Thought waves on seed venture

Loopit’s mobility platform drives car subscription management and billing solutions for automakers, dealerships, fleet leasing, rental companies and startups.

The Tidal team recently made an investment into Loopit, and we're publishing our investment notes below. 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 how we invest here.

Markets with Tailwinds

With the transformation to cloud, consumers and businesses alike are consuming software online using subscription as the standard arrangement. This transformation is occurring across many other industries, and the automative industry is undergoing its own digital transformation that is set to change the way:

• consumers or businesses interact with car brands (e.g. Care by Volvo)
• consumers obtain the vehicle (e.g. subscribe to an EV through your energy provider)
• consumers experience the entire lifecycle of acquiring, running, managing, and selling a vehicle (e.g. subscribe to a car, maintained by the vendor, only fill fuel, return it when done or swap they vehicle if the plan allows it)

We believe that there is a compelling case emerging for the growth of car subscriptions as a viable alternative to long term rental, leasing, and ownership in many cases.

This transition is aligned with changing consumer behaviour that seeks greater flexibility and convenience around mobility. There is waning interest in owning physical products, particularly among younger generations; hybrid and remote work is changing the way cars are used, and climate consciousness and improving infrastructure are driving a shift to electric vehicles. In addition to being highly flexible, vehicle subscription programs are also perceived as being more cost-effective than traditional car leases, rentals, or outright purchases. The experience of buying and selling a car can be tedious, and, factoring in on-road costs, registration, taxes, servicing, and depreciation, the total cost of ownership is often under-estimated by more than 50%.

In parallel, the auto industry is undergoing its own transformation. Tesla has led the way, disrupting the industry through both its car and its go-to-market approach. Newer micro-mobility categories (e.g. e-bikes, scooters) were born online and have been early adopters of a subscription model, and now the traditional car industry more broadly is transitioning to online retail, which will emphases personalisation and better customer communication.

We expect the subscription market to continue to grow at pace through improvements in price competitiveness, the customer experience, and consumer awareness. According to market research, the current vehicle subscription market is US$4.1B and will grow at 22.8% CAGR to 2030 to a market size of +$31.7B. Over the next eight years, BCG estimates that up to 15% of new car sales will be via a subscription.

Products that change the game

Loopit provides a turnkey subscription management solution that helps automakers, car dealerships, fleet rental companies and startups to introduce car subscription offerings to their own customers.

Loopit’s SaaS platform facilitates the end-to-end subscription process, providing mobility companies with the ability to control, configure, and provide a subscription offering quickly and easily. The platform handles the customer-facing touchpoints such as onboarding, billing, and ongoing customer management, as well as back-office management features such as management of inventory, pricing, and utilisation.

This is game changing for both new entrants who wish to get to market quickly, and existing automotive players who largely run their businesses on legacy platforms that are tailored to other customer models.

Loopit not only powers the shift to subscriptions, they improve the overall customer experience, back office management and economics through software.

Founders that Hustle

Co-founders (and brothers) Michael and Paul Higgins have lived their customers’ problems and built the industry-leading solution to solve it. They initially built Loopit’s software to support their car subscription marketplace HelloCars, before realising the opportunity to provide it more broadly across the mobility industry.

Michael, Paul, and the broader management team combine both strong functional capabilities in building a software business with extensive domain knowledge in the automotive industry. They have demonstrated strong execution, building a healthy and scalable business that has won several key automotive brands as clients and expanded globally prior to any venture backing.

A compelling business model

Loopit have built out an attractive business model and demonstrated strong unit economics. They earn both a subscription fee for ongoing use of the platform, as well as consumption revenues through a clip applied to the underlying subscription payment of the end consumers.

Over time, we see the opportunity for continued growth through expansion into new markets, and further influencing the economics and experience of car subscriptions through the product. With critical mass they can obtain an unfair data advantage with access to inventory, pricing intelligence and a future opportunity to launch their own aggregation play via a marketplace.

