Homebound aims to help solve Austin’s housing shortage problem

The sheer volume of people migrating to Austin from all over the country, but particularly from the San Francisco Bay Area, has been making headlines for a while now.

One result of this continued migration is a steady surge in housing prices due to increased demand and low inventory that dropped to nearly zero earlier this year. Now, Homebound, a Santa Rosa, California-based tech-enabled homebuilding startup, is entering the Austin market with the goal of helping ease some of the pain felt in the city by offering an alternative to buying existing homes.

Homebound has raised about $73 million over the years from the likes of Google Ventures, Fifth Wall, Khosla, Sound Ventures, Atomic and Thrive Capital. It raised a $35 million Series B last April and then closed on a $20 million convertible note late last year. CEO Nikki Pechet and Atomic managing partner Jack Abraham founded the company in 2017 after Abraham lost his home to wildfires.

Essentially serving as a virtual general contractor, Homebound combines technology and a network for “vetted” and licensed building “experts” to manage the new home construction from the design phase to completion. The startup has developed tools to track and manage hundreds of unique tasks associated with building a home.

Up until this point, Homebound has been focused on helping homeowners navigate the challenges and complexities of rebuilding after wildfires in California. But this month, Homebound will be expanding to Austin, its first non-disaster market, with the goal of taking learnings from those rebuilds and applying the same “streamlined, tech-enabled building process” to make custom homebuilding an option for local homeowners.

I talked with Homebound’s CEO and co-founder, Nikki Pechet, to learn more.

With Homebound, she said, the company is out to serve as a “next gen” homebuilder to make it possible “for anyone, anywhere to build a home.”

Austin’s housing market is definitely overheated, with homes going 10-30% above asking in some cases (I should know, I live here).

“Homeowners have been reaching out to us from across the country asking us to come to their market,” Pechet said. “We’re already seeing Austin grow faster than any of our other markets did in their early days. It’s going to be a huge market for us.”

It’s a model Pechet envisions replicating in other cities with similar housing supply issues such as Miami, Tampa, Raleigh and Charlotte.

“This is just the start,” Pechet said. “We’re taking the platform to markets across the country to help exactly with this issue.”

The company starts by helping a potential homeowner identify land they want to build on, or help them find a lot among the inventory Homebound has already built up. From there, it can help with everything from architectural plans to design to actual construction via its platform. Homebound offers a set of plans for people to choose from, with varying levels of customization.

Building costs for a typical single-family home in the Austin area will start around $300,000 depending on the size, complexity of house, lot size and location. That does not include land cost. Some people are opting to build second units on existing properties.

“In most cases, people can build a new home for less than they can pay for an existing home just because of the dynamics,” Pechet said.

Austin’s newest unicorn: The Zebra raises $150M after doubling revenue in 2020

The Zebra, an Austin-based company that operates an insurance comparison site, has raised $150 million in a Series D round that propels it into unicorn territory.

Both the round size and valuation are a substantial bump from the $38.5 million Series C that Austin-based The Zebra raised in February of 2020. (The company would not disclose its valuation at that time, saying now only that its new valuation of over $1 billion is a “nice step up.”)

The Zebra also would not disclose the name of the firm that led its Series D round, but sources familiar with the deal said it was London-based Hedosophia. Existing backers Weatherford Capital and Accel also participated in the funding event.

The round size also is bigger than all of The Zebra’s prior rounds combined, bringing the company’s total raised to $261.5 million since its 2012 inception. Previous backers also include Silverton Partners, Ballast Point Ventures, Daher Capital, Floodgate Fund, The Zebra CEO Keith Melnick, KDT and others. 

According to Melnick, the round was all primary, and included no debt or secondary.

The Zebra started out as a site for people looking for auto insurance via its real-time quote comparison tool. The company partners with the top 10 auto insurance carriers in the U.S. Over time, it’s also “naturally” evolved to offer homeowners insurance with the goal of eventually branching out into renters and life insurance. It recently launched a dedicated home and auto bundled product, although much of its recent growth still revolves around its core auto offering, according to Melnick.

Like many other financial services companies, The Zebra has benefited from the big consumer shift to digital services since the beginning of the COVID-19 pandemic.

And we know this because the company is one of the few that are refreshingly open about their financials. The Zebra doubled its net revenue in 2020 to $79 million compared to $37 million in 2019, according to Melnick, who is former president of travel metasearch engine Kayak. March marked the company’s highest-performing month ever, he said, with revenue totaling $12.5 million — putting the company on track to achieve an annual run rate of $150 million this year. For some context, that’s up from $8 million in September of 2020 and $6 million in May of 2020.

Also, its revenue per applicant has grown at a clip of 100% year over year, according to Melnick. And The Zebra has increased its headcount to over 325, compared to about 200 in early 2020.

“We’ve definitely improved our relationships with carriers and seen more carrier participation as they continue to embrace our model,” Melnick said. “And we’ve leaned more into brand marketing efforts.”

The Zebra CEO Keith Melnick. Image courtesy of The Zebra

The company was even profitable for a couple of months last year, somewhat “unintentionally,” according to Melnick.

“We’re not highly unprofitable or burning through money like crazy,” he told TechCrunch. “This new raise wasn’t to fund operations. It’s more about accelerating growth and some of our product plans. We’re pulling forward things that were planned for later in time. We still had a nice chunk of money sitting on our balance sheet.”

The company also plans to use its new capital to do more hiring and focus strongly on continuing to build The Zebra’s brand, according to Melnick. Some of the things the company is planning include a national advertising campaign and adding tools and information so it can serve as an “insurance advisor,” and not just a site that refers people to carriers. It’s also planning to create more “personalized experiences and results” via machine learning.

