Thought waves on seed venture

Checkbox is a no code platform that enables non-technical business experts to build automated solutions that replace the manual tasks that bog down their day.

Checkbox combines forms automation, decisioning support, document automation, and workflow automation in a single platform to enable complete end-to-end Expert Process Automation (”EPA”) with a seamless end-user experience. EPA enables an organization to capitalize on the knowledge of its experts and build that into technology created by none other than those experts themselves. The automation of expert workflows is crucial to driving productivity gains within enterprises as no matter how repetitive and mundane the task, an expert’s knowledge is always required, drawing them away from the highest value-adding activities.

The team at Tidal tracked the business for nearly six months before the founders, Evan Wong and James Han, made the decision to raise a pre-Series A round with Tidal and Sequoia India's Surge. We spent that period white-boarding with Evan and James during monthly workshops that covered GTM, customer segmentation, and Series A tactics. We've been very impressed with the founders' responsiveness to advice, speed of execution, and ability to set and meet their forecasts.

Markets with Tailwinds

A crucial part of any investment process at Tidal is the ‘thesis development stage’. In fact, this often precedes an individual investment opportunity. As with most VCs, we want to invest behind markets with tailwinds. In other words, it’s important to get the timing right and to be able to answer the question “Why Now”.

A note on the No Code revolution

In the same way PCs democratized software usage, APIs democratized software connectivity and the cloud democratized the purchase and deployment of software. No Code will usher in the next wave of enterprise innovation by democratizing technical skillsets...this profound generational shift has the power to touch every software market and every user across the enterprise.
~ Techcrunch

We are in the midst of a No Code / Low Code movement, democratizing the ability to create software applications without the requirement to code. This removes internal bottlenecks caused by barriers to accessing IT and enables the business to address customer needs (through internal Dev & IT teams) without de-prioritizing internal productivity needs. The best part is that the creator of these internal automation tools is also the commercial expert, which has the benefit of producing the most relevant output as well as capturing a greater proportion of organizational IP within the tools themselves, therefore reducing the IP leakage that often comes with knowledge workers departing a company.

From RPA to EPA

Whilst often labelled as late adopters, enterprises have been turning to technology to drive efficiency gains for decades. In fact, it was estimated that enterprises spent USD 550 billion on custom software in 2021. The big shift we have seen in the past five years is towards automation. The first wave of enterprise automation is referred to as Robotic Process Automation (”RPA”), which automates individual tasks, removing them completely from the hands of humans. RPA saw a huge tailwind push during the pandemic, as companies sought to automate what was previously simplified by having people in the same office together. A leader in this space is UIPath, who were early to market in 2005 and IPO’d in 2021 as one of the largest US software IPOs in history (at that time, anyhow). Though it was the 12 months pre-pandemic when Gartner reported annual growth in RPA of sixty-three percent.

Next up was Business Process Automation, or BPA. This took RPA one step further by automating workflows and not just individual tasks. Human engagement was solicited through the process as and when required, but the workflow itself was overseen by the software. Technology is leveraged to perform a sequence of repetitive tasks where manual efforts are otherwise substituted. This market is estimated to reach $19.4 billion by 2026, up from $9.8 billion in 2020, growing at a CAGR of 12.2%.

And that brings us to Expert Process Automation, or EPA, what we believe is the next wave of the ‘no-code revolution’. EPA tackles problems that are higher up the value chain.

Unlike RPA, which is about replicating the exact actions a human user would take, EPA is about replicating the exact decisions and actions an expert would take.

Products that change the game

Enterprise teams need to automate manual work in order to drive much-needed productivity to remain competitive, but traditional software development software is typically not accessible or feasible (or incredibly expensive). Enterprises often turn to custom software to build out automation, which can address the specific needs of a business. However, each new solution has to play nice with legacy systems and processes and balance the competing interests of multiple internal teams, as well as be continually maintained over its lifespan. This doesn’t strike me as the most efficient option...

Enter Checkbox. Using drag and drop, expert knowledge workers can quickly and efficiently create and deploy software solutions that automate repeatable workflows. Internal IT resources are not required to unlock these new solutions (which can focus on the much higher value, customer-facing, needs) and the cost of Checkbox pales in comparison to leveraging third-party consultants.