The Seed Phase and beyond

Loopit is in its Seed Phase. It has demonstrated strong product-market fit and built out a highly capable team, having bootstrapped the business to date. This round is intended to support with global expansion and implementing a more scalable and repeatable go-to-market approach. We see significant opportunity to ramp up growth efforts with product and sales / marketing activities in harmony, providing customers with different maturity levels with the opportunity to either self-serve, or to localise and tailor their offering with a higher degree of support.

We look forward to continuing to support the Loopit team as they enable the transition to car subscription models.

Thanks to Max Kausman for help in drafting this post.

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

Market sentiment has officially changed.

Use your microscope and your telescope simultaneously in times of market uncertainty!

This will be the fourth 'tech cycle' for the Partner team at Tidal. We have invested during the Dotcom era, the Global Financial Crisis, and the short downturn in 2012. This cycle will no doubt be different for a variety of reasons including Covid, the great talent reshuffle, global supply chain issues, and a US inflation rate at a forty-year high.

The underlying message from the various investor notes issued to founders in the past few weeks is clear: for a time, capital has been abundant and cheap. Now it will become expensive, and harder to get.

It is important to note that for Australian start-ups looking to raise a Seed to Series A round in the current market, there is still an abundance of capital that has been committed from LPs to Venture Capital funds in the past twelve months. However, we expect that these funds will be deployed more slowly and carefully than the past three years.

This is a good thing, for founders and for investors. Founders that take the time to get to know their investors will benefit in the long term. It will also focus the funds across Australia into pragmatic and visionary founders that build products for true customer problems, in sectors ripe for disruption.

Insights from the US market

I have just returned from a two week US trip, where I visited both the East and West Coast, meeting with founders and investors. Here are my expectations and insights from the trip:

• The current revaluing of multi billion dollar technology assets will flow down from public markets and later stage startups to the Seed-Stage investment space. This will impact valuations and capital allocation across the venture capital sector at some point during this next cycle
• Entry valuations for Seed investments will likely be revised downwards. Founders may need to adjust the amount of capital they raise in order to retain acceptable levels of dilution for their Seed round
• Companies may need to raise their Seed capital over a series of investment rounds in order to prove product market fit, reach solid levels of revenue traction and demonstrate unit economic profitability before raising a Series A.

Leadership and culture is always important, but in times of market uncertainty it gets put under the microscope.

Takeaways for Seed Stage founders

• Live your values. Leadership and culture is always important, but in times of market uncertainty it gets put under the microscope. Your team is the lifeblood of your business. Lead with authenticity and empathy, hear the voice of your organisation and communicate effectively with your team. The mission and ethos of your product-building organisation lives on regardless of the ‘noise’ in the market.
• Get scrappy to fund growth. You can fund your business growth with capital or you can fund it with revenue. The cost of capital is going up, so act accordingly. In times like these, over-index on the growth drivers that generate cash in your business (pricing, packaging, growth hacks, product features).
• Unit Economics are key. One day, the value that your company creates for shareholders and your ability to fund further innovation will depend on your profit margin. The choices that you make today in the way you build your team, your product and your customer acquisition methods, will shape this future. Profitability is not a can to be kicked down the road, it is a key driver for startup success and now is the time to nail it. Hint: this is not about pinching costs, it’s about stealing market share from your competitors by building the best product and then cracking a low cost path to customer acquisition.
• Build the best product. Talk to your customers. They will tell you what they will or won’t spend money on. Make sure your product is a must-have for their business to thrive in a downturn. Make it easy for them to try your product, to integrate it into their daily usage, to share it with their colleagues. Create the feature that they can’t live without and entice them to upgrade. Stay true to your core and build with empathy for the user.
• Know your investors. Whether you are a venture backed startup already or are seeking your first round of funding - the quality of the relationship you have with your investors during this current market, and the collaboration you can share both ways - is critical. Don’t assume the next round of funding is just around the corner, be master of your own destiny.