“We are accelerating our efforts to make The Zebra a household name,” Melnick said. “And we want a deeper connection with our users.” It also aims to be there for a consumer through their lifecycle — as they move from being renters to homeowners, for example.

And while an IPO is not out of the question, he emphasizes that it’s not the company’s main objective at this time.

“I definitely try not to get locked on to a particular exit strategy. I just want to make sure we continue to build the best company we can. And then, I think the exit will make itself apparent,” Melnick said. “I’m not blind and am very aware that public market valuations are strong right now and that may be the right decision for us, but for now, that’s not the ultimate goal for me.”

To the CEO, there’s still plenty of runway.

“This is a big milestone, but I do feel like for us that this is just the beginning,” he said. “We’ve just scratched the surface of it.”

Early investor Mark Cuban believes the company is at an inflection point.

” ‘Startup’ isn’t the right word anymore,” he said in a written statement. “The Zebra is a full fledged tech company that is taking on – and solving – some of the biggest challenges in the $638B insurance industry.”

Accel Partner John Locke said the firm has tripled down on its investment in The Zebra because of its confidence in not only what the company is doing but also its potential.

“In an increasingly noisy insurance landscape that includes insurtechs and traditional carriers, giving consumers the ability to compare everything in one place is is more and more valuable,” he told TechCrunch. “I think The Zebra has really seized the mantle of becoming the go-to site for people to compare insurance and then that’s showing up in the numbers, referral traffic and fundraise interest.”

6 VCs talk the future of Austin’s exploding startup ecosystem

For years now, a growing number of tech companies — large and small — have either relocated their headquarters to Austin or opened another office or campus in the Texas capital. They’ve been drawn to the city for a number of factors, including its laid-back lifestyle, no state tax, a business-friendly environment and lower cost of living (for now).

The impact on the city’s startup ecosystem is noticeable in the growing number of entrepreneurs (many of whom worked at some of the tech giants who have a big presence in the city) and investors calling Austin home.

Most recently, Tesla’s plans to build a gigafactory in the city and Oracle’s announcement that it was relocating its headquarters here have made national headlines.

The comparisons to the Bay Area abound — from the burgeoning and maturing startup scene to an overheated and competitive housing market.

All the while, venture capitalists see several key areas of opportunities. At one point, Austin was once a big enterprise software city. While software is still big here, a number of other sectors are growing including CPG (consumer packaged goods) and real estate tech, among others.

What follows is a survey of some of the top VCs in the city and their projections about the growth of Austin’s ecosystem.

Here’s who we spoke to:

  • Eric Engineer, S3 Ventures
  • Morgan Flager, Silverton Partners
  • Joshua Baer, Capital Factory
  • Carey Smith, Unorthodox Ventures
  • Krishna Srinivasan, LiveOak Venture Partners
  •  Zaz Floreani, Next Coast Ventures

Where do you see Austin’s startup scene five years from now? The city has attracted a wide range of people over the years, including more big tech and startups very recently. How will it add up to something more than the sum of the parts?

Eric Engineer of S3 Ventures believes that by 2030, the Texas startup ecosystem could be the country’s second largest.

“Tech ecosystems benefit from virtuous cycles. As more talented people move to Texas, more capital will follow them, which will then attract more talent, and so on,” he said.

Morgan Flager of 16-year-old Silverton Partners says since Silverton’s inception more than 16 years ago, the state’s largest VC firm has always bet on Austin and, more broadly, on Texas.

“We’ve always felt that if Austin wins, we win, and that’s how we’ve run our business,” he says. “But we are just one organization, and now we are joined by many others who are also betting on Austin and want to do their part to make this ecosystem better…Moving forward, a critical component of success is fostering this existing philosophy of community collaboration, which has already played a part in making Austin such an attractive place to be. Austin is a place where people want to succeed by helping their community succeed, and they aren’t willing to sacrifice the former for the latter. If we continue to hold on to that core philosophy as we grow, we’re in for an amazing future.”

Joshua Baer of Capital Factory believes that in 5 years from now, Austin will have gone from “up and coming” to “arrived” and from the top of the Tier 2 cities to a competitive Tier 1 city. Two of the big signs of this, he predicted, will be a new cohort of Austin unicorns from the likes of Aceable, Apptronik, Disco, Eagle Eye, Everlywell, ICON, and Zen Business combined with big Series A funding rounds of the likes the city has not seen since the days when there was only one big VC firm in town called Austin Ventures.

Unorthodox Ventures Founding Contrarian Carey Smith hesitates to predict, noting that it’s hard enough just to characterize the scene as it is right now.

“There are so many companies of so many different sizes doing so many different things, and there isn’t really a unifying characteristic beyond growth and innovation. It really could go any direction,” he says.

LiveOak Ventures’ Srinivasa points out that Texas has tremendous number of Fortune 500 companies and, as a result, folks with deep domain in major industries such as energy, healthcare, real estate, hospitality and retail.

“This domain knowledge when cross-pollinated with the surging tech talent from big tech and startups has already had a multiplicative effect and is further accelerating entrepreneurial activity,” he said. Besides big tech talent and the continued maturation of the current startup ecosystem that is already underway, we will all continue to spawn an even greater number of incredible category leaders in the years to come. As such, we feel the Austin startup scene is poised to grow faster than ever before.”

Floreani of Next Coast Ventures projects that in five years, Austin will see signs of a maturity of the current market with potentially half a dozen unicorns and half a dozen startups finally going public.

Remote work is pushing and pulling the global workforce. This means that some offices will disappear from Austin, even with more companies moving in, but also more locals who work remotely for companies elsewhere. How do you see these factors impacting the city’s tech evolution?