We think Checkbox can be famous for enabling its users to quickly spin up a piece of software that automates some of their own workflows, striking that perfect balance between technical sophistication and ease of use.

This is game-changing for business users, who, without needing to code, can build an app that manages the information flow, decision making, and document generation required to automate their work. Checkbox's technology provides a full suite of enterprise-grade application development features on a single seamless interface, combined with rapid deployment, permission control, analytic dashboards, and integrations.

Founders that hustle

We first met Evan and James almost exactly one year ago — they are clear communicators, ambitious, capable, and very commercial. We witnessed firsthand their ability to articulate a vision for their business and consistently execute against it. We were most impressed with the strong ‘test and iterate’ culture they had cultivated and the speed and hustle with which they explored new growth levers. There were no excuses or delays when it came to testing out a new lever (on the GTM or product front), which enabled the team to make an informed decision around prioritization and value trade-offs.

A compelling business model

Checkbox is a SaaS business with attractive margins, excellent net revenue retention, and expanding ARR. Checkbox is well-positioned to engage in a dual-pronged GTM, with a genuine product-led growth engine complimenting enterprise sales efforts, especially as its reach expands through Tier 1 global partnerships.

We see strong potential for revenues to 'land and expand', with Checkbox generating incremental revenue the more apps their customers build (and the more value their customers derive from the platform). Checkbox has an existing blue-chip enterprise customer base (e.g. Coca-Cola, Telstra), largely landed through the legal department, with evidence of expansion across functions to People & Culture, Procurement, Finance, Risk, and IT. In addition to inter-company expansion (by department or function), Checkbox has already proven its ability to compete in the US having secured its first six-figure US customer in 2021.

The Seed Phase and beyond

Checkbox firmly checks the boxes (pun intended ;) for nearly all Seed Phase proof points despite having never raised a formal Seed round. We see this with companies, such as Checkbox, that demonstrate a strong product-market-fit from Day 1 and accelerate through the initial growth phase. Off the back of strong global momentum, the founders made the decision to raise a pre-Series A round that will position the company to tap into international markets for their next round of capital.

For a refresher on how we view the Seed Phase, please read our blog on this topic. The company has a product that customers love, a repeatable GTM strategy, a clear land product, and well-understood metrics. Leading up to the round, the company had proven its ability to compete with global incumbents and secure international customers. We see a huge opportunity ahead, especially as the team leverages global distribution partners, to further tap into international markets from both a customer acquisition and investment perspective.

We look forward to supporting Evan, James, and the Checkbox team as they continue to help business users automate their work, and grow Checkbox into international markets.

If you're a visionary founder who is ready to make waves, please reach out via our website.

FrankieOne provides customers with a single API to better manage KYC/AML and Fraud. Its integrated platform delivers a unified view of end customers and unlocks data-led decision-making and workflow automation for compliance, operations, audit, and risk.

FrankieOne (or just "Frankie") recently announced a A$20 million Series A round co-led by US VC fund Greycroft and Sydney-based Airtree Ventures, with participation from Harry Stebbing's 20VC in the UK, Reinventure, Mantis Ventures in the US, high profile executives from global Fintechs such as Robinhood and Public, and follow-on investment from Tidal and other existing investors. This brings the company's total funding to just under $23 million.

Frankie's announcement comes one week after one of its competitors, Alloy, announced a US$100 million Series C round at a whopping US$1.35 billion valuation, suggesting this is a hot sector to be backing right now. But what did we know at the time we invested in the Early Seed round two-and-a half years ago? Let's take a look at how our investment thesis from May 2019 has stood up against the world we know today.

Markets with tailwinds

FrankieOne capitalizes on a data integration & orchestration opportunity within the financial services sector. Existing point solutions are often decentralized, requiring multiple integrations (and in some cases, they completely fail to integrate with legacy systems), and provide poor visibility of the customer to financial service providers....and a broken user experience to boot.

