While the holy trinity of venture funding 鈥� California, New York and Massachusetts 鈥� saw massive declines (we鈥檒l get to that tomorrow) some states actually realized significant gains last year, according to SA国际传媒 data.

鈥淚t doesn鈥檛 surprise me,鈥� said , founder of Washington, D.C.-based venture firm , which focuses on investing outside of the major hubs of Silicon Valley, New York and Boston.听

鈥淎 lot of these areas laid the groundwork years ago and are seeing the payoff,鈥� he said.

While the big three saw big declines in venture investment between 2021 and 2022 鈥� although still more than they saw in 2020 鈥� states such as Florida and North Carolina saw substantial gains. Texas venture funding numbers remained even with 2021 levels to the state after seeing a significant increase in 2021 鈥� still impressive since most areas saw a decline last year.

Case said while there has been steady progress in making the geographical dispersal of venture capital more diverse, the COVID pandemic and the movement of talent has likely accelerated that trend.听

Along with that, new government initiatives around sectors such as semiconductors and infrastructure and certain areas having an advantage in specific sectors tech has moved into 鈥� such as health care and foodtech 鈥� also have helped level the playing field.

The Sunshine State

No state was able to take advantage of those trends more than Florida. The Sunshine State saw the biggest percentage increase of any state in venture capital investment between 2021 and last year.

In 2021, investors spent $7.8 billion on Florida-based startups over the course of 652 deals, according to SA国际传媒. Last year, that venture number jumped 25% to $9.7 billion in 601 deals. In 2020, Florida startups only took in $3.4 billion in 470 deals.

鈥淓ven us, as Florida鈥檚 biggest cheerleaders, we could not imagine what has happened,鈥� said , partner at , an investment firm that focuses on Florida and the Southeast and has 96 portfolio companies.

Florida saw several large funding rounds last year into the likes of , and . Industries including crypto, space, gaming and cybersecurity have started to thrive in the state.

While the Florida startup scene has been bolstered by the lack of state income tax and a host of successful exits including , and in recent years, it also is likely the state received the biggest boost from COVID migration.

During the pandemic, Florida remained much more open than parts of California and New York.

鈥淧eople moved here, money moved here,鈥� said Baum, pointing out the state has the third-highest number of accredited investors behind only California and New York.

Baum also points out that many see Florida as a natural entry point to the growing Latin American market, also making it an attractive location.

With the increase in venture, Baum added he has already seen big names move into the market in the past few years. 鈥淲e see , , , etc.,鈥� he said. 鈥淲e never really saw those names until recently.鈥�

While those firms have added to the competition on deals to some extent, it also has given more opportunities to work together.

鈥淵es, it’s added competition, but also they want and need to collaborate,鈥� he added.

The Tar Heel State

Although Florida saw the biggest venture capital gains in 2022 鈥斕� a come-back-to-reality year for the industry 鈥� it was not the only state to see a significant uptick.

Just up the road, North Carolina also powered through what was a down year for most areas. The Tar Heel State saw nearly a $1 billion increase in venture capital going to the startups in its borders.

The numbers were helped out immensely by 鈥� massive $2 billion investment from and that valued the gaming company at $31.5 billion.

, founder and managing partner at in Raleigh, said he has noticed real growth in the tech and startup ecosystem in the state 鈥� and it is not just due to the effects of COVID.

鈥淐learly there has been a shift,鈥� Delgado said. 鈥淧eople moved here and you can just look at the dealflow.鈥�

Unlike some regions that are seeing a relatively young tech scene prosper, Delgado points out that North Carolina has been sustainably growing its startup scene for decades, from research and biotech out of the Research Triangle to the successes of Epic Games and open-source software giant .

North Carolina鈥檚 numbers are definitely moving in a positive direction. Startups in the state received about $3.5 billion in venture capital via 241 deals in 2020. Those numbers grew to $4 billion via 285 deals in 2021.

However, the state saw an even bigger jump 鈥� 24% 鈥� last year while most other regions posted declines. North Carolina startups, meanwhile, saw $4.9 billion roll to them in 234 deals.

Delgado said he already is seeing more out-of-state money come into the state 鈥� and just like Florida, he is seeing bigger names including , and being more active.

Tiger, for example, took part in Raleigh-based analytics firm 鈥檚 $150 million Series F in 2021.