Eric Engineer of S3 Ventures says that talented people are choosing Austin because of all it has to offer from a lifestyle perspective – not just the job. He believes remote work could ease some of Austin’s growing pains as workers will commute fewer days per week. That will give the city more time to develop the additional transportation infrastructure it needs to handle the continued growth, Engineer said.

Silverton Partners’ Flager thinks remote work shifts the playing field some because it allows workers more choice with respect to where they want to live versus where they have to live to get the job they want.  And while it will give people more freedom and make certain things we do more efficient, he thinks most roles will require a hybrid solution where remote work is complemented by in-person interactions. “Thankfully, Austin has both — it is a desirable place to live and it has a rapidly growing tech community,” he said. “This is part of the reason we’re seeing such an influx of talent moving here at the moment.”

Joshua Baer believes that when people can work anywhere, they won’t actually work everywhere. He thinks there will be big winners that attract much more talent than other places, and that Austin will be one of the biggest winners in the tech migration of the next 5 years. “More companies will move their headquarters here, and more people will choose to work here for offices that have headquarters elsewhere,” he predicts.

Remote work doesn’t work for Unorthodox Ventures’ Carey Smith and he doesn’t believe it will work for Austin long-term. When he briefly worked from home at the start of the pandemic, he felt far less connected to the people I work with — and yet was even busier as remote work added “so much difficulty to even simple tasks.”

“I really thrive with face-to-face meetings and appreciate the hustle and bustle of the office. It keeps all of us motivated,” Smith said. “In short, it’s the lubricant that keeps my wheels turning, and I think it’s required to keep driving innovation in Austin.”

What industry sectors do you focus on within Austin (and beyond)? What is happening in Austin now that you’re most excited to fund?

Over the past 15 years, S3 Ventures has primarily investing in B2B software companies (two-thirds of its portfolio are in this space). But it has also had successful exits in consumer digital experiences and healthcare.

“Texas has an incredibly diverse economy, and so the technology innovation is also broad-based,” Engineer said. “We are seeing huge sectors of the economy (financial services, real estate, health care, education, skilled trades, hospitality, industrial, energy, manufacturing) that were slower to digitize, now start to embrace cloud-based solutions across their entire organizations.”

Silverton Partners has always been a generalist fund. That said, there are several dislocations occurring at the moment that are hard for the firm to ignore, according to Flager. Specifically, he said, there’s rapid disruption in digital health, fintech /insurtech, and education. “The playbooks in these massive industries are being rewritten and we are certainly looking for entrepreneurs who have a strong point of view relative to what the future will look like,” Flager added.

Capital Factory’s Joshua Baer believes the variety of the city’s startup scene is part of what makes it so vibrant. “If it’s hot in tech, it’s happening in Austin,” he said. Some of the areas that have been big recently include artificial intelligence and machine learning, consumer packaged goods, drones, e-commerce, healthcare, marketplaces, robotics and SaaS.

Unorthodox Ventures’ Carey Smith said his firm is focused on investing in companies making tangible products that solve real problems. And unlike many other VCs in the city, and even though it’s a big part of the culture in Austin, he’s not a fan of software. “I prefer the challenge of manufacturing consumer goods,” he said. “Beyond that, software companies lack diversity and only benefit a small sliver of society with the jobs they create. Manufacturing, on the other hand, helps everyone from GEDs to PhDs.”

LiveOak Venture Partners invests across pretty much all industries. In the past year, it has backed companies in proptech, fintech, retail, supply chain, business compliance, cyber security and edtech.

Proptech, in particular, is exciting to LiveOak, and the city has seen success in companies such as Opcity and OJO Labs. Another area with big potential are startups working in legal/compliance. Disco and Mitratech are large companies headquartered in Austin and there are exciting fast growing newcomers like Osano, Eventus and Litlingo.

For Next Coast’s Floreani, the increased number of successful B2C startups in Austin hitting scale is promising “as it cements our talent pool and secret sauce beyond Austin’s early days of being know as a semiconductor and SaaS town.”

“We still have great software entrepreneurs but we also have the DNA to do consumer and media if you consider EverlyWell, Literati, FloSports, Atmosphere, to name a few,” she said.

What are some of the local challenges you’ve encountered or seen founders struggle with? More generally, how should people looking to hire in, invest in, or relocate to Austin think about doing business in the city?

The general consensus among local investors is that Austin’s tech community is welcoming and collaborative and that they all went to serve as a resource to anyone thinking of moving to the city. S3 Ventures’ Engineer said his firm has had several recent transplants from both coasts share how they were pleasantly surprised by this culture – especially compared to what they were used to.

Silverton’s Flager acknowledges that moving is always a challenging event, but moving during COVID is certainly a class of its own.

“I’ve seen some founders struggle with finding strong community ties after relocating to Austin in the midst of a pandemic,” he said. “Almost everything is virtual and that makes integration with a new ecosystem more difficult. Part of my role as an investor and steward of the Austin ecosystem is to facilitate more connectivity within the founder community. As the vaccine rollouts continue and in-person contact becomes safer, Silverton is planning to host a series of community building events to better integrate founders moving here.”

Capitol Factory’s Baer believes Texas investors think about loss prevention more than their peers in Silicon Valley. His advice to companies? Develop two different pitches and know who you are pitching to. “The Texas pitch talks about how you have de-risked the business and the Silicon Valley pitch talks about how big this could be if it works,” he said.

For Unorthodox Ventures’ Smith advises founders to be careful of organizations in Austin or elsewhere that look to help entrepreneurs while “taking equity and not giving enough in return to justify it.”

“Founders need to make sure they are selective about the investors and advisers they take on and that they choose people who offer more than just capital,” he said.

LiveOak Ventures’ Srinivasa warns that people in Austin are not transactional and that if you come across as being transactional and strictly interact with somebody in a transactional way and not a relational way, “it rubs people the wrong way.”

