as a $28 million round and to be at $50 million in revenue last year, it seems pretty impressive. So maybe they're pretty close to break even and don't really need the money. I'd be curious how much of this is secondaries as well.
Jon: So do you think that a company that raises money would raising a smaller amount be on purpose if they have like acquisition plans? Like because if you raise too much to.
Peter: Be acquired.
Jon: You you can't get acquired. Like, who was the.
Peter: Company or a lot of company? A lot of founders are like, Hey, I just we're already kind of at break even. I don't need to give up that much dilution. I'd rather take just a little bit less money or sometimes it's, Hey, we want to be able to bring on some really great partners, right? So if you look here, they've got it looks like it's really being led by Amazon's Alexis Fund.
Peter: And so that kind of makes sense as a very strategic type investor. And so maybe they open up the round in order to bring them in as well as a bunch of these are like kind of who's who investors, right? Mark Pincus Jason Calacanis I mean, they've got a bunch of great people and so there might be an element of that is going on as well.
Jon: Yeah, that's pretty cool. Generally, how often how many music deals do you see in a given month or two? Is it like a common.
Peter: I mean, we don't do a ton of music investments and I would say there aren't a lot of music based companies getting backed.
Jon: Yeah, because my background is in angel investors, I rarely saw any. Most of the deals I saw was B2B SAS and very few that were focusing on a consumer play.
Peter: Yeah, I agree with that.
Jon: And that might just be more of a Utah background. We're both from Utah, by the way. How often do you see deals in construction management?
Peter: They're definitely more common than they used to be. Yeah, we've looked at a handful of different kind of proptech construction tech deals over the years. Yeah, it's interesting. Construction is one of those industries where historically there hasn't been a lot of technology there. And so I think a lot of different companies have said, Hey, there's an opportunity for us to come in and and really add a lot of value here.
Peter: The flip side of that is that there are a lot of companies that have done that. And so, you know, I feel like it's there's a lot of low hanging fruit. These companies can get initial traction pretty quickly. But then the question is like, well, is there really going to be one winner that kind of dominates the space or not?
Peter: And then within construction, you have a lot of you have this like long tail effect where you have some very large developers that do a lot of big projects, and those are probably really great customers from a recurring basis. But then you have this super long tail of developers that, you know, not that they're fly by night, but they, you know, they come up, they pop, you know, they do business and they shut down and they're kind of one project at a time.
Peter: And so I think it makes it a little more tricky to run like a really solid recurring revenue business off of that market.
Jon: When I looked at deals in this space and this was a little while back, is that the good sign that we identified is that there were a lot of companies that were managing all of their projects through an Excel spreadsheet. Yeah. So typically we looked at that as the ability to for like a new market. It's like you could make something 100 times better.
Jon: But the thing we saw was at least at that time, was unwillingness to adapt to new technologies. I think the other big component was when you're out in the field, it's extremely difficult to have Internet access and to run some of these business applications, even on a mobile device. So we might have been that we're hitting a tipping point or more of a tipping point.
Peter: Yeah, no, I think that's definitely true. I think there is a timing issue. Right. And, you know, today I think people are a lot more technology literate, broadly speaking. And Internet is, you know, much better deployed. And so a lot of these applications are probably applicable and usable for the first time ever.
Jon: Okay. Let's keep going through, if you might. That's super sapiens.
Peter: Well, this is in Atlanta, so I'm really interested because we're opening an office this this coming month in Atlanta.
Jon: You guys currently have an office in San Diego, Salt Lake City, and now.
Peter: And soon to be Atlanta. Yeah.
Jon: Okay.
Peter: So the sports continuous glucose monitoring.
Jon: I think the space is Kevin Rose from Houston at Google Ventures. Yep. One of his recent podcasts was on glucose monitoring and some of the things that I wanted to do a lot I've been focusing, I purchased an offering and a band them because I'm personally interested in space. I think it'd be fun to start a company in this space, but it's like we're it's consumer electronics and Iot is a very difficult space to compete in.
Jon: But it's it's one of the areas that's popping up is the glucose monitoring.
Peter: Yeah, I'd be really curious to see how their technology works. So we're actually an investor in a company called Tula Health that has a continuous glucose monitoring technology that they're working on. It's pretty interesting.
Jon: Glucose monitoring has been around for a while.