Enterprise software, deep tech, AI and fintech all provide substantial growth areas for North Carolina, Delgado said.

鈥淚t鈥檚 very diverse,鈥� Delgado added. 鈥淛ust the diversity of focus [of startups] is incredible.鈥�

The Lone Star State

Sometimes in a year that doesn鈥檛 live up to its predecessor, it鈥檚 not just the areas that make gains that count. It鈥檚 also important to note the ones that held steady and did not give back previous massive jumps.

Texas fits that bill exactly. Venture funding to startups in the Lone Star State jumped 105% between 2020 and 2021 鈥� from $5 billion to $10.3 billion 鈥� per SA国际传媒 data. Last year, Texas startups saw about the same 鈥� actually, a little 1% uptick 鈥� which is especially notable since Texas鈥� venture economy trails only that of the big three states.

鈥淚t was an interesting year here,鈥� said , managing partner at Austin-based , which has more than $500 million under management. 鈥淚t was kind of a year of two halves. The first half was definitely a carry-over from 2021.

鈥淭he second half softened,鈥� he added.

Not surprisingly, the two biggest rounds 鈥� raising $1 billion and 鈥檚 landing $675 million 鈥� both happened in the first half of last year.

While Texas has welcomed its share of big tech companies in recent years including and , Flager said the tech ecosystem can still continue to grow in the state 鈥� although perhaps not at the same pace places like Austin have grown in recent years thanks in part to COVID and other cultural shifts.

Health care IT, fintech and enterprise software are all leading upward-trending growth, along with a significant influx of talent over the years.

鈥淚 don鈥檛 feel like we鈥檒l take a step back,鈥� he said. 鈥淭here are too many tailwinds. But it will be interesting to see what happens to the pace.

鈥淎 place like Austin cannot continue to have increases in its population like what happened in 2021,鈥� Flager added. 鈥淏ut it鈥檒l still grow.鈥�

Illustration:

Subscribe to the SA国际传媒 Daily

Founded by in 2013, SparkCognition ranging from energy, oil and gas to finance and aerospace with cybersecurity and machine learning technology. Its goal is to make operations more safe, secure and efficient. The company鈥檚 products include cybersecurity and document solutions, as well as data science technology.

It has 鈥減artnered鈥� with a number of companies including The Boeing Co., Hitachi High-Technologies, Aker BP, and others. In fact SparkCognition recently partnered with Boeing to form SkyGrid, a joint venture focused on delivering unmanned aircraft system traffic management solutions through the use of AI and blockchain technologies.

With this round, SparkCognition has raised a total of $175 million since it was founded in 2013. This last round was raised at a valuation of more than $725 million, according to Pitchbook.

I talked with Husain by phone today and he told me that the company has been “doubling revenue” year-over-year, and that revenue in 2019 so far has “already exceeded last year’s significantly.”

Meanwhile, headcount is approaching 300, he added, and up about one-third compared to this same time last year.

The company plans to use the new capital to invest in growing its research group, continuing to expand globally (it recently set up operations in Latin America and in the Middle East), and in building out an integration facility near its home base of Austin, according to Husain.

“A lot of the work we do is focused on integrating industrial systems into the physical world,” Husain told me. “So this will allow us to further develop those capabilities.”

In February 2018, SparkCognition announced the full close of its multi-part Series B. The firm raised a total of $56.5 million in the round, which was announced during both and the .

In March of that year, I interviewed Husain鈥攁 prolific inventor with 22 awarded and over 40 pending U.S. patent applications to his credit鈥攐n how AI was likely the harbinger of both innovation and destruction.

Then in July 2018, SparkCognition and Boeing announced they would use artificial intelligence and blockchain technologies uncrewed air vehicles in flight and allocate traffic corridors and routes 鈥渢o ensure safe, secure transportation.鈥�

“In a short few years, SparkCognition has proven itself to be one of the leading industrial AI companies in the world,” said , managing director and co-founder of March Capital Partners, in a prepared statement.

New investor also participated in the round, along with a slew of other institutions and individuals, including , and Malcolm Turnbull, former Australian Prime Minister and former managing director of Goldman Sachs Australia, among others.

Existing investors who also participated in the round included The Boeing Co. through its Boeing HorizonX unit, former Cisco CEO and chairman and , the private investment fund of Michael S. Dell and family.