“Outsiders need to be aware of this when they come here,” he said. “When making a hiring decision, it’s important to choose someone who is a good cultural fit, and not hire based solely on resume. From an investor perspective, if you want to do business here, it’s important to focus building strong relationships, besides offering attractive deal terms.”

Next Coast Ventures’ Floreani notes that hiring growth leaders has been a consistent challenge across her firm’s portfolio. “It would be great if Austin had a deeper bench of talented marketing and sales leaders,” she said.

Who are key startup people you see creating success locally, whether investors, founders or even other types of startup ecosystems roles like lawyers, designers, growth experts, etc. We’re trying to highlight the movers and shakers who outsiders might not know.

S3: Founders/CEOs – Leo Resig (Atmosphere), Jag Bath (Favor), Kim Rodriguez (Acessa), Doug Donovan (Interplay Learning), Richard Lebovitz (LeanDNA), Adelle Archer (Eterneva), Andy Ambrose (LiveOak Technology), Adam Berman (TVA Medical), Dion Cornett (Liquibase)

Investors – Rosa McCormick (Wild Basin), Oksana Malysheva (Sputnik), Adam Lipman (Ecliptic Capital), and Josh Baer / Bryan Chambers (Capital Factory)

Service Providers – Marc Nathan (E/N), John Gump (CBRE), Lathrop Smith (MLR), Austin Willis (SVB), Paul O’Brien (Mediatech)

Silverton: Heather Brunner and Jason Cohen @ WP Engine, Chuck Gordon and Mario Feghali @ Sparefoot, Jess Ewing @ Literati, Blake Garrett @Aceable, James Garvey @ Self Financial, Brian Cruver @ Alert Media, John Banczak and T.J. Clark @ TurnKey, Michelle Davey @ Wheel, Rob Taylor @ Convey and several others. 

Capital Factory: http://baer.ly/austinabc

Unorthodox Ventures: Christa Freeland built ATX Kit, a startup that supports more than 40 local food entrepreneurs with her Austin-centric snack boxes.

Bob Bridge and the Southwest Angel Network (SWAN) support startups aiming to solve serious societal challenges, including environmental, health and social justice issues.

LiveOak:  We are fortunate to have many movers and shakers here in our network. We do not wish to include one at the expense of another; that being said, we do want to recognize Dan Graham, who funds social impact startups through Notley Ventures, who has launched a fund to invest in women entrepreneurs, via the BEAM Angel Network and has played an active role in the emergence of CPG. Jim Breyer has been here for only a year and in that period has been an incredible advocate in op-eds, blog posts and interviews for Austin, the local startups and the energy of this town. That has been a big positive addition.

NextCoast Ventures: The founders of these startups have incredible growth plans for Austin: EverlyWell, Upequity, Steadily, Eterneva, Literati, FloSports, and Enboarder. Please note I may be a bit biased here as most of these are companies we have backed.

What do you think of comparisons to Silicon Valley? What impact do you think the influx of (big & small) tech companies is having on the city’s startup scene?

S3’s Engineer believes there is only one Silicon Valley, and that it is highly unlikely there will be anything comparable in the Western world.

But he thinks that while much smaller today, if the trends continue over the next ten years, the Texas ecosystem has a real shot at growing as large, if not larger, than New York and Boston.

Silverton’s Flager was born and raised in Silicon Valley. He went to school there and worked there as well. As a result, he’s not a big fan of the comparison.

“Each place is distinct with different pros and cons,” he said. “Will Austin ever overtake Silicon Valley in terms of size and activity? I really don’t know — we certainly have a long way to go. To some extent, I’m not sure that matters.”

What he does care about is that Austin retains its vibrant character and that its current growth enriches the city, rather than dilutes its energy. “It’s important to recognize that Austin’s culture has not been tech-centric,” Flager said. “Austin is a unique powerhouse of live music, great food, arts, outdoor living and ‘keeping it weird.’ ”

He adds: “As I contemplate what I admire about Silicon Valley and all the things Austin needs to do to be at that level, I tend to spend as much time thinking about what we could do differently.”

Unorthodox Ventures’ Smith believes it’s no surprise that “everyone wants to leave Silicon Valley.

“They finally figured out it’s a disaster,” he said. “As more intelligent, hardworking and curious people gather here, it’s a good thing for Austin and for VCs more broadly. One of the problems with Silicon Valley is that such a strong percentage of VC money stays there or in New York or Boston. We need more capital in Austin and other innovative cities throughout Middle America where we’re solving real problems for the everyday American. As Austin feels more and more influence from Silicon Valley, it’s so important to fund more than tech-oriented projects. Venture capitalists need to focus on basic human needs, too.”

LiveOak’s Srinivasa knows that comparisons to Silicon Valley are inevitable, and for the most part welcome when those comparisons bring broader national and international attention to Austin and reinforces its reputation as a city with a booming startup scene.

“There’s a lot of vibrancy and momentum to the startup scene here that is reminiscent of the early days of Silicon Valley — the growing number businesses being launched, the number of companies being funded, the amount of talent flowing here eager to engrain themselves in the tech community,” he said. “Yet we know there is something unique to Austin that sets it apart from any other tech hub—the collaborative spirit of the people here. There’s also an energy and excitement in this community that’s palpable. Austin has great respect for the successes Silicon Valley has brought forth, and we will incorporate their positive aspects, while forging our own path.”

Next Coast’s Floreani believes that comparison has been overused for a decade. “We are not Silicon Valley and will never be it,” she says. “I am not saying that in a negative sense. I grew up in the Bay Area. I simply believe we grow companies differently here and even though more SV talent and investors are coming to town I don’t think we will suddenly shift to a more Valley like approach to growing companies like blitz-scaling. Rather I think we will find a happy medium that incorporates fast growth and sustainability.”