Tidal looks through the lens of a telescope

Tidal is a Seed-Stage venture fund with long investment horizons. We remain excited about the opportunity to back founders that are in the earliest stages of building their product for global markets, with a view to profitable, sustainable growth.

We can’t profess to have a crystal ball and know what the next cycle will entail, but we do know that the greatest companies in history were created during a market downturn. Capital-constrained environments can produce the most innovative and transformative companies. Our investment team is actively seeking Australia’s best founders and we have ready capital to deploy from our Seed Fund II to support your Seed Phase.

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

When you’re sitting on some really smart technology with loads of potential applications, what do you do? You choose one market vertical first, and focus on it. For Hone, it’s Agtech.

According to government and industry sources, Australia’s Agtech sector is predicted to be worth $100 billion by 2030, and companies like Hone are at the bleeding edge of this rapid growth.

We recently spoke to one of Hone’s founders, Antony Martin, and he revealed the team’s journey from necessity, through invention, to market identification. Here’s their story and how Tidal got involved.

Starting with the problem

Hone co-founders and scientists Antony Martin, Will Palmer and Jamie Flynn have known each other for years, and worked together at the Hunter Medical Research Institute (HMRI). It was while working together on a research project about biofuels, they found themselves out in a blistering hot field of sorghum, wishing there was an easier way to get the data they needed.

With months of sample processing and analysis ahead of them, including hundreds of lab hours, they came up with a part of the answer: let’s analyze the samples faster using spectroscopy.

A simple definition of spectroscopy is that it measures the interaction of light with the chemical make-up of samples. In practical terms, a spectrometer can quickly tell the difference in quality between different sorghum varieties. So the team hacked together a solution using off-the-shelf components, mathematics, and a unique methodology, and began processing their samples in record time.

It occurred to them that if it could do that for sorghum, it could do that for other crops as well. And so Hone started.

From faster labs to field tech

One of their early customers was a rice breeding institute in the Philippines. In two weeks, the team had processed 60,000 test results and provided data that would have taken years for the institute to get processed manually. Not satisfied with just fast processing, the team set about making a device to collect data on the spot, from the crop, soil and grain, cutting out the lab altogether.

That’s where things really changed for Hone. From scientists using technology, they became technology builders themselves and sought backing for their ideas.

Tidal entered the picture after a few smaller and one larger angel investor had already taken the lead. It was through one of the angel contacts at the HMRI, that Grant McCarthy was introduced to Hone and the relationship began.

From tech builders to company builders

While not an inexperienced team by the time Tidal came on board as investors, Hone was ready to go from a science tech business to a growth company. “They came in and worked with us on the foundations of the business, particularly on the commercial side and the go to market strategy”. Both Grant and Wendell Keuneman were involved in the early days, “getting their hands dirty and helping out with pricing, identifying customers and really working out who we were trying to serve.”

Hone’s technology can be adapted for use in multiple industries, and they started out with a wide testing field. “I think that there was definitely a sort of aha moment there where it was like, this is not scalable to try and develop every application under the sun.”

Knowing they had to focus, Tidal helped them narrow in on the AgTech vertical before scaling into others. “Wendell, especially, helped us set up our processes around software teams and how we deliver products.”

They called him the “whiteboard warrior” and many sessions were held to discuss “how we were structuring things, how we were thinking about the business, and how to scale the team up.”

The learning and commercial curve

“People tell you stories about VCs”, Antony says. “They say be careful who you bring on. But we have always found Tidal very supportive. They really understand what we're going through. They've seen it all before and have the best intentions to help us get to the next level.”

Hone is currently emerging from what Antony describes as an engineering and R&D  phase, to a new commercial phase. And Grant is a “wealth of knowledge when it comes to that.” Apart from sitting on the board, he has been “pulled into offsite planning sessions, advising on the business roadmap, the org structure, capabilities, and culture.”