Illustration:

Subscribe to the SA国际传媒 Daily

There鈥檚 been a lot of hype around Austin鈥檚 startup scene as of late. Companies big and small are relocating, or opening up offices, in the Texas capital left and right, as we covered back in April.

Funding has increased in recent years, too. And while we鈥檝e covered that extensively, we haven鈥檛 really looked at that funding activity in the context of how it compares to other markets.

So I asked our senior data reporter, Jason Rowley, to pull some numbers looking at average round size in various stages. There鈥檚 good and bad in what he turned up. For one, Austin ranks in the top 10 at least among major U.S. cities in terms of average amount raised at the seed, early and late stage. But unsurprisingly, considering that firms here are mostly focused on this stage, the city is stronger at the early stage and (significantly) weaker at the later when it comes to average round size.

As you can see in the chart below, Austin ranks sixth when it comes to seed-stage round size with an average of $1.46 million across 228 rounds struck between 2017 and late August 2019.

Meanwhile, Austin ranks ninth when it comes to early-stage round size with an average of $9.24 million during the same timeframe across 216 rounds, topping only Chicago among major funding-rich cities.

Its weakest performance lies at the late stage. It ranks No. 10 with an average late-stage round of $35.19 million across 46 rounds.

That Austin lacks late-stage investors on the ground has been a common refrain. And many of us believe that until that changes, we鈥檙e not going to see the needle move much in the way of big deals in the city. Increasingly, we鈥檙e seeing investors from other markets participate in rounds. But as we reported back in July, Texas-based VCs are still the primary backers of Texas-based startups.

Recap

Speaking of late stage, Austin was home to at least one significant round during the month. Fintech startup raised $60 million from a bevy of investors (many of whom were notably from out of state) in its third funding round in 13 months after notching 700 percent (!) ARR growth in 2018. Read more about that here.

Over in San Antonio,听, a firm that offers a non-traditional form of capital and debt for SaaS companies, acquired e-commerce search shop 听for an undisclosed amount in its second acquisition out of its recently closed second fund. This piece on the deal also gives some background and context to the firm’s approach.

We also gave readers the scoop on Austin-based , a SaaS digital marketing company focused on SMBs, raising $14.3 million in venture and debt financing.

And last week, I reported on San Francisco-based digital life insurance startup announcing plans to open an office, and build out an engineering team, in Austin after raising $60 million in a Series C led by .

News We Didn’t Get To

As always, there鈥檚 more happening in Texas than we simply have time to cover. I鈥檒l summarize a few of those deals next.

First off, there were a couple of notable acquisitions by, and of, Austin-based companies. AustinInno that , 13-year-old Austin-based 鈥渕arketplace that connects the IT industry to help tech buyers and sellers get their jobs done,鈥� was being acquired by New York-based , a global marketing giant 鈥渢hat operates brands including IGN, Mashable, Humble Bundle, Speedtest, PCMag and Offers.com.鈥� As part of that deal, though, AustinInno reported that there would be some layoffs. The publication cited a state filing indicating that Spiceworks would be 鈥渓aying off 59 employees, as of Aug. 19.鈥�

Also, late in the month, Austin-based , a provider of product reviews and user-generated content (UGC) 鈥渟olutions鈥� New York-based and venture-backed , a product discovery and reviews platform with nearly six million 鈥渃ommunity members.鈥�

Terms of the deals were not disclosed.

In organizational news, the Austin Business Journal reported that had as executive director of the 鈥渢o pursue something new.鈥� No word yet on a replacement.

Meanwhile, announced it was outside of San Francisco in downtown Dallas, according to the Dallas Morning News. The move has the potential to bring 3,000 jobs to that area.

And lastly, to our above point regarding funding, there were a number of seed and early-stage rounds that caught our attention. One in particular included big-name investors located outside of Texas.

Over in Houston, , a company aiming to 鈥渆nable the bulk commodity shipping market to operate in a unified and digital environment,鈥� announced the completion of a $1.5 million seed funding round co-led by , , , and . Voyager said its new capital would be used to expand its Software-as-a-Service (SaaS) network鈥檚 offerings, further acquire and expand its customer base, and grow its engineering, development, marketing and sales teams. The company notes that while there鈥檚 a ton of funding in the container shipping sector (think , , and for example), the $360 billion global bulk commodities industry (including crude, oils, gas, grain and metals) is actually 鈥渇our times鈥� larger by volume and drives the global container traffic.