Everlywell acquires two healthcare companies and forms parent Everly Health

Austin-based home lab testing kit startup Everlywell is expanding its scope considerably with two acquisitions, and a transformation that includes the establishment of a new parent company led by Everlywell CEO and co-founder Julia Cheek. The new entity, called Everly Health, will now offers services including at-home lab testing kits and education, population-scale testing through a U.S.-wide clinician network, telehealth and payer-supported/enterprise self-collected lab test.

This is a big move for Everlywell, which was found in 2015 (and which was a finalist in TechCrunch’s 2016 Disrupt SF Battlefield completion). The company has steadily iterated on its offerings, expanding its at-home testing from fertility products, to food sensitivities and allergies, and last year, to at home COVID-19 test collection.

Everly Health’s business now includes not only that kind of at-home consumer diagnostic and personal health education, but also many relationships through PWNHealth, which will rebrand to Everly Health Solutions, with health plans, employers and labs across the U.S.

Everlywell itself was actually a longtime partner of PNWHealth, which is what Cheek told me an in interview actually helped make the acquisition make so much sense to both companies. They’d been working together for years, and that collaboration had only deepened in the wake of the COVID-19 pandemic.

“What we found over the last year, was we were collaborating on all these different enterprise partnerships to offer solutions, and so our cultures are really well aligned, and our teams have worked closely together,” she said. “And we both share this common ethos that we felt the urgent need to help people and to save lives, but also this discipline around consumer-friendly and enabled care, grounded in diagnostics.”

Overall, Cheek said that the decision to go out and acquire the pieces of the puzzle needed to deliver a more comprehensive care offering was partly driven by the pandemic, but that really just drove an acceleration of what Everlywell was already beginning to see before COVID-19. Freshly capitalized with the $175 million it raised last December, the startup was in a position to make some bold moves in order to make the most of the moment.

“Before the pandemic, but especially during and looking out to post-pandemic, we have just seen this massive acceleration of the need for consumer friendly testing services,” she said. “Our business has continued to grow exponentially, even since normal doctor’s appointments resumed, orders of magnitude, 300% growth. We sat back and said, since we believe healthcare is in a watershed moment post-pandemic, where do we think we need to actually be to be able to offer a full-service diagnostic solution as this entire space grows. So it’s Everlywell as a consumer friendly brand, but it’s also this massive enterprise need for home testing, and broader consumer diagnostics.”

The new acquisitions do add some complexity to Everly Health’s business, since its Everly Health Solutions also serves a number of customers that would be considered competitive with Everlywell. Cheek points out that both businesses have a demonstrated track record of security and data integrity, compliant with HIPAA standards, and says that they’re setting up a strict firewall that will result in “complete data independence” of Everly Health Solutions to ensure there’s no possibility of anti-competitive behavior.

The companies will however share customer experience, design and product resources, however, and the plan is to build a unified brand focused on high-quality customer engagement across the board.

Everly Health hasn’t released the financial details of the transaction, but it has shared shared that PWNHealth CEO Sanjay Pingle will be acting in a transitional role in the combined company for the time being, and will serve on the board of Everly Health. Investors in PWNHealth, including Spectrum Equity, and Blue Cross/Blue Shield corporate VC Blue Venture Fund will also retain an ownership stake in Everly Health.

Planting seed investments on tech’s frontiers nets KdT Ventures $50 million for its latest fund

Like other venture investors over the past year, Cain McClary, co-founder of the investment firm KdT Ventures, recently made the jump to Austin. But unlike the rest of them, he was coming from Black Mountain, NC.

McClary had spent the better part of the last three years with his co-founder Mack Healy building out a portfolio that would be the envy of almost any investor looking at financing startups whose businesses depend on innovations at the borders of current technological achievement.

Since 2017, when the firm closed on the first $3.5 million of what ended up being a $15 million fund (they had targeted $30 million), McClary and Healy managed to find their way onto the cap table of businesses like the green chemicals manufacturer, Solugen; health diagnostics technology developer, PathAI; the Nigerian genetic dataset developer, 54Gene; the novel biomaterials developer, Checkerspot; and the genetics-focused therapy company, Dyno Therapeutics. 

That portfolio — and the subsequent top decile performance that Cambridge Associates has said comes with it — has allowed McClary and Healy to close on an oversubscribed $50 million new fund to invest in promising startup companies.

KdT co-founders Cain McClary and Mack Healy. Image Credit: KdT Ventures

Hailing from a small Tennessee town outside of Leipers Fork (itself a small Tennessee town) McClary studied medicine at Tulane and business at Stanford where he linked up with Healy through a mutual friend.

Healy, who had done stints throughout big Bay Area startups like Airbnb, Databricks, and Facebook brought the software expertise (and some capital to stake the firm) while McClary provided the life sciences know-how.

Together the two men set out to hang their investment shingle at the intersection of software and life sciences that was proving to be fertile ground for new business creation. Each company in the firm’s portfolio depends on both the advances in understanding how to code computers and living cells.

McClary had left California for personal reasons when he launched the fund in 2017 and in 2020 relocated to Austin for professional ones. Healy had already set up shop in the city and it was easier, McClary said to fly out to San Francisco to look for companies from the Austin airport than it was from Ashville.

Also, both men were placing big bets on the Dell Medical School at the University of Texas to become the breeding ground for the type of entrepreneurs that the firm is looking to back.

Mack was there… the Dell Medical School and we think it’s going to be produce the types of entrpereneurs that we want to support. Houston has a med system. I firmly believe that texas has a place at the table in the future 

“The way that we define it is that we like to invest in the physical layer of the world,” said McClary. “That includes not only medicine, but chemicals and agriculture. All of that is driven by some of the things that we have this sourcecode for the physical world.”