“Learning and doing well at the same time is hard”, Antony remarks. “We’ve got to learn fast while building up the commercial side of the business.” Since coming on board, Grant and Wendell have “always been there to advise on the strategic direction of the business.”

When asked about the learning curve, Antony responded, “we thrive on the process of learning. We want to operate in a mode of constant reflection and constant learning, so that we constantly improve.”

No limit to scale

The selection of Agtech as the focus vertical is meaningful to Antony and his team. And the focus on primary crop data is significant. “Primary data inputs are a rare commodity in agriculture and really help the farmer maximize the productivity of their crop and their land.”

It’s the same with VCs. Choose one that helps you achieve your primary goal. Or in Antony’s words, “if you’re going to get in bed with a VC, choose someone who's there to support you and the business, and help you through all the difficult things. Find one focused on founders, rather than just providing money.”

By honing in on their primary market, Hone is on track to develop countless other applications for their tech. Starting with the whole farming lifecycle and encompassing soil health, regenerative agriculture, carbon offset measurements, and moving into food and beverage testing, environmental monitoring, medical testing and more. Antony is excited about the possibilities, “I think if we can just nail it with one key vertical, the sky's the limit.”

Blakthumb is a software company that provides an intuitive end-to-end operating system for cultivators and producers of cannabis and food. Their mission is to build resilient communities through the power of decentralised production.

The Tidal team recently led Blakthumb's pre-seed round, and we're publishing our investment notes below. 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 how we invest here.

Markets with Tailwinds

An underserved market.

For the past decade, technology built for the Indoor Agriculture market has focused on (1) environmental control and (2) compliance. As a result, almost all the technology advancements have been made in hardware systems (including vertical racking, nutrient mixes and LED lights), compliance software, and sensor technologies, with highly fragmented distribution.

The operational side of growing plants (management of people & processes) has been almost entirely ignored. However, with hardware costs coming down and market tailwinds pushing consumer demand, the Indoor Ag market is starting to mature.

We believe cultivators will need a competitive advantage in operational efficiency, quality management and high performing teams in order to thrive and scale.

The timing is now.

In 2021, the cannabis and indoor food production market generated $201.9 billion in revenue and it's growing rapidly at a CAGR of 17.6%. The North American cannabis market is exploding as the world begins to recognise the medicinal benefits of the plant. The indoor food industry is benefiting from the cannabis flow-on effects, as capex decreases and consumer preferences, food security issues and supply chain pressure pushes the world toward more sustainable food production methods.

The market tailwinds are in place and the infrastructure requirements are now increasingly cost effective and easily accessible. With Blakthumb's operating system, cultivators will have the final piece of the puzzle to enable them to start, optimise and scale their growing operations. Blakthumb will become the market enabler and unlock this growth.

Products that Change the Game

There is a burning need for beautiful software in this market.

Planning for production is typically done on a spreadsheet, and task management is on a whiteboard or in a Team Leader's head. None of these methods are sustainable or scalable operationally, and the approach is prone to human error, which runs the risk of something catastrophic happening. Team Leaders worry about this constantly, and can lead to burnout or resignation.

Cannabis cultivation is a nascent industry that lacks experience. The result is an industry with a high turnover rate - between 40-60% of people leave within the first two months - and the two major reasons why people leave are lack of recognition and lack of job structure. This is costing the US cannabis industry at least $1 billion each year.

A vertical SaaS product with a System for Action.

Software tends to be built for business owners who want data rather than teams who need to take action. Teams end up dealing with multiple legacy systems that don't actually help them do their jobs and show their work. Production teams don't need another system of record, they need a system for action. The data they create provides the insights and predictions they need to take smarter actions.

Blakthumb brings order to the chaos by providing Team Leaders with an automated, digital tool to replace their static tools. At its core, the product provides visibility over the cultivators end-to-end production environment. Blakthumb manages the complexity of production issues and delays, both quickly and with assurance. Blakthumb captures data across all areas of production to deliver precise strain performance insights and make it easy to plan and delegate tasks effectively.