And yet, KYC ("Know Your Customer"), AML ("Anti-Money Laundering") and Fraud prevention solutions are mission critical when onboarding new customers and monitoring BAU transactions. The cost of not having adequate tooling and protection can be hugely material to a financial services provider in terms of cyber fraud, as well as revenue left on the table.

We have seen this act play out in a material way in the consumer services sector when Twilio (and similar service providers) saw adoption at scale to provide non-core capabilities to customer tech stacks.

Our thesis: With the build out of open banking and digitally native financial services companies, there is a huge opportunity for the emergence of an automated aggregator for critical services that feed into these banking stacks. The first wave of this is KYC, AML, Identity Verification and Transaction Monitoring.

Products that change the game

Frankie connects compliance and risk data sources to a single API that unifies how its customer base (which includes the likes of Westpac, AfterPay, crypto exchanges, utility companies, wealth management platforms, lending institutions etc.) onboard and monitor their customers, meeting global regulatory requirements.

Frankie's product currency (how it is directly attributable to a measurable outcome for its customer) is two-fold:

(1) A higher "pass-through rate" (the % of new customers that are verified & approved for onboarding) that it delivers by leveraging hundreds of data sources and utilizing its intelligent decision engine to solve for missing information across multiple sources → this increases revenue for the customer and saves the cost and complexity that accompanies manual intervention.

(2) A unified view of consumers at the end customer level (not by product, for example), delivering a better onboarding experience to consumers and a more secure means of ongoing monitoring → this improves consumer satisfaction & retention, and eliminates the multi-step process currently undertaken to stitch together a holistic view of an end customer (e.g. the customers of a bank).

Founders that hustle

Two key attributes we look for in founders are (1) whether they have a unique insight or experience with the problem space they’re trying to solve, and (2) whether they employ a data-driven approach to building a business (how they assess the market opportunity, acquire customers and establish a test & iteration culture).

On the first point, co-founders Simon Costello and Aaron Chipper were FrankieOne’s first customers. Let me explain this circular reference — Simon’s journey with Frankie began with him building the foundations of a neobank (branded “Frankie”) for the Australian market in 2018.

It was during this process that Simon & Aaron experienced a lack of plug & play solution to conduct KYC and AML for new customers. Even when building a financial services company from the ground up — one that would not be encumbered by legacy systems (in comparison to a large Australian bank, for example) — they could not find a solution that delivered what they wanted. There were individual data sources to connect to, but doing so left revenue on the table and did not help deliver an amazing experience to the end customer (an absolute must for any new consumer product focused on Millenials). Simon even delved into the business banking sector only to realize the same applied to KYB (“Know Your Business”) — the industry was stiffened by legacy systems and manual processes (KYB is now a fast-growing component of FrankieOne's product suite).

This leads me to the second point. I believe it was back in 2016, while Simon was still at the helm of a fast-growing Fintech in SE Asia, that he flew to Sydney for a conference to begin his market research on the emerging Fintech landscape in Australia. Having previously lived in the UK, he'd seen the rise of digital challenger banks such as Monzo and I'll never forget Simon sending me the link to its crowdfunding page (I note Monzo is now valued north of A$2 billion!). When Simon moved back to Australia with his vision in mind, I watched him meticulously conduct market studies with carefully crafted user groups to identify exactly where the pain points persisted.

Simon's decision to pull the launch of Frankie, in exchange for the RegTech version of the business we know it to be today, was not one taken lightly — the legals had been finalized, the wireframes for the consumer app built and commitments secured for a large angel round...but it wasn't the multi-billion dollar global opportunity he saw with FrankieOne. Simon's ability to put pens down at the final hour was supported by his data-driven approach to decision making and only served to build even more confidence with investors in his execution capabilities when he came back to fundraise for FrankieOne.

We backed FrankieOne at the earliest stage of Seed, when it was pre-launch. We had huge conviction in the market but it’s fair to say we put our chips on Simon & Aaron, founders with a clear vision and the discipline to truly test the market and iterate.

Seed: landing a compelling business model and strong product-market-fit

Frankie's Seed Phase comprised two rounds — the first was pre-launch and the second was just as the company was going live with its first handful of customers.