Mapping the unmapped corners of the frontier tech startup world means that the firm not only has a presence in Austin, but has hired principals to scour Houston and Research Triangle Park in North Carolina for hot deals.

That doesn’t mean the firm is forsaking California though. One of the most recent deals in the KdT portfolio is Andes Ag, an Emeryville, Calif.-based startup that’s applying yield-boosting microbes directly to seeds in an effort to improve crop performance for farmers.

“The KdT team speaks the language of science, making them an outlier in this area of venture investing,” said JD Montgomery of Canterbury Consulting, a limited partner in KdT’s first and second fund. “They are passionate about building the science companies of the future that will tackle some of the significant challenges our world faces in the next decade and beyond.”

Chicago Ventures raises $63M to back seed-stage startups located anywhere but Silicon Valley

Buzzy mega-rounds and high-profile IPOs often dominate headlines. But many of those companies were once early-stage and scrapping to raise a seed round.

Today, Chicago Ventures, a VC firm that often leads seed-stage rounds, announced the close of its third fund — a $63 million vehicle that it’s already put to work.

Chicago Ventures (which is based in Chicago, where else?) has a very specific set of criteria when it looks to back companies. For one, as mentioned, it not only wants to back seed-stage startups, it usually leads those rounds. The firm is targeting 25 investments out of its new fund with an average check size of $1.5 million to $2 million.

As evidence, it has so far backed 11 companies out of this third fund, leading 10 of those rounds. The startups include CognitOps, CoPilot, Forager, Interior Define, NOCD, OneRail, PreFix and Ureeka.

The firm also is focused on investing in companies located out of the traditional hotspots of Silicon Valley and New York. Six of its most recent investments were in Chicago-based startups, two in Austin (where it recently opened an office), one in Orlando, Florida, and one in Los Angeles.

Chicago Ventures prides itself in identifying, and backing, “overlooked” companies. It was founded in 2012 under the premise that enduring companies could be built “anywhere” and not restricted to “a few select area codes.”

“Only a handful of funds consistently lead seed rounds. Tag-along, momentum-based investing is the norm,” the firm said in a statement. “The industry’s attention still converges on industries and geographies with rich histories of innovation. We fill these gaps. We lead seed rounds before it’s obvious, and serve as active, operationally-involved partners during a company’s earliest days. We invest off the coasts.”

Since its inception, the firm’s portfolio companies have raised more than $1.5 billion in follow-on capital. Seventeen of those companies are now valued over $100 million, including Cameo, business software marketplace G2 and logistics software company project44.

Chicago Ventures closed its second fund in 2016 — which included a $60 million main fund and a $6 million sidecar fund. The firm opted not to go the sidecar route this time around. 

In conjunction with the new fund, Chicago Ventures also announced that it has promoted Peter Christman and Lindsay Knight to partner. Christman leads investments in companies rebuilding old-line enterprise workflows and consumer products expanding access to care and financial well-being. Knight leads the firm’s post-investment operations, including talent, business development and functional best practice sharing.

Chicago Ventures has also named Jackie DiMonte to the team as a new partner. DiMonte comes from Hyde Park Venture Partners, where she led early-stage, enterprise investments. An engineer by training, DiMonte is based in Austin, where Chicago Ventures has made 10 investments since 2015.

In 2020, the dollars invested into seed-stage startups in the United States had an up-and-down year that TechCrunch explored in this piece. Also, the pattern of rising seed-check sizes seen in prior years continued, despite the tumultuous business climate.

From food delivery to housing: Former Favor founders raise millions for Sunroom Rentals

Real estate tech startup Sunroom Rentals, which leases units on behalf of property managers and apartment owners, has raised $11 million in a Series A round of funding led by Gigafund.

Ben Doherty and Zachary Maurais, former founders of the delivery app Favor, launched Sunroom in May 2018 with the mission of “boosting the profitability” of mid-size property managers and apartment owners by giving them a way to outsource their leasing operations.

The pair sold Favor to Texas grocer H-E-B in 2018 and soon after shifted their focus on building out Sunroom. The Austin-based company has developed an app that it says gives renters a way to tour, apply for and lease a unit “entirely online.” COVID-19 has led to more renters wanting virtual ways to explore and secure rental units. Mobile-first, Maurais noted, is particularly appealing to millennials and Gen Zers.

“Personally, we love to create products that fulfill consumer’s most basic needs,” said Maurais, the company’s president. “With food under our belt, we decided to focus on housing.”

While one might wonder what the parallels between food delivery and housing might be beyond fulfilling consumers’ needs, CEO Doherty said the rental market in 2021 looks a lot like the food delivery market in 2013.

“In 2013, Grubhub had successfully put many restaurant menus online, but most of the transactions and delivery process was still offline,” he told TechCrunch. “We’re in a similar position with the rental market, as the majority of rental listings are online, but touring, applying or leasing units is still done offline.”

Since its launch, Sunroom Rentals has signed more than 2,000 leases and had over 100,000 renters sign up for its services in fast-growing Austin, where it focused its initial efforts.

“According to the U.S. Census, that represents roughly 10% of renters in the greater Austin metro,” Maurais said. “Instead of going shallow and wide nationally, we decided to go deep in markets, in an effort to gain network effects, which was a strategy that worked well for us at Favor.”

Sunroom Rentals claims that it’s leasing units five days faster than the market average. This benefits property managers, Doherty said, because they can grow quicker “while improving leasing performance.”

Looking ahead, the company will use the funding to expand across Texas, including in Houston, San Antonio and Dallas. It will also invest in its partner portal, which aims to give owners and property managers a way to view real-time data on leasing performance.