Founders that Hustle

The winning product will be built by experts who care deeply about the customer.

Software can't be built for cannabis and food production without deep domain expertise. The industry is complex with specific terminology, processes, and exceptions to the rules - and to win here, you need credibility. Mel and Carey are the team to build the best product for this market. They have been producers themselves, they have researched the market extensively and they have done deep dive user research to hit on the right value proposition.

This founding team are some of the most determined we have seen in years. They have been seeking the right business model for this market for 6 years with minimal outside capital. This is their life’s work and we at Tidal feel privileged to be backing them with early Seed capital to kick start their plans to change this world.

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

Get to know Tidal's Max Kausman

What drew you to Seed investing and in particular, the Tidal Team?

I have always been interested in startups and technology. I love great products and I’m fascinated by the way tech businesses and business models re-shape markets. I thought deeply about why I wanted to be in venture, not only about why I would find it interesting and purposeful, but also about whether the role would match my attributes, capabilities, and personality. I don’t think it’s for everyone, but I get energy from the role - it’s hugely people-centric, there’s a lot of autonomy, and a lot of intellectual breadth. There are new learnings - business models, technologies, sectors - every day. It requires curiosity, comfort in ambiguity, and a long-term perspective.

The Seed Phase in particular is an extension of that. It’s people-centric, but still with real analysis and deep thinking involved in understanding markets, products, and business models. It’s such a formative stage that the impact we can have is enormous, and I relish the opportunity to work very directly with founders in this stage as they build out their teams and find product-market fit.

When I joined, I felt (and continue to feel) like I could learn an enormous amount from the Tidal team. I was drawn to the diverse backgrounds and unique skills and capabilities of the team, and I spoke to a number of founders who raved about Tidal as investors. I liked our portfolio, our investment mandate and philosophy, and how we have the conviction to lead Seed rounds and are genuinely active operational partners to our founders.

What’s a day like in the role?

It’s enormously varied. Broadly, my time is split across deal-flow, supporting our portfolio companies, and helping to build Tidal itself as a funds business. Within each of those, there are lots of different jobs that need to be done. It’s fast-paced, and there’s lots of context switching.

What's the first question you ask when you come across a prospective investment?

I generally start with the origin story of the business. I love unpacking how a founder realised there was a problem, and why they then decided that they cared enough to dedicate their time and energy, over what could be decades, to solving it.

What is something you believe that others don't?

I believe that ‘weird’ is a compliment. There’s a lot of social and societal pull to conform and be normal - but I have a lot of time for people who are authentic enough to let their weirdness emerge. Those who make the greatest entrepreneurial strides are often eccentric, unconventional, and willing to be wrong.

What is one thing that inspires you every day at Tidal?

I think all venture investors have a healthy scepticism. We say no a lot, and there is always a reason why a business idea won’t work. What gets underplayed is the underlying optimism that goes into figuring out why a business idea could work, and how exciting and inspiring it can be to then do the deep thinking and get to the point we ultimately say yes. When that happens, we get to partner with some incredible founders and work closely with them to realise their vision for the future of the world.

At a macro level I’m also excited by the amazing compounding momentum we’re now seeing in the start up ecosystem in Australia, and its potential to create jobs and reshape our economy.

What do you think is the most important qualities or characteristics a business founder should aspire to have and never lose?

A great founder should have binary qualities. What I mean by this is that founders should deeply understand the problem they are solving, but also be able to zoom out and see the bigger picture. Founders should have humility and be open-minded, but ultimately be decisive, relentlessly believe in themselves, and be willing to create buzz and draw others to their mission. When those binaries interweave, and there is a clear sense of hustle, I feel we have found a great founder.

What are you passionate about outside of work?

