We are pleased to announce that we have led a $7m Series B financing in Rover.com, the leader in digital dog boarding that connects dog owners with approved, reviewed, and insured sitters. In addition to making our dogs Brooks, Bear, Einstein, and Mosley happy, we are excited to be funding another great Seattle-based company as well as a company to emerge from a Startup Weekend (where Brad is a board member.)
Rover.com fits in our new marketplace theme. In this theme, we are searching for situations that have an inherent suppressed supply as well as a demand – the market needs to work for both participants. We’re particularly intrigued with markets where the goods or services in question exist already, where full demand has been difficult to obtain on an individual basis. Finally, we are concerned with time – we want assets that expire if not used. We think of this type of market as “remnant asset monetization.”
Rover.com is a perfect example of this type of a marketplace. The existing solution for dog sitting, which consists of kennels and private dog boarding, is a very large annual market ($10b+). However, less than 20% of all dog owners end up using one of these solutions as the vast majority of dog owners are not comfortable with these solutions. As a result, we estimate there is a $50b+ “shadow market” of either privately arranged dog sitters, friends and family, or unmet dog sitting capacity. In short, a perfect opportunity for remnant asset monetization.
If you, like us, view your dog as a member of your family, take a look at Rover.com the next time you leave home and need to find a sitter for your dog. Your dog will love you for it.
Our Investment in VictorOps
We are pleased to announce we have led the seed round financing of VictorOps, a company based in Boulder, CO founded by serial entrepreneurs Todd Vernon, Bryce Ambraziunas, and Dan Jones. Todd, Bryce, and Dan have worked together closely over the years as co-founders and early executives at both Raindance Communications and Lijit Networks.
This is the third time we have backed a company Todd has founded. Todd was previously co-founder/CTO at Raindance Communications, which we backed at Mobius Venture Capital and went public in 2000. Todd went on to be co-founder/CEO at Lijit Networks, which Foundry Group invested in in 2008 and was acquired in 2011 by Federated Media.
VictorOps is creating an enterprise communication and collaboration platform targeted at the Ops team, aka the Network Operations team, the Tech Ops team, the Dev Ops team, etc. The team at VictorOps has years of experience living through the grind the Ops teams faces due to unplanned yet regularly occurring outages that any company running web infrastructure inevitably faces, and VictorOps is building a “situation room” environment that enables the Ops team to quickly resolve outages, which can have disastrous (and revenue-impacting) consequences.
VictorOps will be in heads-down development mode over the next couple quarters, with a goal of getting early versions of the system in customers hands by mid-year. We are excited to be playing a part in the “getting the band back together” dynamic behind VictorOps and looking forward to working with Todd, Bryce, and Dan.
We are pleased to announce that Foundry Group is the lead investor in a $6.5m Series B investment in Betabrand Corporation. Located in San Francisco, CA, Betabrand is an online clothing company that creates unique clothing that appeals to an individual’s sense of personal style, exclusivity, and creation. By creating limited edition “inventions” Betabrand takes the ability to manufacture small batches of clothes while allowing their users to participate in the creation process.
We’ve been thinking more often about how valuable companies are being built by creating new marketplaces. We believe that we’ve found a great opportunity in Betabrand to help create a company that embodies many of these principals in the world of online fashion.
Currently, the company allows users to chose which new items will be offered by posting proposals on their website and having prospective customers vote on which ones will be brought to market. The long-range plan, however, is to allow customers to actually design the clothing, crowd source input and modifications and designs, and then bring the product to life. Already the company has brought out a few items with this process and predicts that 80% of their items will be generated from their customers and freelance designers.
The company has created a unique distribution model built upon social media. Called the “Model Citizen” campaign, customers send photographs of themselves wearing Betabrand clothing to the company, which in turn sends them a link they can forward to friends that puts those photos front and center on what looks like the Betabrand home page. (In fact, it’s a personalized version made just for them.) In the future, one will be able to shop by only viewing things that interest friends in their social circles. In some cases, they may limit the purchase of a particular item to only one person in a social circle to ensure exclusivity.
The company was founded by Chris Lindland who previously invented Cordarounds. We are excited to work with the team. And if you happen to see us wearing some cool new clothes around town, it’s probably Betabrand gear!
A New Investment Theme? You Tell Us.
At Foundry Group, we spend a lot of time thinking about our Thematic Investing Approach. We both rethink our current strategies within existing themes and also talk about what big picture and transformative trends are occurring that may lead to new themes.
Previously, we’ve unearthed themes after we’ve made several initial investments in an area and have spent enough time that we’ve been satisfied that we’ve found an area of opportunity that we can invest in over a ten to twenty year life span. Prime examples of this were our February 2011 unveiling of our Distribution theme and our April 2011 post about our Adhesive theme, which itself emerged out of our Glue theme.