Sunroom Rentals currently has 18 employees with the goal of more than doubling its headcount this year. It’s in particular looking to hire across its engineering, product and sales departments.

As mentioned above, Gigafund led the Series A financing, which included participation from NextGen Venture Partners, Calpoly Ventures and a slew of angel investors, including Gokul Rajaram (Google & Square) and Homeward’s Tim Heyl, among others. Existing backers include Founders Fund Seed, Draper Associates, Boost VC and Capital Factory (among many others). The round marked Sunroom’s first “priced” round, meaning the first time it’s given up stock.

Jonathan Basset, managing partner at NextGen Venture Partners, believes Sunroom was essentially in the right place at the right time and “on trend with touchless leasing even before COVID hit.”

“I watched them build a profitable consumer marketplace in a competitive market with Favor and was impressed with them as operators,” he said. “These businesses have a surprising amount of similarities and I’m confident they can rise to the challenge.

Last week, TechCrunch reported on the raise of another startup operating in this increasingly crowded space. Seattle-based Knock — a company that has developed tools to give property management companies a competitive edge — raised $20 million in a growth funding round led by Fifth Wall Ventures.

Knock’s goal is to provide CRM tools to modernize front office operations for these companies so they can do things like offer virtual tours and communicate with renters via text, email or social media from “a single conversation screen.” For renters, it offers an easier way to communicate and engage with landlords.

Maurais said the two differ in that Knock is a CRM built for leasing agents with a SAAS model where as Sunroom is a marketplace, where renters match, tour and apply with partnered properties.

“Sunroom also provides a suite of leasing & analytics software to its partners and generates both transactional and subscription revenues,” he added.

Will the Texas winter disaster deter further tech migration?

Austin is known for its usually mild winters. But on February 12, a winter storm hit the state — leading to over a week of freezing temperatures. This has resulted in a statewide disaster with millions of Texas residents losing power or water, or both.

It’s too early to tell the exact toll this has all taken in loss of life, property damage and economic activity. But it’s clear that this disaster is, and will continue to be, devastating on many levels. Austin-area hospitals even lost water this week, as an indication of how bad things have been.

Since last Thursday, my own household lost power and got it back multiple times. On February 17, we lost water, with no idea of when it will be restored. I realize there are many worse off than me, so I’ll spare you the pity party, but it’s definitely been a humbling experience. Boiling snow/ice for toilet water and rationing the little bottled water we had left with fear of frozen/bursting pipes. At least we have been warm the past couple of days, as many still don’t have power.

Meanwhile, over the past few months (and years, really), Austin has been making headlines for other news — namely the fact that so many tech companies, founders (ahem, Elon) and investors are either moving their headquarters here (Oracle), building significant factories (Tesla) or offices (Apple, Google, Facebook) here, or are thinking about relocating entirely.

The lack of state income taxes has been a big draw, as well as the housing/land/office prices that are affordable when compared to those in the Bay Area. This is nothing new, but only accelerated as the pandemic has encouraged/forced more remote work.

Ironically, some of the very things that have led to the state being more attractive to companies have also contributed to the crisis: Fewer taxes means less money for infrastructure, for one.

But it goes beyond that. Many other states have had freezing cold temperatures without the loss of power and water that Texas is currently experiencing. As The Washington Post reported earlier this week, the state’s choice to deregulate electricity led to “a financial structure for power generation that offers no incentives to power plant operators to prepare for winter. In the name of deregulation and free markets, critics say, Texas has created an electric grid that puts an emphasis on cheap prices over reliable service.”

Even Elon shared his disappointment on Twitter:

It’s fair to say Texas has attracted widespread criticism of its handling of this new crisis — both in terms of its lack of preparation and mismanagement (Sen. Cruz, we’re looking at you). But are the events of the past week going to take away some of the shine on Austin as a potential relocation destination for tech and investors? Will this deter people from wanting to move here? Isn’t it also ironic that some folks who didn’t want to move here due to the scorching summer temperatures are now also slamming the city/state for the impacts of a major winter storm?

So I did what many other enterprising tech reporters might do in this situation, and took to Twitter. The results were pretty much as expected — varied and passionate on either side.

There were many tweets from Austinites who defended their city and praised how its residents have come together during crises:

Then there were some tweets from people who lived here but are disgusted and disappointed:

There were also some tweets from others who said they were so turned off they’d never contemplate moving to Texas or that they were dismayed by the lack of preparation:

And there were those who don’t live here but scoffed at the notion that this was enough to keep people away, while others pointed out that natural disasters happen all over:

Then there were those who joked that the disaster was engineered as a ploy to “keep California people away,” or at least might have that effect:

I have lived on all three coasts — East, West and Gulf. There are pluses and minuses to each. This likely is enough of a deterrent to keep people away. But I will say that the state could — and should — have been more prepared when it decided to deregulate electricity. I am heartbroken at all the suffering people in the city and state are dealing with and for now, just want to see things get back to “normal” as soon as possible so the only crisis we’re dealing with is the COVID-19 pandemic. Never thought we’d look back fondly on those days.

Here’s to hoping that migration of techies can build solutions that could maybe help prevent similar disasters in the future.

UpEquity raises $25 million in equity and debt for its cash-pay mortgage lending service

With a stated goal of aligning the mortgage industry with consumer interests, Austin-based UpEquity has raised $25 million in equity and debt funding to expand its business.

Chief executive Tim Herman started the mortgage lending company to take advantage of what he saw as inefficiencies in the $2 trillion U.S. housing market.

Existing financial services and property technology companies treat the symptom and not the cause of market inefficiencies, said Herman.