According to Voyager, that space has been largely ignored by technology and is also losing billions a year. Via email, the company told me: 鈥淯nlike the relatively modern container industry, 99% of bulk shipments are still managed by phone, email, fax and text. A single shipment generates thousands of emails and documents. Teams are overloaded, mistakes are frequent and costly, and, most notably, 95%+ of a company鈥檚 data is sitting in folders, spreadsheets, PDFs and inboxes, inaccessible to the company and users at scale. Voyager is the antidote, modernizing the entire chain.鈥�

And last but not least. The funding of a startup that comes with a touching history.

was inspired to start Austin-based , which offers affordable health insurance plans for freelancers, sole proprietors, and 1099 contractors, after he realized 鈥渢hat not everyone is fortunate enough to have great health insurance.鈥� During Soman’s second year studying to get an MBA at l, he was diagnosed with Guillain-Barr茅 Syndrome, and was paralyzed in intensive care for four months. He spent another six months in rehab. Later, Soman was working as a self-employed freelancer when he realized he was spending more on health insurance than for anything else in his family鈥檚 budget. So he focused his energy on helping freelancers have access to more affordable health insurance in the form of Decent, which he founded in 2018.

The startup just led by and including participation from (both out of Silicon Valley). So far, the company鈥檚 plans (which it claims have premiums that are 30 to 50 percent lower than typical market rates) are currently available in Austin and will soon be available in other parts of Texas and the country. Decent plans to use the new capital in part to grow its team over the next year.

“Health insurance is too expensive, especially for people who buy their own without subsidies. Freelancers are seeing premiums rise by more than 20 percent per year,鈥� Soman said. 鈥淭he future of work demands the future of insurance.鈥�

Well, that’s it for this month! Hope everyone had a good Labor Day weekend. See you next time.

Photo credit: Mary Ann Azevedo, Data Credit: Jason Rowley

Subscribe to the SA国际传媒 Daily

Founded in 2012, OutboundEngine鈥檚 marketing software provides 鈥渁 responsive website, relevant content created and sent automatically across email and social media, and hands-free social advertising on Facebook and Instagram.鈥� Its subscriptions range from $199 to $449 per month. The company currently works with over 10,000 businesses, including individual professional service providers such as real estate brokers, mortgage companies, and independent insurance offices 鈥渢o make their marketing simple and easy to manage.鈥� Specifically, it writes and produces branded relevant content and then distributes it via social and email channels.

鈥淥ur mobile app surfaces the most engaged content and provides a means for customers to engage with their prospects and to start conversations and close more deals,鈥� CEO told SA国际传媒 News.

In recent months, OutboundEngine on an $8 million 鈥渧enture loan鈥� from . While that news was announced last month, the company also quietly recently raised a Series C-1 round of $6.3 million from , , , , and . That round is an add-on to a $16 million it closed in 2016. OutboundEngine has raised over its lifetime, according to SA国际传媒 data.

Pickren joined the company last year with the goal of accelerating growth. Last year, OutboundEngine had a $23 million annual run rate, according to Pickren, and has been growing about 16 percent year-over-year.

鈥淲e鈥檙e continuing to focus on what I call healthy company unit economics and making sure we鈥檙e growing in the right way,鈥� he said. 鈥淲e鈥檝e increased customer retention rates by over 25 percent, sales productivity has increased by over 40 percent and improved how cost-effectively we acquire customers so that they pay us three times as much as it costs to acquire them.鈥�

The company is using its recent debt and equity raises to 鈥渄ramatically expand鈥� the industries and types of professionals it serves, as well as to expand its total addressable market, Pickren added.

鈥淲e鈥檝e been investing in our prospect database and marketing capabilities,鈥� he said. As part of these efforts, OutboundEngine has hired nearly 40 new salespeople in the last two to three months and today has over 200 employees.

Empowering small businesses is a big part of the company鈥檚 overall value proposition.