I have a broad range of interests and I love trying new things. I’m an avid traveller. I love sport, especially Basketball, AFL, and Cricket, and I’m a good skier and a wannabe surfer. I enjoy music and live gigs, good food, getting outdoors, and being social. I’m a voracious reader, particularly on tech, psychology, geopolitics, and macroeconomics. I’m both self-aware and shameless enough to use the word ‘voracious’ unironically.

What advice do you live by?

Advice is easy to give and much harder to receive.

How do you think the world would change in 10 years?

The rate of change - in technology, and in society, is enormous, and I believe it will only continue to accelerate. There’s a convergence of amazing forces going on - in AI, Robotics, Clean Energy, Biotech, Blockchain, Space, Remote Work - the list goes on. I’m optimistic about what this means for the world in terms of better living standards, and I hope this ultimately results in vastly more people doing creative things and working for themselves. I would temper my techno-optimism with a bit of macro-pessimism though. There are some big societal problems to be solved - a big economic deleveraging, Western populism, decarbonisation, the risk of great-power conflict. It's going to be an interesting decade!

How do you measure success?

I measure success by the quantity, calibre, and depth of relationships I have. Success to me is in having people for whom I’d go the extra mile, and feeling confident knowing they’d do the same for me.

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.

When I talked with Drive Yello co-founder and CEO Steve Fanale for this interview, he was in a car, driving towards Canberra. I mean, he was the passenger, but it still somehow seemed appropriate to be talking about his company while he was on the move.

Drive Yello is a bit different to other startups. They are a platform connecting retailers to a gig driver network. Their network of drivers delivers to consumers on behalf of their customer base of major retailers, connected through Drive Yello's intelligent product layer. The Australian economy was protected somewhat during the pandemic because of a strong supply chain, so Drive Yello did well, delivering grocery and convenience items to locked down retail consumers.

More than just a convenience service business, however, Steve describes changing customer behaviour in the last few years. “Retailers like Amazon are innovating in this area, and Australia is still a bit behind. But we’re catching up, now that consumer behaviour has changed and retailers are finally getting systems in place to meet the demand.”

Solving a simple problem is a great start

The business value proposition is simple: help retailers get products to their customers. Starting with restaurant delivery through Menulog and then later cracking the retail sector with major players Woolworths and BWS, Drive Yello has always had its sights on national market presence. But the road was sometimes rocky.

Like many startups, building on a central idea or technology is one thing, but building a business requires scale and market reach, which is a whole other thing. With Steve Fanale at the helm, Drive Yello was always going to get the best shot possible.

“I'm a problem-solver and a product guy,” says Steve. “I’ve got a business background and I studied commerce and marketing at Uni, and I have worn many hats.” Versatility has been a key driver of business growth and for weathering the many challenges of being a gig economy-reliant business.

The solution is not always simple

Gig-economy businesses have challenges that are unique. Steve notes that one of the biggest ones is a lack of “real clarity around a gig economy worker from a legal perspective.” It’s hard, he says, to “come up with a model that is valid”, but adds that “the gig economy is not going anywhere and it’s a matter of making it work in terms of the legislation and policies around work models. To get the network effect, you also need scale and critical mass.”

The challenges don’t stop there, with the capital intensive nature of gig-economy businesses and historical scarcity of funding in Australia. “You can grow organically with most businesses to a point of profitability, whereas in a gig economy business, it's all about scale and you can't achieve that scale without funding.” At times just scraping by, Steve says Tidal’s support has been invaluable to gaining the momentum to to turn the corner and scale.

When an investment injection came at around the same time as securing some major new retail clients and the arrival of the pandemic, Drive Yello was poised to boom.

A long history and a more recent connection

Steve has known Tidal’s Grant McCarthy for over 20 years, through Steve’s previous businesses and around the once relatively small Australian startup sector. But back in 2016, Grant reached out to Steve and suggested an investment partnership. He saw the potential in Drive Yello and Steve’s vision, and wanted to invest.

