Thought waves on seed venture

Upflowy is a low-code signup engine that empowers growth leads to build and test lead signup flows without needing to utilise the scarce resources in their engineering teams.

This month the Tidal team made an investment in Upflowy and we're publishing our investment notes below. Although we invest across a range of markets, models and products, there are core principles that we live and die by in our investment decisions. For more information on the pillars that make a great Tidal Seed Investment, see our investment criteria here.

Markets with tailwinds

We are in the midst of a customer experience movement and trend toward self-service online. Businesses need to respond with slick and more efficient / high converting digital products. To achieve this, testing and iterating on new products has become the norm and businesses that look to acquire customers online understand that the user experience and journey through the funnel needs to be continuously optimised.

But there is a problem and it is two-fold.

1. Growth teams that are looking to optimise the customer journey through the online acquisition funnel are constrained by the product roadmap and tech availability of the business. We have experienced this issue directly in our own portfolio companies. One of the Upflowy founders was previously solving this problem at his last business using a complex array of 90 online forms. We know early stage product-led growth companies with teams of 10+ people trying to solve this problem by stitching together basic tools.
2. It is exceptionally difficult for most teams to set up and track an end-to-end customer journey funnel, with all the relevant metrics. Tools like Hubspot are doing a good job of owning the Top of Funnel metrics piece, but there are limited options to track the user journey from discovery through onboarding and offboarding and data & insights into this critical part of the acquisition funnel is limited.

Products that change the game

Upflowy provides a SaaS product for growth teams to build user flows and test and iterate against those in an easy to use, low code environment. This significantly alleviates the burden on the IT side, and democratises the ability for low-tech users to move forward with continuous user flow updates. The product also opens up access to end-to-end funnel analytics, which gives instant insights into the performance of the funnel and arms the team with the data they need to make changes to the user experience.

The 'hook' for the customer is the ability for marketing/product teams to build sign-up flows without needing to divert resources from the engineering team. The 'currency' of the product is the data and insights around customer journey through the funnel, which is directly correlated to converted revenue.

Our thesis: if Upflowy is able to demonstrate clear improvements to sign-up flows right at the point of the customer's customer transaction, it will be sticky and defensible within its customers day-to-day test and optimise workflows.

Founders that hustle

The Upflowy founding team is the one to solve this problem. All three co-founders have successfully built and exited multiple startups. Guillaume Ang is a serial entrepreneur and B2B SaaS growth expert. Matt Browne is also a serial entrepreneur with exit success from Whispli and DoneSafe. Alex Girard is leading product and engineering, having built 20+ SaaS products and held technical co-founder roles. The team has come together with a mutual frustration for the problem at hand and the necessary skills across ops, growth and product to build a globally scalable solution for the market.

A compelling business model

The great thing about low-code products is that they are easy to use by design and are usually built with a specific target user archetype in mind. This lends itself well to a product-led growth model, which we know creates compelling business value over time. This is a great starting point, but the real amplifier of value creation comes from layering on top immense value creation for the customer itself. By 10X-ing the customer's online conversion rate through better sign up flows, Upflowy earns the trust of its customers right at the point that matters to them the most: revenue generation. This gives them the right to further monetise that customer relationship with better product, data and insights over time - that is the beauty of the next evolution of SaaS businesses that unlock valuable primary data that didn't exist before.

The seed phase

We loved the speed with which the Upflowy founding team were able to get an initial test product in market, validate it with early customers and build a business case and growth plan around it for their Seed Phase. Whilst the core focus early on has been around the 'brute force' part of working closely with early users and hitting the phones, the founders have done this with an eye toward their scalable path to market and are building for a frictionless growth plan from day 1. Next step will be to make a beautiful product easily accessible to customers and start testing growth channels.

Using these core principles, we gained conviction at Tidal to back the Upflowy team early in their journey and we look forward to welcoming them into the fold and supporting them as they pursue their world domination plans through their seed phase.

A note on the low code / no code thematic

Business users want access to the productivity, workflow automation and data accessibility that they have become accustomed to in their consumer experience of technology. But they don't want to have to learn how to code to get it and nor should they. The low code / no code movement is about democratising the ability of business users to build the tools they need, alleviating pressure on core engineering teams and drawing on their unique knowledge of the problem to be solved. This will speed up the capacity for teams to innovate and create.

Upflowy is just one of many tools that we see emerging in this category. If you're a visionary founder who is ready to make waves, please reach out via our website.

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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.

You have probably heard the jargon investors use to define the 'stage' of their investments: pre-Seed, Seed, Series A, Series B and beyond. What these titles lack in creativity, they make up for in practicality as the startup ecosystem seeks a common language to categorise early stage companies.

Tidal Ventures is a Seed fund. We subscribe to the notion that Seed is a phase (capturing Early Seed + Seed + Late Seed / Seed Extension). We believe it is far more useful to focus on the proof points that founding teams need to hit during this phase rather than the size of your team, revenue booked or dollars raised.

Seed: the period of time a venture-backed startup has to demonstrate the proof points required to raise a Series A from an institutional investor.

Let's focus on what actually needs to happen during the Seed Phase, from the perspective of three different "success milestones": (1) product-market fit, (2) finding a scalable path to market and (3) hiring a gun team.

Focus Area: Getting to Product-Market Fit

First and foremost, the Seed Phase is all about building an exceptional product that your customers simply love to use.  

Focus Area: Finding a Scalable Path to Market

During the Seed Phase, we formulate a hypothesis on the best way to access the customer and then test and iterate until we find the optimal channel.

Focus Area: Hiring a Gun Team

The hiring decisions you make during your Seed Phase are critical and will impact culture well into the life of your business.

Establishing 'proof points' and tracking performance

It's helpful to attach tangible proof points to each of these areas to help focus your team around a clear success milestone. For example:

Timing and runway

Seed is a phase with an undefined time period and the biggest constraint for the founder is usually capital availability. Seed businesses fail when they can't hit their proof points before their cash runway ends. This is sometimes due to uncontrollable risk factors such as market timing or founder break-ups.

We focus on the controllable elements: planning and team execution. By setting clear proof points upfront, founders can be clear with themselves and their team about what success looks like. By demonstrating the capability to execute against a plan, they give themselves the best likelihood of a successful Seed outcome, whether that is a Series A fundraise or otherwise.

Nailing the Seed phase

To close, here are a few things we see successful founders focus on in their Seed phase:

• Building a product that is truly mission-critical to the customer. Great product leaders will ask themselves early: "Is my product (1) core to operations (2) revenue-enhancing (3) cost-saving or (4) nice-to-have?" Don't be 4!
• Use clever design to short-circuit the "time to value" for the customer: Is there a way you can get your customers to quantify the actual value that your product is bringing them early in their user journey?
• Focus on efficient deployment of capital: If you're raising funds, ensure you've budgeted enough time to hit your proof points before raising again.
• Focus on monetisation earlier rather than later: customer revenue trumps investor capital any day of the week.
• Figure out your sustainable unit economics: Find a low-cost acquisition path and don't wait too long to figure out what you can charge your customers, use that Seed phase to test pricing and packaging before you scale.