Opening Back Up…

  • Cloud and mobile based infrastructure enabled innovation in: retail, e-commerce, remote learning, healthcare, and hybrid-enterprise enablement. Snowflake, Twilio, Mulesoft and Salesforce are just a few examples of cloud and mobile infrastructure businesses transforming large segments of the economy. Cloud collaboration applications, intelligent technologies and productivity and workflow automation tools existed prior to the pandemic (Zoom, Slack, Google Workspace, Gitlab, Airtable and Salesforce) but saw massive usage acceleration by workforces globally, driven by hybrid / remote work requirements. This adoption is allowing organizations to evaluate and adapt to more permanent policies that allow workforces to be hybrid/flex (e.g. Salesforce, which had it’s best first quarter ever in March 2021 will remain hybrid/flex through YE 2021). Cloud software is now a variable cost for businesses and new business creation. It is driving innovation across all sectors
  • The rise of the ‘solo-entrepreneur’ — Vertical SaaS and mobile enabled solutions now allow individual business owners and very small scale companies to operate with information systems, data, and marketing tools that were historically too expensive to access. This is especially true for businesses that serve traditionally overlooked sectors: e.g. mental health (Lyra), family care (Papa), creatives (Patreon). It is also true of solutions that serve overlooked communities (e.g. women, communities of color, LGBT+, etc.) We are seeing a furious pace of innovation and business creation leveraging tools that make it faster and much less expensive to develop software solutions that often disintermediate a broker (creative economy) to improve specific end user needs and create more value for all market participants
  • The pandemic has thrown into stark relief the sclerotic and antiquated nature of government (state, local and federal) technology — from operating to supply chain and procurement systems to research and innovation capabilities. Conversely, it served to highlight new opportunities, especially with the Biden infrastructure bill’s focus on home healthcare workers, climate and the environment, supply chain renewal, advanced manufacturing and breakthrough technologies. Leadout is proud to be strong backers of CoProcure in the govtech space
  • Remote Company Funding: we thought that new investments might slow as we and the broader investment community retrenched and helped portfolio companies reevaluate burn, access to private capital, and whether to apply for PPP loans. “How would the Winter Cohort of YC’s Demo Day even work?” will investors — having never met a founding management team and really “kicked the tires” in the traditional sense — wire capital after video chats and phone calls only? Turns out the answer is ‘yes’. In fact, the increased ability to build businesses remotely seems to have accelerated new business formation
  • We believe these are exciting tailwinds for our Founder Market Fit thesis as more entrepreneurs have access to the tools and talent necessary to build successful companies from anywhere and by anyone
  • More than 50% of our portfolio is outside of the Bay Area. We met many of our founders over Zoom and we look forward to meeting in person as things open back up
  • We grew as a firm during the pandemic: Steve Brownlie and Yun-Fang Yuan started spending a LOT of time with me on Zoom in early 2021. I’ve known both of them for a long time, but we haven’t seen each other in person since becoming Leadout colleagues — that hasn’t stopped us meeting hundreds of companies together
  • The pace of vaccine development. We did not predict that the discovery of the vaccine would take 18–36 mos (we thought longer). Rapid mobilization of clinical trials and scientific collaboration on a global scale drove unprecedented innovation and accomplishment in the public health realm. #WeLoveScience
  • The Resilience of Residential Real Estate — as evidenced by Compass and AirBnb IPOs. New Housing Starts were up — remote work has impacted demand and preferences for housing. And as cities like New York and San Francisco come back, inventories are currently at an all time low
  • Stagnation in who gets funded — We believed female founders would continue to make progress raising institutional capital for early stage startups but the data suggests otherwise. Investment in female led fund managers declined as did investment in female founded companies. The data is even worse for underrepresented (e.g. Black, LatinX) founding teams. There is still much work to be done. In Q1 2021, 83.9% of venture dollars went to all male founding teams. LatinX founders received ~2% of dollars and Black founders received less than 1%.The need and opportunities for funds that focus on these groups continues to be great.

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