The company makes free cash offers but charges 2.5% on the loans it makes to homebuyers to give them the cash they need to make an offer before having to go through the traditional process of taking out a home loan through a bank. Then the homeowners can make payments directly to UpEquity to pay off the mortgage on the house.

“Our cash offer works like a guarantee that during the escrow period we will be able to get the mortgage in place,” Herman said.

A U.S. Naval Academy graduate and former fighter pilot, Herman saw real estate as the only avenue to true wealth creation open to him and his family given their years on the road and lack of available investment capital.

After the Navy, Herman went to Harvard Business School and met his co-founder Louis Wilson. It was in Boston while in B-School that the two men started UpEquity.

They since relocated to Austin because of its booming housing market and relatively more relaxed regulatory environment.

Ultimately, the pitch to customers is the ability to make an all-cash offer, which dramatically improves the likelihood of closing on a house. It’s a luxury that roughly 90 percent of Americans can’t afford, Herman said. There’s no downside for selling homeowners, if a purchaser doesn’t end up buying the home then UpEquity owns the house.

Of all of the 300 deals the company has done so far, only two have failed.

That’s why a company like UpEquity can raise $7.5 million in venture and $17.5 million in venture debt to start making loans.

The company’s A round was led by Next Coast Ventures and UpEquity said it would use the money to fund product development that can slash the time-to-close for the real estate agents that act as the company’s sales channel to ten days.

“Our goal is to finally align the mortgage industry with consumer interests,” said UpEquity Co-Founder and CEO Tim Herman. “This funding is validation that consumers, real estate agents and venture investors understand the power of removing friction from the homebuying process, not only for personal advancement, but to attain the American Dream.”

So far the company has expanded its operations from Texas into Colorado, Florida and California, where it has originated $100 million in mortgages in 2020.

“As real estate continues to evolve in the face of limited supply and tight competition, UpEquity is at the helm of PropTech’s growing capabilities,” said Thomas Ball, managing director at Next Coast Ventures. “Most innovation has focused on the front end, but until now, nobody has expedited what happens after the borrower submits an application. UpEquity has the team, talent and technology to not only succeed, but to disrupt and emerge as the leader in the mortgage lending marketplace.”

 

Mate Fertility is aiming to create a franchise of fertility clinics open to everyone

Mate Fertility, the new Los Angeles startup launching today with $2.8 million in financing, has a mission to create a more inclusive network of family planning services for people struggling with the high cost and low availability of fertility clinics around the country.

Founded by serial entrepreneur Oliver Bogner and his brother Gabriel, Mate was born from both brothers’ struggles with trying to start a family. For Oliver, that was when he and his partner were looking at IVF as a way to screen for the BRCA1 gene from her embryos after she found out that she was a carrier. Meanwhile, Gabriel, an IVF baby who is a member of the LGBTQ community, felt that the services for family planning weren’t always accepting of the gay community.

“IVF and surrogacy were the only options for me to have kids,” the younger Bogner said. “And the queer community has been locked out of these services. It became my mission to democratize healthcare for my community.”

Once Oliver started doing research into the market and discovered that there were only 460 fertility clinics in the U.S. and that over 80% were concentrated in five major metropolitan areas, he knew there was an opportunity for a new business.

Mate Fertility co-founders Gabriel and Oliver Bogner. Image Credit: Mate Fertility

The Bogner brothers enlisted famed reproductive endocrinologist Dr. Jeffrey Steinberg, who trained under the British doctors that pioneered In Vitro Fertilization, to come on board and together the three men launched Mate Fertility.

The co-founders have enlisted an impressive array of financiers to back their business, boasting an investor base that includes Andy Dunn, the founder of Bonobos; Peter Pham, the co-founder of the LA-based consumer-focused company incubator, Science; Patrick Schwarzenegger; Brian Schwartz; the investors behind Roman, Allbirds and Caspar, Rosecliff Ventures; Pure Imagination Brands; Mana Ventures; and Maschmeyer Group Ventures.

Mate is launching first in Oklahoma City, where two legacy providers are charging anywhere from 10% to 15% above the national average for family planning services. “We’re going in at anywhere from 50% to 60% lower costs than they are,” said Oliver Bogner.

The company said it would offer egg freezing services for as low as $5,000 and IVF for $9,400*, while the national average for IVF cycle costs ranges from $15,000 to $18,000, including medication.

“We’re still making healthy margins that allow us to operate the business. It’s not a matter of these procedures costing more. These 460 clinics are allowed to radically mark up the process,” said the elder Bogner. “One of these clinics is making approximately 1,000% profit margin on every procedure.”

Given the fact that the company estimates roughly 18% of the U.S. population will face some fertility issue, the need for more clinics — setting aside the lower costs — would be enormous.

We need 3,000 clinics to properly serve our population; today we have 460. There’s a huge gap in care,” said Bogner. 

The company is working with the architects behind Dry Bar, Heitler Houstoun, to design its clinics in an effort to popularize and destigmatize the services.

“We were really intrigued by Oliver and Gabe. In terms of what the biggest risks are… you’re not playing around. You’re not creating software, you’re creating life,” said Adam Struck, the founder of Mate Fertility’s lead investment firm, Struck Capital. “The ultimate KPI which is success rate for our patients is top tier. There’s a lot that Mate is doing to ensure that some of the best medical personnel in the world are part of the Mate mission.” 

Mate Fertility offers modern EHR platforms, an e-pharmacy, proven protocols, payment assistance and digital patient and provider portals for services that include IVF, genetic screening, egg freezing, surrogacy and LGBTQ family building treatments, the company said.

Its first locations will be clinics in Oklahoma City, Anchorage, Alaska; Bakersfield, California; Lancaster, Pennsylvania; Austin, Texas; and Portland, Oregon.

*An earlier version of this story cited the company’s IVF price as $8,000.