Peter: FOR Yeah, the big challenge is whether or not it's invasive. So today the gold standard is Dexcom, which actually is a needle that goes. It's a patch with a needle that goes in your arm, has a battery and you swap it out. It's relatively expensive, but it's, you know, continuous, which is which is really cool. And then there are a lot of companies that are trying to figure out how can you do something that's noninvasive, right?
Peter: Like right through your Apple Watch, for example. And, you know, I think the challenge there's so many challenges with that. But if somebody can crack it, the market is just so big.
Jon: Yeah, my preference is that my Apple Watch that I'm wearing right now is that Apple would open up more of their HealthKit APIs to allow other companies like because a lot of times I'll wear an Apple watch in a blue Yeah for very different purposes but it's all collecting the same data they're just trying to collect it more frequently.
Jon: And I would like to personally see one of these things that brings like it's more of a platform that people can plug into.
Peter: You know, it's so funny you say that because I've pitched you on that idea not that long ago.
Jon: It is you. I think your idea was a little bit different. I think you wanted a place where you could store your data. And I don't think these other places where you store your data. But if I if you someone created a platform where, you know, woops, the ad could also communicate to your platform, I.
Peter: Mean, isn't that kind of the same thing?
Jon: It's similar, but different. I think you wanted to like you're using Apple health. You want all of your Apple health data to go there. So tomorrow you switch to a Samsung device, you could say,
Peter: No, it's less of that. It was more like, hey, all of my data is in these like these disparate devices, right? And I'd like to have a central place where, like, not only does my Apple device data flow in, but I can also pull data from my smart scale, from my, well, you know, whatever it might be and have a nice dashboard where I can start doing interesting things with it.
Jon: Like this basis, someone says, John Bradshaw, here's a million bucks. You're probably more like 2 to 3 dig off the ground. Sure, it would be a space that I personally would love to go into because like I see you've got all these people who are trying to solve different things. I think Apple's a generalist in the space. I think you have people like Woo for focusing on the high end, but someone who who can really simply have a really good user interface that brings all of us in and you truly own your own data, which makes it more, more swappable would be kind of fun.
Jon: So even if you want to use the Fitbit, watching it would plug in. You could do more and more with it, you see.
Peter: So it looks like they're using Abbott's glucose monitor and they're just they're kind of saying what you're saying is like, hey, we're going to use, we're going to take Abbott's device, you use that and then we'll pull the data from that and do interesting things with the data. What I'm saying is I think I agree. I think there's a really interesting opportunity out there for somebody to build a platform that pulls and data from multiple devices, right?
Peter: Yeah, like pulls in from Abbott and your WOOP and you know, your smart scale and all of these different things and then uses that data and AI to really generate interesting findings that are very personalized for you.
Jon: Or like let's say you can go to the hospital and you get, you get like blood test and stuff like that. Yeah, that those tests, that data can suck in there and I don't Have you seen that out there yet.
Peter: There's a, there are a couple of companies that are doing some really interesting things where it's it's like a very personalized clinic. And so they do they collect a ton of data and they do a lot of different tests on use of blood tests, bone marrow, I mean, all kinds of different things. And then they pull that data and analyze it and create very personalized recommendations for you.
Peter: But those services are in the like thousands of dollars a month. So it's really limited to kind of the more wealthy set. But I don't see any reason why, you know, better solutions can be offered down market with the technology that's currently out there.
Jon: The other thing that I'm really interested in is personalized medicine. So it's the concept that like I take finasteride, which is a hair loss medicine and it might affect you or that affects me, so I might be Irish or African-American or Asian, it could affect us all differently. And so Whoop is starting to get into this where you're able to start like a B testing.
Jon: But if you could start actively monitoring and if they could create this huge database of comparing your health data to similar people, it might tell you here might be better outcomes here. You know, how does your gut feel? How does your you know, how does your heart refill? Do you sleep better? Those type of things. And that's like that's a level of performance I think is currently impossible, but could make a ten 20% increase impact on your life for productivity now?
Peter: Absolutely. I think there are a ton of opportunities around that.
Jon: So the last one for today, let's review. Keep attacks. So keep your taxes. Raise a $13 million series A and their big focus is the gig economy. Workers in the gig economy like Uber drivers, Lyft drivers, people who are doing gig type of work. I think Foundation Capital is a fund that you're familiar with. Yeah.
Peter: Yeah, they're great fun.
Jon: What do you know about Foundation Capital?