“We're pretty good at separating our friendship and commercial relationship. We’re quite open with each other, and pretty direct, which means we are transparent on both levels.” He goes on to say that “Grant's been a sounding board and a personal support, as well as a funding support.” Through some tough times in late 2019, Steve explains how Grant was there through some of the hardest business decisions.

“He's probably the main person I go to when making a decision on strategy and direction. Whether we're considering mergers or being acquired or acquiring, or thinking about new product opportunities.” Grant is there, even as Steve is looking ahead to the next move.

The calm voice in the storm

Among a number of anecdotes about working with Tidal, Steve mentioned the “calm voice” and solid support of Wendell Keuneman when it comes to product strategy, senior hiring and technology decisions.

Wendell has been “a great sounding board from a product strategy perspective, offering advice and helping to hire a VP of engineering.” Accustomed to wearing multiple hats and juggling strategic, tactical and technical problems, Steve welcomed the expertise on product direction and building technical teams. “I know that our CTO has reached out [to Wendell] and I know he's always there if we need to help enhance from that perspective.”

Being a CEO can be a lonely gig. “If you haven't done it, it's hard to relate to how tough it is, particularly when you're dealing with people.  It's not just about the numbers, it’s people's lives and when there's tough times and you have to let people go, or when there's a conflict on a human resource level, that affects you personally as well." External support can be critical at these times.

Not just cash, but connections

When I asked Steve what he looked for in an investor, he said “cash is good, but it's really important that you get along, and you feel that they are going to contribute to your business beyond just the money.”

The relationship between co-founders, he says, “is like being in a marriage and so is the relationship with an investor and an entrepreneur. You’ve got to think about what the relationship looks like in one year, two years, three years time, because you're going to be hanging out together pretty closely.”

The other thing to look for is connections and a strong network. You want your investor to connect you to people who can help your business beyond what it does now. “Grant's been heavily involved in introducing us to a range of people that can assist us and also support what we need to do next."

Tidal has also got “good experience across the board that they can bring to the table and any situation; whether that be a funding scenario, a growth scenario, or going international. There’s plenty of things that they can get involved in beyond just funding.”

When it comes to investors, Steve says, it’s part of his due diligence to check out the nature of the investor. “You don't want everyone to be hands-on and you don't want everyone to be passive. It's good to have an investor that can actually assist in the business and help us grow, and luckily I’ve got that with Tidal.”

Growing with greater clarity

Steve describes the business as having a clear north star. A clarity of mission that has really only solidified in recent times. “The maturity of the business around our values and our mission has evolved over the last 12 months. That’s been the ‘aha’ moment if I had to sum it up. We’re more confident now in what we’ve achieved. We know what we offer the market and having that real clarity will enable us to grow to another level.”

The next step for Drive Yello is to partner internationally and break into new markets. With the confidence in decision making and the strategic steers provided by Tidal and other investors, Steve is looking to the future. When I ask if he would do anything differently, he thinks for a moment and then answers that it's very easy to look back in hindsight, but “if I look at every decision that we made, we thought we made the best decision at the time.” Words that are true for all of us.

Renewtrak is a platform for lifting the conversion rate of renewals for technology providers. It digitally automates the end-to-end logistics of renewals from quote to payment, including sales, pricing, billing, and commission constructs.

The Tidal team recently made an investment into Renewtrak, and we're publishing our investment notes below. 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 how we invest here.

Markets with tailwinds

The market for technology is enormous - there is US$5.2T (yes, trillion) in global indirect technology spend per year. It is also growing rapidly. As technology investors, we have deep conviction that technology will continue to 'eat the world' and take a larger share of organisational spend globally.

Renewals are a significant component of this revenue pool, estimated at US$260B per year, across ~3,500 software and hardware vendors and ~140,000 channel partners and resellers globally. This revenue pool is expected to rapidly accelerate, as technology businesses continue to transition away from one-time sales, towards annualised recurring 'as-a-service' business models, which are highly valued for their predictability and customer loyalty.

