We welcome Wave Capital to our Partner Fund portfolio. Based in San Francisco, Wave was launched last year by Sara Adler, Riley Newman, and David Rosenthal. Wave specializes in companies creating marketplaces and invests in companies at their earliest stages, as they build their teams, find product market fit, and work towards their Series A.

Leveraging their Bay Area roots and deep Silicon Valley networks, the Wave team is targeting top talent spinning out of major tech companies like Airbnb, where Riley built and led the Data Science team and Sara launched the Corporate Development program. They will also target marketplace startups in Seattle, where David spent over six years investing in early stage companies at Madrona Venture Group.

Wave’s focus on marketplaces was immediately intriguing to us, given our own marketplace investment theme. We initially met David through our co-investment with Madrona in the dog care marketplace, Rover, where David worked closely with the founding team. Throughout his venture career, David has won the hearts of many founders, who think of him more as a co-founder than an investor — someone who not only shares their vision for the company but rolls up his sleeves and works side by side with them in the startup trenches. Riley brings a data-driven, operator perspective as one of the first ten employees at Airbnb, growing its Data Science program from a team of one to over one hundred. Sara rounds out the team with extensive Corporate Development experience at AirbnB, Dropbox, and Facebook, bringing deep knowledge of long-term growth strategy and what it takes to get to a successful exit.

We’re excited about Wave’s network and ability to help marketplace companies at their earliest stages. We think of Wave as a window into the next generation of great founders focused on building highly scalable marketplaces across many industries. We’re thrilled to partner with Wave as they build their firm and first portfolio and look forward to co-investment opportunities as their companies grow. You can learn more about Wave and their new fund here and here.

We’re pleased to announce that Foundry Group portfolio company MakeTime has been acquired by Xometry. This acquisition brings together the country’s two top manufacturing network businesses and creates the largest on-demand manufacturing platform in the United States. As part of the transaction, Foundry Group Next led a $25 million round of financing for the newly combined company. Almaz Capital, BMW’s iVentures, GE Ventures, Highland Capital Partners and Maryland Venture Fund also participated in the round.

We first invested in MakeTime in 2016, having followed the company and the on-demand manufacturing market closely for over a year prior to that. Driven by fragmentation in the $80 billion market for on-demand manufacturing, the thesis behind MakeTime was to bring order to the often opaque and manual process of finding parts manufacturers. Much of this market is driven by small and medium sized manufacturers – there are approximately 190,000 manufacturers with fewer than 20 employees in the US alone – and there exists no common directory, no view to individual machine shop capacity, or understanding of any given machine shop’s speciality or performance history. The majority of projects in this market are sourced through slow RFP processes which rely on prior vendor relationships and lack even the most basic automation.

In contrast, the combined Xometry/MakeTime business will have access to 2,300 partner manufacturers ranging in capabilities from 3D printing prototypes to CNC machining to injection molding. This partner network, combined with Xometry’s real-time pricing capabilities, allows Xometry customers to confirm parts orders instantly on the Xometry platform. We are excited to have the opportunity to combine the two businesses and create a clear leader in on-demand manufacturing. Both businesses shared a common vision around this space and bring complementary skills and capabilities that they will work to combine into a single platform in the coming months.

The combined business will be run by Randy Altschuler, Xometry’s CEO, and headquartered in Maryland. MakeTime’s office in Lexington, KY will continue to operate and the business anticipates expanding in both locations. Drura Parrish, MakeTime’s founder and CEO will become Xometry’s Executive Vice President for Platform.

We’re excited to continue to work with Drura on the new business and welcome Randy and the entire Xometry team to the Foundry Group family.

Over the past year, there have been a number of sexual harassment scandals in tech, especially involving venture capitalists. The power dynamic in our industry has enabled bad actors to harass founders seeking capital and junior employees trying to work their way up in a very competitive and historically male-dominated industry.

Some in the industry feel that Limited Partners (“LPs”) — the institutions, wealthy families, and wealthy individuals that fund VCs — are in a strong position to create change because they are the first source of capital in the investment chain. If bad-actor VCs are unable to raise capital, it diminishes their ability to leverage the power of that capital to harass others. As a result, LPs could be part of the solution by choosing not to fund VCs who commit sexual harassment.

A challenge is identifying bad actors before they have the power to prey on others. Victims of sexual harassment rarely report it for fear of retaliation or reputational damage. In addition, sexual harassment lawsuits are often settled out of court and involve non-disclosure and non-disparagement agreements. Likewise, many employers have non-disclosure provisions in employment agreements that prevent victims of sexual harassment from speaking out. Thus, allegations of sexual harassment are unlikely to show up in common due diligence methods such as background checks and reference calls.

So how can LPs find out if a fund manager has been accused of sexual harassment?

They can start by at least asking the question. A recent survey conducted by the Investment Management Due Diligence Association (IMDDA) revealed that 89% of the 78 participating institutional investors do not inquire about sexual harassment in the workplace (not to mention sexual harassment outside the workplace, such as that which is committed by VCs against founders seeking capital). It’s time for LPs to step up and start asking this question during diligence on a fund manager.