鈥淲hen you鈥檙e in the technology business or in a software business, sometimes you can lose sight of the customer and human element,鈥� Pickren said. 鈥淭he people we serve are small businesses and independent professionals, so many of them try to do their own marketing and fail. That鈥檚 where we come in.鈥�

, general partner at Austin-based Silverton Partners, believes that SMB marketing automation software 鈥渋s an untapped, compelling opportunity.鈥�

鈥淎lmost 17 million SMBs use no digital marketing tool and 92 percent of them use no marketing automation software, yet they spend more than $35 billion on digital advertising,鈥� he said. “We believe that the SMB market will move away from do-it-yourself (DIY) and toward do-it-for-me (DIFM) offerings鈥� such as what OutboundEngine provides.

, partner at Austin-based S3 Ventures, notes his firm led OutboundEngine鈥檚 $16M Series C and also invested again in the C-1 round. Plauche believes that most small business owners don鈥檛 have the time or expertise to write content and manage outreach themselves.

鈥淥utboundEngine solves this void in the market with a simple, easy to use platform that basically does everything you need,鈥� he said. “The market has several basic email campaign managers but none match the product depth and functionality of OutboundEngine.鈥�

Illustration:

Featured image courtesy of OutboundEngine

Disclosure: The author wrote for OutboundEngine on a contract basis in 2016.

Subscribe to the SA国际传媒 Daily

The company forwent Texas-based investors, turning to mostly West Coast-based money for its Series C. led this latest round (its exits include , , and . 听(Its venture arm is based in San Francisco) Returning investors , , and also participated in the financing, in addition to new backers such as , , and , and some angel investors. Kansas City-based , which recently opened an office in Austin, put money in the round as well after having invested as far back as ScaleFactor’s seed raise in 2017. (The funding though, overall, bucks a trend we often see of Texas-based startups mostly raising capital from Texas-based VC firms. Specifically, 83 percent (or ten) of the top 12 active investors in Texas in H1 of this year were actually based in Texas).

ScaleFactor鈥檚 online financial SaaS platform is focused on building a back office for SMBs (small-to-medium sized business). The back office, as defined by , 鈥渃an be thought of as the part of a company responsible for providing all business functions related to its operations.鈥�

The six-year-old company is growing rapidly and says it needs the capital to keep up with demand. Evidence of that growth can be seen in ScaleFactor鈥檚 surging annual recurring revenue (ARR), a metric that modern software companies use to track growth in their subscription income, and headcount. CEO and founder told me that his company鈥檚 ARR grew by 700 percent in 2018 compared to the year prior (although from what he admittedly described as a relatively 鈥渟maller鈥� base it鈥檚 still on the very high-end of the growth curve). He projects ScaleFactor鈥檚 ARR will grow by 300 percent this year as the firm approaches the 1,000-customer mark after adding 鈥渉undreds of new customers a month.鈥�

The company started the year with 107 employees and recently crossed the 200 headcount mark. Notably, besides Rathmann, it has 30 CPAs on its team. Below is a look at its fundraising history.

The Future

With the new capital, Rathmann said ScaleFactor will focus on adding depth to its features and building out additional products and services so that it can serve as 鈥渁 one-stop shop鈥� back office for smaller companies. That will include 鈥渟caling its national presence鈥� and building out its product and engineering team, Rathmann said. (Most startups boost hiring after raising new capital.)

The company wants to go beyond offering payroll services or helping with corporate cards for SMBs, which Rathmann believes are increasingly 鈥渞eally savvy buyers.鈥�

鈥淭here鈥檚 a lot of them, and they need a lot of help,鈥� he told SA国际传媒 News. 鈥淎nd they don鈥檛 traditionally have access to resources that bigger companies do. Ultimately, we want to provide more than just accounting and finance assistance. We want to help our customers with what鈥檚 happening tomorrow, or next week.鈥� For example, ScaleFactor claims its 鈥渋ntelligent finance鈥� offering takes data on a businesses鈥� patterns to predict things like being short on cash flow before payroll day, rather than the day of, to better assist its customers with controlling their financial operations.

鈥淚n time, we want to be known as the news feed for a business,鈥� Rathmann said. 鈥淲e alert our customers to what needs attention and make proactive suggestions with their bottom line in mind.鈥� Looking ahead, the company is also eyeing the lending space.

Its headquarters are spread out over three offices in Austin, but the company will consolidate into a 50,000-square-foot new space in the hip, gentrifying eastside of the city, which is growing in popularity among startups. It also has offices in Denver and in Vancouver.