Recently, we’ve invested in a couple of companies that have caused us to examine whether or not we’ve found an investment area that qualifies as a new theme. But instead of holding our thought process behind closed doors as we normally do, we’ve decided to try a new experiment: we are going to unearth our current thinking and solicit your responses. Consider this “Foundry Group Thinking Out Loud.”
What’s the potential new theme? For now, let’s call it “Marketplace.”
We’ve been spending a lot of time thinking about marketplaces – particularly in the past year, but really dating back to investments we’ve made over the past decade in companies such as Service Magic (now HomeAdvisor) and Trada. Specifically, with the success of companies like Airbnb, Uber, and Etsy it appears to us that interesting and valuable companies can continue to be built by bringing transactions that have yet to be thought of as ripe for online disruption, especially if there are some specific scale or operational challenges in doing so that we believe can be solved to create a sustainable competitive advantage.
Not any old marketplace will do, however. We believe that there must be an inherent suppressed supply as well as a demand – the market needs to work for both participants. We’re particularly intrigued with markets where the goods or services in question exist already, where full demand has been difficult to obtain on an individual basis. In the case of Airbnb, people had an unfulfilled demand for places to stay outside of the traditional hotel market while others had spare bedrooms and homes to rent. In the case of Uber, there was a massive supply of unused car service operators while people sat frustrated in cities that did not have enough cabs. The “inventory” previously existed, but it was nearly impossible to expose it efficiently before nearly ubiquitous connectivity and computation came along.
In both these cases there is also a factor of time – the Uber driver can sell minutes that he is not otherwise working and if they don’t the supply simply goes unfulfilled. Airbnb has the same dynamic. We think of this type of market as “remnant asset monetization.” When real-time demand and location are important to the equation, mobile is the “killer app” while other types of friction may be best served via more traditional web applications.
One of our first investments in a remnant marketplace was PivotDesk, which is creating a end-to-end marketplace for remnant office space offering leaseholders the ability to connect with small businesses in a way that previous has not existed.
Not all of these marketplaces deal with remnant assets, however. (Some people have coined this remnant asset monetization as “collaborative consumption”). For example, as Uber continues to mature, we see many operators buying additional cars to fulfil the demand. Our recent investment in Sidetour has allowed the company to create a marketplace for people to discover and book unique experiences offered by hosts with specific expertise in their trade. While to some extent this is fulfilling unmet demand, like Uber, Sidetour is seeing hosts come up with new ideas for experience that leverage their expertise which is akin to buying new cars to fulfill demand.
What we are focused on are large markets, with known supply and demand dynamics, that have some sort of friction that previously disintermediated buyers and sellers. Additionally, we are not focused on regulated markets. For instance, there is much inefficiency in the medical space, but the spectre of regulations makes this marketplace uninteresting to us.
So is this a new theme for us? We don’t know yet. We know that we are very interested in the dynamics here and have looked at a lot more companies than we’ve funded, but there feels like there is something “more” here than just a few one off investments.
Let us know what you think. Even better, if you are an entrepreneur building a business like this, reach out to us. We would love to learn from you.
Our investment in isocket
Today isocket announced an $8M Series A financing led by Foundry Group. isocket is pioneering the concept of “programmatic direct buying” of online advertising – connecting buyers and sellers of premium display inventory together on the isocket platform to streamline and make more efficient the process of buying and selling premium display. By making the traditionally very manual direct ad sales process easier, isocket has created the largest marketplace for direct ad buys. This means more high value demand coming straight to publishers doors, and more premium reach for advertisers with less overhead and more synergy with their RTB campaigns.
At Foundry we’ve made a number of investment in our Adhesive theme that are bringing technology to the online advertising ecosystem, including several that are focused on programmatic (meaning machine to machine) trading – specifically AdMeld (which was purchased by Google last December) and Triggit (the leading onramp to Facebook’s burgeoning exchange). Like most of the historic investment around programmatic, both AdMeld and Triggit are focused on that large swath of inventory that publishers don’t sell with their direct sales force, known in the industry as remnant or non-premium. With the large volumes and relatively low unit price points (not to mention the ability to target across huge audience segments), this was a logical place for this programmatic technology to enter the display ecosystem. But isocket is tackling the next frontier of programmatic buying and selling – building a platform that brings this same type of efficiency to the direct sold side of the business. To this day, direct sold inventory relies on email and faxes to transact – adding significant cost to the process of buying and selling house ads. It is this cost that isocket is attacking by building technology that helps both publishers and advertisers connect and transact more seamlessly.
We’ve had our eye on this space for some time and have evaluated a number of the emerging companies that are starting to focus on this problem. We believe that isocket Founder and CEO John Ramey has assembled the best team and has built the best product (and as a result the best customer base) to attack this problem. We’re thrilled to have isocket as part of the Foundry family! You can read more about this investment on Seth’s blog here.