Peter: I know foundations. They're they're great fund, you know, a lot of great deals over the years. The rest of their their backers are great to you ventures We had one of our students go to work at E Ventures Matrix great fund okay a lot of kind of traditional series funds in this round.
Jon: The way they make revenue, at least right now is they charge $89 per gig user per year.
Peter: And they help kind of with all the 1099 tax tax related.
Jon: Stuff, correct. If you look at it, their focus is we help you discover write offs. My guess is that they focus more on their much simpler version of like a TurboTax QuickBooks combo, just trying to make their super simple. But I don't know. What are your thoughts on the space?
Peter: I think it's really interesting. I mean, big question is the secretary of U.S. labor just a couple of days ago came out and said that he thinks all gig economy workers should be classified as W-2 workers.
Jon: So an identity worker would be an employee.
Peter: Right. So that that may not bode particularly well for this company. The flip side of that is I'll be shocked if that actually happened. People have tried it multiple times. Every time it gets shot down in court or is voted out, because I think at the end of the day, people really like the flexibility. Right now. Granted, I'm very biased because we are an investor in Postmates and Lyft and Airbnb and others, which are very much in that gig economy that people like the flexible Litty, they don't want to be told when to work and so on and so forth.
Peter: And so I think if they do end up classifying them as W-2 workers, employees, that there will be a lot of backlash and ultimately what probably needs to happen, this is kind of well beyond tax keeper, but there needs to be like a designation or classification of worker for that. That is really tier geared towards the gig economy.
Peter: But like the gig economy represents a massive portion of our economy and I think will continue to be that that'll be the case going forward, especially if you look at like Gen Z. So Gen Z is characterized as people that are kind of hustlers, right? They're going out, they're working hard, They've got maybe a full time job and a side hustle.
Peter: They're driving for Uber and Lyft and delivering food for for Postmates and and DoorDash and all these other things. And so I don't see that going away. I think that's going to continue to grow. And so providing services like Tax keeper for that population I think is pretty smart.
Jon: For a company. You raised 13 million in the space. What do you think some of their metrics might might have been?
Peter: Yeah, my guess is that they're probably probably about $1,000,000 run, right? A couple million maybe.
Jon: Couples do in a million or two in the space. You think that's they're.
Peter: Raising a series, a series A you're kind of looking at companies that are kind of at the 1 to $3 million run rate range and, you know, 30 million bucks. So if you assume that they're giving up about a quarter of their business, you probably raise this, you know, thirties, low thirties.
Jon: Okay, money for my valuation. Okay. Well, here are some of the few interesting deals that we saw from this last week.
Peter: I actually have one more deal.
Jon: One more deal. Let's dive.
Peter: In. So this is a deal. I just want it down because it's it was announced this week called Paxos.
Jon: Are you in Paxos?
Peter: I'm not in Paxos.
Jon: 300 million series deal. There's a lot of coin that's.
Peter: A lot of coin at a $2.4 billion valuation. How do they.
Jon: Kind of.
Peter: If you read down here, they just closed 150 million plus back in December. Okay. So they are flush with cash. But here's what they do. It is like probably one of the more boring businesses out there, but they are what we call, like picks and shovels. Okay. For cryptocurrencies. Okay. So if you want a launch, so so PayPal, right.
Peter: They want to start accepting cryptocurrency and allowing their customers to accept and pay with crypto right through PayPal. There are all these like regulatory things that they need to have. They need to have like custodial and escrow support and all of these different things. That's what Paxos does. Okay. And so almost overnight, companies like PayPal can spin up and start offering crypto as a new way to transact by using companies like Paxos.
Peter: Okay. Yeah, I think this is super interesting, right? Because companies like Paxos are serving like this really important need in the market, but it's certainly not sexy. It's all in the background operation type stuff. And I think investors are really recognizing that by the fact that one cryptocurrencies today are just exploding. Right. And lot more and more people, it's becoming more and more a part of everybody's daily life.
Peter: And so companies like PayPal and Tesla and some of these others are saying, hey, we need to be able to transact with this type of currency. And companies like Paxos are making that possible.
Jon: Okay.
Peter: So there's a local.
Jon: Company called Tax.
Peter: Bits Tax Bid.
Jon: And also PayPal investors.
Peter: Are people still invested in tax bit? Yep. So tax that is very similar to keep or tax okay except for their like they help people that have invested in cryptocurrencies do their taxes because it's a very nuanced tax tax code.