What They鈥檙e Saying

The company鈥檚 investors had laudatory things to say about the company鈥檚 product, and its resulting growth:

To Coatue Senior Managing Director , ScaleFactor 鈥渋s building the most comprehensive financial SaaS platform on the market for SMBs.鈥�

Byron Deeter, a partner at Bessemer Venture Partners, in a press release described ScaleFactor as 鈥渁 rocket ship of growth.鈥�

Meanwhile, Canaan partner notes that 鈥淪aaS is creating a level playing field for SMBs which previously had to resort to manual tasks via redundant hires.鈥�

Fintech itself is having a moment. In recent weeks, we鈥檝e reported on a number of notable fundings in the space, including raising over $4 million and $100 million Series C haul. Another SaaS company in the financial technology space, , also recently raised a $200 million Series D for its self-described 鈥減eople platform,鈥� which addresses a number of HR-related functions. Like ScaleFactor, it too is aimed at the small business market.

Illustration:

Subscribe to the SA国际传媒 Daily

Despite the scorching temperatures, funding activity was well, kind of lukewarm in July. As you can see below, the largest known deal was a $48 million Series E raised by , which markets and manages vacation rental homes.

No shock that most fundings were raised by startups in Austin, where the majority of startup activity is taking place. Are you reading from Houston, Dallas, San Antonio or somewhere else in the state and sick of the hipster capital getting all the hype? If so, shoot me an email, I鈥檇 love to know why your hometown isn鈥檛 keeping up (sorry, just saying) despiteand lots of cash.

What鈥檚 Playing In Theaters

In July, I reported on how Austin-based raised $24.5 million of a planned $75 million fund. He liked my tweet apparently so that was fun. I also did a Q&A with dating site (which is profitable, so that鈥檚 cool). I wanted to hear more about its fund, which is focused on investing in underrepresented founders. They only wanted to be interviewed via email which was not ideal, but it鈥檚 a free country and Bumble is a private company, so there you go.

I also talked to Austin-based real estate startup ,which raised $4 million in equity funding and $21 million in debt funding to help people buy homes faster. Since I specialize a bit in real estate technology, I got to geekily analyze how this company fits into the overall space a bit. I also got to interview HR tech startup about what it plans to do with its recent $4 million capital infusion that was led by . Pretty sweet bit of cash for a small startup.

And finally, I reported on 鈥檚 acquisition of , an Allen, Texas-based mobile video solutions provider, for an undisclosed amount. The company was previously eyeing an IPO, according to the . For non-Texans, Allen is suburb of Dallas so that was a sweet win for Big-D.

The New Stuff

Y鈥檃ll know I crank every day but there were still some deals I just didn鈥檛 have the juice to cover at the time. So here will go.

鈥淒esigned by technicians, for technicians鈥� startup in a round led by (also based in Austin). Austin-based is a developer of software for mobile auto repair businesses (talk about specific).

Recently-rebranded , a mobile-first concierge platform for apartments, raised $3 million in a round led by New Jersey-based that also included participation from Houston-based , the and Austin-based. According to , the Houston company recently changed its name from 鈥淎partment Butler.鈥� Seems like a good idea. It wants to expand (Denver will be its first stop outside of Texas).

Austin-based , a customer review platform for B2B technology, announced a $12.5 million Series C funding led by (also based in Austin) with continued participation by returning investors Silicon Valley-based and local VC firm LiveOak Venture Partners. The company said it plans to grow ARR by 223 percent and its customer base by three times through 2020.

And let鈥檚 not forget the energy sector. , a Houston-based AI energy analytics company, concluded its Series B funding round with a new $1.8 million investment from, a Colombian venture capital firm backed by one of the largest utilities in South America. The company previously announced in May the initial close of its, led by . Innowatts says its AI-driven technology helps customers such as utilities, energy retailers and smart energy communities reduce their energy bills.

In San Antonio, launched its third fund, raising $10 million toward a planned $50 million offering, according to the . 鈥淕eekdom Fund III is expected to be substantially larger than Geekdom Fund I, which raised $3.4 million, and Geekdom Fund II, which raised $20 million,鈥� wrote the Journal. Per its SA国际传媒 profile, the firm 鈥� invests in early stage IT startups in San Antonio, South Texas and beyond.鈥�

And finally, check out our recently published quarterly report (which found that Texas funding in Q2 barely surpassed Q1 2019 totals, and the state鈥檚 venture market underperformed year-over-year). Don鈥檛 miss it, it鈥檚 good. Thanks for reading and until next time, stay cool and hydrated!

