We are pleased to announce that Foundry Venture Capital 2016, L.P. has completed its initial investment in Dwolla as part of a $6.85 million financing. Based in Des Moines, Iowa, Dwolla provides an API platform for white label ACH bank transfers, enabling a robust connection to the banking infrastructure for software applications.
In 2012, Dwolla raised a financing led by Union Square Ventures to change how payments worked. They initially focused on a consumer to consumer service, scaled the team up significantly, raised several rounds of capital, and built a lot of software to support the infrastructure that was required for their consumer service.
The consumer service didn’t work out for a variety of reasons. But the underlying software was very impressive. Recast as an API-based business, Dwolla is similar to SendGrid and Twilio, two companies we know well, and fits front and center in our Glue theme. As part of this reset of the business, Dwolla shifted its focus back to Des Moines from San Francisco, where it had moved its leadership team several years earlier.
We were reconnected to Ben Milne, the CEO, by several friends. USV had led a new round a few months ago and they were looking for additional investors to fill it in. After talking to our friends at USV, we decided to engage as well as make a few introductions for Ben to funds who are investing in companies in the mid-West.
We were collectively impressed with the current status of the company, the strength of the API platform, the existing customer base, and the growth curve the company was on. After six years, we believed Dwolla found its fit in the market and was now focused on getting cash flow positive on a modest financing. Ben, as founder and CEO, was completely committed to building Dwolla 2.0 in the mid-West.
Along with USV, High Alpha, Ludlow Ventures, Detroit Venture Partners and NextLevel Ventures, we’ve put together a strong financing for Dwolla. We look forward to working with Ben and team to grow an important business, serving developers around the world.
Our Investment In Sensu
We are pleased to announce that we have made our initial investment in Sensu, Inc. Sensu is a modern and cohesive monitoring platform for the enterprise – it can monitor servers, services, application health, or business KPIs, enabling dev and ops teams to keep a vital, real-time view on the health of their infrastructure.
Sensu was originally created to replace an aging Nagios installation that couldn’t keep up with the rapidly evolving demands of a dynamic public-cloud infrastructure, and has been widely adopted due to its backward compatibility with plugins written for legacy monitoring tools Nagios, Icinga, Zabbix, and more. As software continues to devour the world, modern monitoring tools are vital to prevent costly downtime.
Sensu, Inc. fits in our Glue theme and fits in nicely alongside developer and ops oriented infrastructure companies in our portfolio like Pantheon, mLab, SendGrid, Mapbox, and VictorOps.
We were originally connected to Sensu by Nick Stielau, Director of Engineering at Pantheon. As we got to know Sensu, we found that numerous Foundry Group portfolio companies already made use of Sensu in their monitoring infrastructure. We are excited to be working Caleb, Sean, and the rest of team Sensu as they build out their vision for the future of monitoring.
What Does a Foundry Group Next Investment Look Like?
We always stop and consider whether a public posting makes sense whenever we repeatedly send something via email. This post comes from one of those moments. As we do more growth investments outside of our existing portfolio from Foundry Group Next (FGN), we are responding frequently with “thanks, but that doesn’t fit our strategy and what we are looking for.” So, in an effort to have something easy to point to publicly, we wanted to share an outline of what we’re looking for in an FGN investment.
We are looking for companies raising growth rounds that fit within our Foundry Group themes. These themes are horizontal in nature, applying to many different markets, rather than being aimed at one specific vertical market. You’ll see us engage on infrastructure technology around protocols and software that glues the Internet together. We’ve done a lot in marketplaces and are not afraid of hardware or anything that changes the way that humans interact with computers. We also like to see networks that create new distribution models and we’ve done a good amount of investing in business SaaS companies across these themes.
Given Foundry Group’s early stage focus, we define these “growth” rounds as quite a bit earlier than others might. We think the average company will have established product/market fit with real customer sales. In general, companies have reached the $8m ARR level with annual growth rates of over 50%.