One of Frankie's first tasks was determining the best pricing model for the business and its customers. Frankie went to market with a SaaS consumption model — customers are charged a SaaS fee that gives them access to Frankie's software in addition to a transaction fee charged for each API call (which equates to product usage, across any of: KYC, AML, KYB, IDV and new products to come). The transaction fee (or consumption-based component) cost per unit varies by product and the volume of usage.

In terms of achieving PMF, one of Frankie's most compelling attributes has been the inbound nature of its customer base. The team acquired its first +50 customers through inbound leads and referrals → a clear indication that people were proactively searching for a solution to a problem they were facing. In order to facilitate this flywheel, the company launched a website with crystal clear messaging around its core capabilities and the problem it solved. The team also focused on 'landing' with one product (e.g. KYC) as the likelihood that a customer would expand to another product (e.g. AML) was high once Frankie earned a customer's trust. This simplified GTM messaging reduced complexity in the sales pitch as well as made the decision-making process for the customer a lot more straightforward (vis-a-vis selling a suite of products upfront).

Series A: a scalable GTM model and a defensible moat

In order to build next-round investor confidence that Frankie was positioned for scale by the time it launched its Series A round, we workshopped a list of prioritized 'Series A proof points' to help focus resources & time. The team was exceptional at systematically ticking these off one by one over the 12 months that followed.

A big question thrown around during white boarding sessions was "how can Frankie get its customers up and running quicker". This was especially relevant for start-up and mid-market customer segments. Frankie released a Stripe-like widget enabling customers to create their own customized onboarding flows with only a couple lines of code, auto-populating personalized screens that would otherwise have taken weeks to build.

Frankie also focused on shortening the TTV ("time-to-value") for its customers by rolling out Smart UI onboarding screens for its end customers, which improved usability and resulted in a much timelier increase in the pass-through rate for Frankie's customer.

To overseas markets and beyond

To date, FrankieOne has focused its GTM efforts on Australia but this hasn't stopped it from generating > 40% of its revenue from international markets. For starters, some of Frankie's largest customers, acquired in Australia, have pulled the company into overseas markets in which they operate, based on the clear product currency delivered by Frankie on domestic soil. The company also landed Zipmex, a fast-growing cryptocurrency exchange based in Southeast Asia. Frankie has connected data sources in more than 46 countries (and counting), setting the stage for further global domination.

A big part of this next phase in the company's growth will be to proactively enter key geographical markets. One of the core differentiators between Frankie and its competitors around the globe stems from the conscious approach it took on Day One, to address a breadth of customer by vertical and size, ensuring compliance with the largest of banks down to the smallest of Fintech startups.

A note on the Fintech infrastructure thematic

The definition of a Financial Services Provider is evolving to include almost anyone as the demonstrated acceleration of embedded finance reshapes the financial services industry (noting embedded finance is projected to grow by 922% between 2020 and 2025). We talk about the non-core (but mission critical) element of KYC/AML and Fraud Monitoring across Frankie's existing customer base — the dynamic of this relationship only intensifies when you extend Frankie's applicability to any company with an embedded finance offering, where the core focus of the tech stack could be on travel or e-commerce, sitting well outside the realm of financial technology.

Payment services was the first to be embedded, though we have now seen the layering in of more complex capabilities (e.g. FX, lending and insurance) into the tech stacks of embedded finance providers alike.

Frankie becomes a required addition to the primary embedded financial service into the tech stack of non-financial products.

It is the growth of embedded finance up until today that has fueled the proliferation of Fintech giants like Stripe and Square and is poised to have a multiplier effect on the success of companies like FrankieOne.

We look forward to continuing to support the FrankieOne team. If you're a visionary founder who is ready to make waves, please reach out via our website.

Why we started Tidal

The Australian startup ecosystem has developed in leaps and bounds over the past ten years. As it matured, a gap in funding at Seed has widened, with many of the Tier 1 funds focused predominantly on later stage investment. There are limited options for Aussie and Kiwi founders to work with professional venture investors in the early years of their startup, resulting in a lack of access to the product testing, GTM frameworks, white-boarding sessions, talent & customer introductions, investor networks and other non-capital resources so readily available to their US counterparts.