As an investor in smaller funds, we don’t apply a one-size-fits-all approach to fund managers. We do, however, conduct significant due diligence on every Partner Fund we invest with, even the ones we have known for years.

In addition to asking specifically about historical or current instances or allegations of sexual harassment, we’ve recently added a disclosure provision regarding sexual harassment to our standard side letter. We don’t view this as a legal mechanism, but as a tool to prompt a difficult conversation that needs to happen.

These are two specific ways LPs can inquire about sexual harassment issues with VCs they are considering funding. The IMDDA survey mentioned above provides additional recommendations for institutions looking to conduct diligence about sexual harassment. In addition, the Institutional Limited Partner Association (ILPA) is working on developing guidelines for addressing sexual harassment during and after the due diligence process.

As both an LP and a GP in the entrepreneurial ecosystem, we want to find ways to combat sexual harassment and the cultures that allow it to persist. Asking uncomfortable and direct questions is a start and we hope more LPs will feel empowered to join us in having the difficult conversations.  

We are pleased to announce that Foundry Group has made a Series A investment in Section.io. Based in Boulder, CO and Sydney, Australia, Section.io is building a modular, API-driven reverse-proxy layer to provide web engineers with greater flexibility, transparency, and control over advanced edge compute for delivery of their web applications.

Section.io was founded in Sydney, Australia by Daniel Bartholomew and Stewart McGrath, who became frustrated with the rigid “black box” approach of legacy Content Delivery Networks (CDNs), and the misalignment of those CDNs with modern DevOps principles. Stewart and Daniel recognized CDNs were not able to adapt to quickly enough to keep pace with modern software development practices.

Section.io believes there is no “one size fits all” approach when it comes to what software an engineer should choose for their application edge, or indeed on how many endpoints or where that application edge should exist. Section.io also believes that as more compute is taking place at the edge, software should be more reflective of an engineer’s application stack: fully-programmable, flexible, and easily adaptable.

Section.io’s container-based approach to HTTP traffic delivery includes highly available and highly performant HTTP traffic control modules which can be run in a distributed fashion as a CDN and/or behind the firewall as an Application Delivery Controller.

Modules currently available on Section.io include Varnish CacheTM, OpenResty, Image Optimization modules, Web Application Firewall modules, server-side multivariate testing, virtual waiting room, Google’s PageSpeed, and other front end optimization options. As a container-based platform, new modules are being added frequently. Providing a truly DevOps-centric platform, all modules have consistent configuration-as-code and diagnostics capabilities.

Section.io fits into our Glue and Protocol themes as their PaaS connects compute infrastructure from multiple service providers for improved HTTP traffic delivery from a true federation of compute providers.

We met Daniel and Stewart as they were applying to the 2016 Boulder Techstars class, and have followed their progress since they graduated from the program. We are excited to have an opportunity to work even more closely with them through our investment in the company.

 

As we build out our Partner Fund portfolio, we look for opportunities to strengthen existing relationships in our ecosystem. We’ve known the Arthur Ventures team for several years and were thrilled to welcome them to the Foundry Group family earlier this year.

Based in Minneapolis, Minnesota, Arthur Ventures invests in fast-growing, scalable, enterprise software companies outside of Silicon Valley. They’re often the first institutional investor for portfolio companies, writing a substantial initial check at Seed or Series A.

We initially met the Arthur Ventures team through our co-investment in Leadpages. As we spent time getting to know them, we were impressed by their passion for partnering with incredible “Outside the Valley” founders and by their overall hustle. They are not afraid to fly all over North America to connect with great founders and their responsiveness is absolutely incredible They’re thoughtful about portfolio construction and are disciplined and data-driven in their approach to investing. We like that they know what they’re looking for and focus their time accordingly.

In addition to strategy and hustle, we were drawn to the team’s midwest values and commitment to putting founders first. As we spoke with founders that have partnered with Arthur Ventures, we validated our instinct that this team fits the Foundry Group ethos. They move quickly and don’t waste founders’ time. They roll up their sleeves and dig in but know how to balance helping with giving management teams space to thrive.

As with several of our Partner Funds, we started talking to Arthur Ventures about their new fund in a friendly, informal manner. Given our years of GP and LP experience, we like to spend time with friends as they think about launching a new fund and develop their fundraising strategy. We coached Arthur Ventures through several iterations of their pitch deck, helped them think through their partnership structure, and introduced them to some of our favorite LPs. As we helped them through this process, we found them to be coachable while also maintaining conviction in their strategy and approach. We saw that they have great love and respect for each other, which is key to any long-term partnership.

As part of our diligence process, we spent time reviewing and talking through the Arthur Ventures 2013 fund portfolio. We grew confident that their style of portfolio and founder overlapped with ours and were excited by the potential for direct co-investments. We liked the portfolio so much that we expanded our commitment during their fundraise and the team helped us put together a secondary purchase, so we’re now fully aligned as an LP in both the 2013 and 2017 funds.

We’re excited to have partnered with the Arthur Ventures team to get more exposure to companies outside Silicon Valley as we are big believers that incredible companies can be built anywhere. We also look forward to co-investment opportunities in our Protocol, Glue, and Adhesive themes.