Illustration:

Subscribe to the SA国际传媒 Daily

Now, an Austin-based talent management SaaS (software-as-a-subscription) startup focused on helping companies and HR managers not only retain employees, but better engage with and coach them, has raised $4 million to grow its business.

founded what is now in 2010. For the first few years, the company operated as a career coaching consulting business. Human resource professionals ended up being the primary client and many asked about applying the methodology internally to their own organizations via automation of the technology. So in December 2013, Ginac pivoted TalentGuard from a consulting company to a software one focused on career coaching. She landed her first beta customer in April 2014 and says revenue has grown 200 percent year-over-year since.

Along the way, Ginac said, the company was essentially bootstrapped — only raising a total of $3.5 million from angel investors over the course of nine years.

Austin-based led its latest round, which also included participation from a number of individuals including former听Spredfast听CEO (who was also the former CEO of , which was ultimately acquired by IBM); and Horizon Bank Chairman and former Dell CFO James M. Schneider.

The pair join , founding partner at LiveOak Venture Partners, in joining TalentGuard鈥檚 board. In April, LiveOak closed on a $105 million fund to invest in Texas-based startups.

Currently, TalentGuard has 27 employees in the United States and Mexico and more than 80 customers ranging from small businesses to Fortune 500 companies. Examples include BlueCross and BlueShield of Tennessee, Allstate and Zurich Insurance.

鈥淭ypically, our customers are in high turnover industries such as retail, financial services or hospitality,鈥� Ginac told SA国际传媒 News. 鈥淭hose sectors in particular seem to have a hard time recruiting and keeping talent. And usually the number one reason is a lack of career development.鈥�

TalentGuard plans to use its new capital for attracting more customers and expanding its footprint both in the U.S. and globally. It has an office in Mexico City and plans to open another location in Ireland in Q4 of this year. It also plans to hire another 25 employees by year鈥檚 end, with a particular focus on sales and marketing staff.

鈥淲e have clients in Singapore, Abu Dhabi, Germany, Thailand and Egypt, for example,鈥� Ginac said. 鈥淲e want to be closer to our customers.鈥�

The company also plans to use the money to add more artificial intelligence and machine learning bots into its software 鈥渢o make it smarter,鈥� Ginac said, especially in the area of predictive people development. What does that mean?

鈥淲e want to be able to take lots of information and predict a targeted and personalized skill development plan,鈥� she explained.鈥漈he goal is to give employees a way to develop a curated learning development plan that they can execute on and thus help increase the chance of them staying on longer at a company.鈥� In addition, Ginac added, TalentGuard aims to “make it easy to听develop and evaluate skills, connect with mentors, and have more meaningful conversations with management.”

LiveOak鈥檚 Srinivasan told SA国际传媒 News his firm 鈥渉ave been blown away鈥� by TalentGuard鈥檚 鈥渋ncredible听grit and听tenacity听to听create听a听comprehensive talent management platform鈥� with so little external money.

He also said that LiveOak views the company as an 鈥渆arly pioneer鈥� in its space.

鈥淲e like their clever use of AI and believe in general, the HR tech management space is incredibly hot,鈥� Srinivasan added. 鈥淎nd in TalentGuard, we see a platform that can drive strong employee engagement and retention.鈥�

Illustration:

Subscribe to the SA国际传媒 Daily

We like to start each column with some relevant data points, and that normally will include a summary of the funding that Texas startups raised during the month. But since we鈥檙e going to be publishing our quarterly report next week, we decided to take a look at the most active investors in the state.

Here鈥檚 what we found: 83 percent (or ten) of the top 12 active investors in Texas are actually based in Texas. As you can see in the chart below, the two that are out-of-state VCs include: Bay Area incubator and . I admit this was a bit of a surprise to me as I thought Austin鈥檚 tech scene in particular was maturing and attracting more outside investors. But it鈥檚 not to say outside investors aren鈥檛 putting money into Texas startups, but maybe not as much as the ecosystem (which is early-stage VC heavy) needs to grow significantly.