We think the Seed Phase is critical to positioning a startup for success – it requires founders to prioritize capital, separate the "must dos" from the "nice to dos" and get to market as quickly and efficiently as possible to learn, iterate, rinse and repeat. Seed is where we play and where we see the most opportunity for Australian technology over the next ten years.

Australian founders need access to venture fund that focuses purely on the Seed phase. We exist to back the best Founders with early capital and a platform of resources that accelerates a path to hyper-growth.

We dive deep

The investment team at Tidal brings together diverse perspectives and professional experience that can help Founders navigate the many challenges of building an early stage company. We have broad coverage of the functions within a start-up due to our varied backgrounds and aren't afraid to dive in deep where we can help. Our investing team has:

• Founded and exited their own technology startups;
• Led the product function for both small and large corporations;
• Launched and established companies in new markets;
• Invested strategic capital on behalf of large technology companies;
• Managed tech "tuck-ins" within these platforms; and
• Worked alongside Founders through the good times and the bad for many years as investors, directors and friends.

You can check out our profiles here.

What ultimately unites us is our entrepreneurial spirit – we have either founded companies from the ground up or have launched existing companies into new markets, each of us facing the exciting parallels and challenges of building something new.

Our founders are trying to nail down product-market fit, hack together a scalable path to market and attract an A-grade team. These are areas where we specialise, and we've built playbooks and muscle memory to help Founders avoid the pitfalls of those that came before them, positioning their companies for the highest level of success at every turn.

What does a Tidal Seed investment look like

Products that change the game. For a product to be truly disruptive, it needs to change the game. Maybe this means it has the ability to really increase revenue for the customer, or provide a signfiicant competitive advantage. It could mean the product is mission-critical, and so sticky that the customer can't live without it. It almost always means that the produce user is in love with the product and they can really tie their use of that product back to meaningful value creation for them personally, for for their business. At Tidal we want to back the products that aren't just incremental, they are changing the game entirely.

Markets with tailwinds. Not all markets are created equal. Some are more ripe for disruption than others, depending on where the market is up to with its adoption of technology and what the tailwinds are that are changing the flows of value creation in that industry. We look for a really clear problem space that needs to be solved for, or a market expansion opportunity that no one has though of yet. We are industry-agnostic and some of the verticals we have invested behind that demonstrate strong tailwinds include logistics, e-commerce, agriculture, workflow productivity and finance. Current areas of specific interest include: cybersecurity, food technology and education.

Founders that hustle. Our founders have a unique insight or experience with the problem space they are trying to solve. They show outstanding technical competence across product and technology. We like to see a scrappy, data-driven approach to user acquisition and an ingrained culture of test, iterate and learn to get to the answer. Our founders understand that 'it takes a village' to build a business and they have the humility to draw on the strengths of those around them. They can inspire investors, customers and employees to unite around their vision and they show grit when they need to ride the hard times. They are decisive, when they need to make pragmatic decision and have a 'do what it takes' attitude to getting things done.

Compelling business model. We look for B2B or B2B2C models, and business types include Software-as-a-Service, Marketplace/Network and consumption-based models like API businesses. We believe the best way to create shareholder value is to nail down a low-cost acquisition method during the Seed phase and our founders understand that there are ways to acquire customers and show real product value without having to hire sales staff.

The Seed Phase. We invest during the Seed 'phase'. Usually this means there is an initial product in market and the business is generating revenue or user growth within its target customer segment. During this phase, the founder may seek capital to further develop their product, test a range of user acquisition methods or hire a gun growth expert. Our initial investment sizes are typically A$500k to $750k, depending on the maturity of your product, though we can write up to A$1.5 million upfront. We also have the ability to lead or follow in your first Seed round. Because Seed is a phase, it's often that we participate in several rounds over the period that spans an initial Seed cheque through to a Series A round.

We believe there is an unprecedented opportunity for Australian founders to make waves on the global stage. Tidal Fund II is currently live and we are actively investing in founders that are building products that change the game. If this sounds liks you, get in touch with us directly or submit your pitch through our website.