Jon: Okay. What is your future thought on crypto is the end in there is crypto.
Peter: To be question.
Jon: Is crypto going to be a currency?
Peter: So I think the blockchain is here to stay right there.
Jon: The blockchain has been here for a while that right, like the blockchain is not a new thing. It's like 20 years old. So the concept for more sure, it's just another form of a database.
Peter: I think the problem is, is like what cryptocurrency is going to be here long term.
Jon: Yeah, right. Do you think cryptocurrency will be a current? Because I don't under current form, I don't think cryptocurrency will go into. You don't think I.
Peter: Will be here 20 years from now?
Jon: No, I don't think Bitcoin will be here. It's just like the initial web browsers and the initial internet eventually got replaced by something better. My big critique on crypto and I would worry about being an investor in a space like this is like I think the one I'm probably having been burned as a founder. Like, you know, you work so hard, it goes up in flames.
Jon: I see Bitcoin as a very volatile thing, so the founder makes me nervous as an investor. But like if you're not, if you're not doing the next like bleeding thing, as a VC, you've told me so many times, if it's, if it's not looking super risky, like you're never going to make good returns as a VC. So that's one thing things I've learned from you.
Jon: But I think for me I think Bitcoin or something like Bitcoin could be here ten, 20 years from now. But the big issue is the transaction, energy and time required to reconcile the ledger and to process the transaction. And like even like if I wanted to pay you at a grocery store, like let's say you owned all the 7-Eleven, I go to 7-Eleven, I swipe my digital wallet, it, it goes to begin the transaction.
Jon: You could have a clearinghouse, perhaps, which would then act like another Visa, MasterCard, that says, hey, this transaction is approved but doesn't get finalized. It would take like even Chase Bank right now for me and Discover take days to reconcile. But now a transaction for them to reconcile I assume discover they take a couple of days but the actual database transaction time is minimal.
Jon: With the blockchain they'd be like seven and 8 minutes or more as of how does that scale and how does that scale with are different?
Peter: There are different currencies that are being released that solve a lot of those problems there better.
Jon: So that's why I would say long term, I don't think it's going to be bitcoin, but.
Peter: What you need is you still need I mean, at the end of the day, even the U.S. dollar only has value because we ascribe value to the U.S. dollar. Right. And so that's one of the things that these these coins need. That's one of the interesting things about Dogecoin, right, is Elon Musk comes out and says, hey, this currency, it would be fun if this currency actually became something people used.
Peter: And because he says that that lends credibility to it and that credibility convinces more people to buy and hold it and use it. Right, which pushes the price up. And as the price rises, it becomes.
Jon: A self-fulfilling.
Peter: Prophecy, some self-fulfilling prophecy. And so that's a big part of it is like, yeah, maybe Bitcoin isn't the most beneficial because, you know, are.
Jon: You more.
Peter: Energy users or whatever, but you have so many people that are holding and using it that it actually becomes useful in other ways, right? This is like classic disruption theory, which is you have a technology that is not that's inferior in so many other ways, but is superior in one way, right. That that, that nobody else can match.
Peter: And over time it it displaces everybody else.
Jon: So I what I would predict is that Bitcoin will eventually fade a new crypto if it can solve the transaction cost issue, it will slowly like get more and more steam and then surpass Bitcoin.
Peter: So I think probably the more likely thing that's going to happen you're kind of already seeing this is that there will be specific tokens for specific applications across a wide range of things and Bitcoin will ultimately become a currency that allows you to easily move from one token to another as opposed to having to move from dollars into those tokens, which is a fairly tedious process.
Peter: Whereas with Bitcoin it's actually a lot, a lot easier to do. Okay, So in that case, like it be, it never becomes like a utility coin, like a lot of these other things that are out there, but rather becomes kind of a liquidity coin.
Jon: Okay, Like I can see liquidity or a store of value coin. Yeah, totally fine with that. What I'd like to see is something that goes that next the next jump.
Peter: Well, is also begs the question too, is there's a lot of regulatory right so like the Fed could come out right and so if you and say bitcoin is illegal okay you have to use fed coin. Okay. Right. And people like Ray Dalio really think that that's a high likelihood scenario. You know, we'll see. Right.
Jon: Okay. Well, awesome. Well, thank you guys for watching. Make sure you like subscribe and we'll be back next week with more stuff.