Recurring renewal revenues

While renewals from existing customers are critical to margins, profitability, and customer retention, they are poorly served.

Hardware and software vendors can expect to lose between 15-50% of their renewal opportunities because the end customer is not even aware their product or service is due for renewal

Renewals often do not receive the same degree of organisational focus, talent, and resources as new sales, and renewal processes are plagued by manual processes, legacy technology, disparate and low-quality data, complex pricing structures, and poor transactional experiences. The intermediated relationships between technology vendors (OEM's), resellers (channel partners), and end customers make this challenge even more acute, creating a lack of ownership and responsibility for the renewal experience.

Products that change the game

Enter Renewtrak - a workflow automation solution for renewal transactions, with a vision to help the global technology industry to move towards a subscription revenue model. Renewtrak's platform does the heavy lifting of ingesting and consolidating data across the vendor, channel partner, and customer, and managing the renewal process from end to end. The product digitally automates the logistics of renewals from quote to payment, including sales, pricing, billing, and commission constructs.

For technology vendors and distributors, this is game-changing - driving additional recurring revenues by quoting and converting more renewal opportunities, reducing the time and expense involved in renewals, adding organisational control and oversight of transactions, and deepening customer relationships through improved data and payments experiences.

A team that hustles

The Renewtrak team has a strong pedigree in financial services, with payments and workflow simplification embedded in their DNA. The team is led by CEO Mathew Cagney, supported by CTO Andrew Duckworth, CPO Alex Wood, and CCO Paul Dunn, and with active involvement from Chairman Michael Twaits. We have engaged closely with the leadership team closely over the past 12 months as they have driven Renewtrak towards the strong position it is in today, and we are confident that they are fully equipped to scale.

A compelling business model

Renewtrak is focused on accessing a vendor's 'renewals under management' (RUM) to quote and automate. Renewtrak earns subscription revenues for consolidating the customer data and managing the renewals workflows, and consumption revenues through fees applied for success in improving customers' renewal conversion rates.

The model provides for a strong 'land and expand' story. For a given vendor, the RUM accessible to Renewtrak depends on the geography, product type, renewal channel, and value of the renewal. If Renewtrak can demonstrate value by improving renewals revenues, vendors may then choose to apply Renewtrak to additional pools of RUM by expanding product use across more geographies, product types, and renewal thresholds. By connecting both vendors and distributors to customers, there is also the potential for vendors to roll out Renewtrak across additional distributor relationships, and for distributors to recommend Renewtrak to their broader stable of vendors.

Our thesis: Renewtrak has the potential to enjoy powerful network effects by demonstrating value through its core renewals product, then enabling core services to be offered through its 'platform' connecting vendors, distributors and customers, and then opening up that platform to third-party service providers across the technology category, creating an ecosystem.

The Seed Phase

The team at Renewtrak is squarely in its Seed Phase. They have built a powerful platform for renewals automation, landed major technology customers including HP, Lenovo, VMWare, and rolled out the product in over 40 countries. Near-term, the focus is on demonstrating continuing improvement in customers' renewal conversion rates while accessing a growing pool of RUM from customers as the platform is rolled out across additional geographies, product lines, and renewal thresholds.

A note on the workflow automation thematic

Tidal is actively investing behind businesses that help automate important organisational workflows, spanning customer engagement (Upflowy), and transactional processes (FrankieOne) to date. With technology driving continued improvements in customer experience, businesses are being challenged to leverage automation technology to improve workforce productivity, data and analytics capabilities, customer engagement processes, and payments offerings. This can unlock more personalised and better supported product offerings, and deeper customer relationships. Renewtrak is one of many tools we see emerging in this space.

We look forward to continuing to support the Renewtrak team as they build out the product, grow the team, and support their customers to generate more recurring revenues. If you're a visionary founder who is ready to make waves, please reach out via our website.

Thanks to Max Kausman and Evelyn Zhang for help in drafting this post.

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.