We think of these as a round or two before a purely quantitative spreadsheet and metrics driven approach would definitively green-light such an investment opportunity. The company will likely have line of sight to cash flow break even but there might be another round after ours. The average valuation in the portfolio will be sub-$150M with a range of $50-200M pre-money for rounds where we can provide $5-20M and still have capacity for all the insiders to play in a $20-50M total raise. We would expect to own 7-12% of a company after the financing. Brad, Jason, Seth, and Ryan will be leading these on the deal side and would be the board representative for us. We try to help find these companies well before they need to raise and see if there is mutual interest, hopefully using a friendly GP as the starting point for an introduction. We’ll likely do around three of these investments per year, where we can be helpful to the company.
We’re finding two common scenarios that interest us. These financings are usually labeled as a late B or C round. The first scenario is something that is non-obvious and catching an inflection point. In this case, we almost always have a trusted referral from one of the existing investors in the company that makes us pay attention where others might blow it off.
Another scenario we find attractive is a reset round where we can come into the company, help insiders clean up the cap table, and get involved to lend a hand on the board. These are situations where a company may have gotten ahead of itself and needs to reset and perhaps upgrade the team to get next level. We feel like we can be a trusted and helpful partner on these financings as well.
The idea is to solve a potential fundraising challenge, leading a proactive round and keeping your teams out of fundraising mode and in execution mode. We want to be the investor you add when something is working or when you need supportive board members to take a company from good to great.
We’ve been very encouraged by the engagement of our friends in the venture capital community around our Foundry Group Next strategy. We find that being able to invest in funds as a supportive LP but also together on a direct basis leads to great long term relationships. It’s very rewarding to have such alignment and support across the portfolio, while bringing a few of our friends closer in our network and finding good companies to work on together!
Our Investment in Borrowed & Blue
We are pleased to announce that Foundry Venture Capital 2016, L.P. has completed its initial investment in Borrowed & Blue, Inc. With offices in Charlottesville, Virginia and Boulder, Colorado, Borrowed & Blue is a wedding vendor marketplace that helps couples research and book their wedding vendors.
Every year, 2.2 million couples get married in the United States. The average couple spends $24,000 on day-of wedding vendors, across many transactions, making weddings a $53 billion industry annually. Yet the market remains notoriously inefficient, and a handful of players, led by The Knot (NYSE: XOXO) have dominated the wedding landscape for many years with pay-to-play vendor listing directories. Other wedding sites and services have focused less on helping couples discover vendors, and more on tangential benefits, such as sharing wedding photos, organizing guest lists and seating charts, or creating wedding websites.
Enter Borrowed & Blue, whose tagline is the ‘Smarter Way to Wed’. B&B is taking a content and data-centric approach to serving the wedding industry. B&B is focused on helping couples discover vendors through their work. Every photo on the platform is tagged with the relevant vendors whose work is featured, and links to more detailed information about that vendor. To build up this repository of content, the company publishes more weddings than anyone else online, adding 350+ new weddings a week to its platform. The company has doubled its audience in just the last four months, and already has 18,000 vendors actively engaged on the platform. Borrowed & Blue has also recently launched an iOS app available in Apple’s App Store.
On top of this foundation of content, Borrowed & Blue is building the first transactional marketplace for the wedding industry, so couples will be able to book their venue, photographer, planner, etc. on the platform. Borrowed & Blue’s goal is to provide vendors with a true pay-for-performance model, while offering couples a one-stop shop to both discover and book all their wedding vendors online. Our marketplace theme posits that technology can be the answer to galvanize the two communities of wedding vendors and planning couples, and create a highly attractive business. We were particularly attracted by the company’s product focus and data-driven model.
Borrowed & Blue was founded by husband and wife team Christin and Adam Healey in 2012 after they experienced the challenges of planning their own Charlottesville wedding. Adam Healey is an experienced entrepreneur whose last business, hotelicopter, was a hotel meta-search engine that launched with a massively viral April Fool’s Day prank in 2009. Adam successfully sold hotelicopter in 2011 to Roomkey, a company owned by the six largest hotel chains in the world.
Borrowed & Blue has 20 full-time employees and a network of over 50 freelancers that help support their content publishing operation. We were introduced to the company via Jason’s colleague Brad Bernthal, with whom Jason co-teaches entrepreneurship at CU Boulder. We’re excited to be working with Christin, Adam, and their team.
We hear you on Pogoplug
To frustrated Pogoplug users, we offer our sincere empathy. We were caught off guard just like you. We are making every effort we can to help those users who have been impacted. We hope to have an update soon.