Next, we鈥檒l do a highlight reel of our Texas venture coverage over the last month. We reported on how Houston-based has raised $82 million for its fourth fund, Mercury Fund Ventures IV, for which it aims to raise a total of $125 million. Just add that to the growing list of VC firms raising nine-digit funds in the state. We also reported on Austin-based $25 million Series B. The Austin-based freight brokerage startup projected that revenue would reach $600 million this year. And just last week, we wrote that Austin-based telehealth startup Remedy had raised a $10 million Series A to provide virtual doctor visits, make house calls when needed and operate a walk-in clinic.

This is just a fraction of what took place, so we鈥檒l now do a quick summary of some deals that we didn鈥檛 have time to cover.

On June 25, Austin-based a sustainable fragrance company, announced it had completed its $7 million Series A. Germany鈥檚 led the round, which also included participation from existing investor , and attracted a new strategic investor Peru鈥檚 one of South America鈥檚 largest beauty companies.

During the month, the Houston Chronicle published a series of stories focused on the city鈥檚 startup scene that are worth reading, including examining whether Houston could avoid past mistakes as it works to build its tech scene.

Also in June, RV rental and outdoor marketplace which relocated its headquarters from Silicon Valley to Austin last August, announced a slew ofthat came from a number of larger companies such as Tesla, Mercedes-Benz, Twitter, eBay, Airbnb, Google and Expedia. The company is aggressively expanding in Europe and is hoping its new hires will accelerate that growth. One example includes the appointment of Christine Porretta as senior director of content. Porretta formerly oversaw content marketing for Airbnb鈥檚 LuxuryRetreats.co business. Also, Andrew Cunningham, a former product leader at Twitter, has joined Outdoorsy as director of product. The company, which has raised about $75 million since it was founded in 2014, said it saw 400 percent growth last year.

Not all news was directly related to startups鈥� raising money or hiring new people. In June, local accelerator announced the launch of The Austinpreneur Podcast, a series highlighting startups, entrepreneurs, and innovators in Texas. Here鈥檚 to its 40-plus episodes, which include titles such as, 鈥淲hy Toronto & Austin are More Alike Than You Think,鈥� and 鈥淲ant to Know what VCs Won鈥檛 Tell You?鈥�

Meanwhile, a by publication Startups San Antonio revealed that a number of local SaaS and cybersecurity startups made a list of fastest-growing companies in Texas. That SaaS is a growing sector in the city is not entirely shocking considering that , a venture equity firm that acquires and moves SaaS startups poised for growth to San Antonio, is headquartered there. Earlier this year, our EIC Alex Wilhelm wrote about its new $80 million fund.

Austin-based , one of the more unusual startups I鈥檝e heard of recently, raised a $1.2 million in its first (oversubscribed) round of funding. The company creates diamonds from cremated ashes of people and pets, and said it raised the money in four weeks. Eterneva launched in the fourth quarter of 2017 and said it 鈥済rew 250% YOY.鈥� So apparently, there is demand for this sort of thing. , founder of and Notley Ventures is one of the investors who put money into the company. He said Eterneva is an example of a 鈥渞eal B2C renaissance happening in Austin right now.鈥�

Speaking of SaaS, , a cloud-based HR technology company, closed an $8 million Series A during the month. led the round, which also included participation from Austin-based and . The company鈥檚 founding headquarters are in Sydney, Australia, but execs decided to make Austin its U.S. home as part of this new funding.

Last but not least, Plano-based fintech company closed on a . On June 10, Dallas Innovates noting that the round was led by prolific investor and Philadelphia-based . Austin-based and also participated. The 10-year-old company provides cloud-based digital banking solutions to U.S. credit unions and banks and over time, according to its SA国际传媒 profile

Well, that鈥檚 it for this month! Hope you all have a safe and fun Fourth of July and stay tuned next week for our quarterly report on Texas funding. Bye for now!

Illustration:

Subscribe to the SA国际传媒 Daily

Founded in 2005, Mercury Fund has $275 million under management (per its ) and has historically focused on investing in 鈥渕iddle America.鈥� That doesn鈥檛 mean it doesn鈥檛 back companies on the coasts. Its most recent investment was participating in South San Francisco-based 鈥檚 $76 million .

If Mercury Fund raises its targeted $125 million, this fourth fund would be , according to SA国际传媒 data. It raised $20 million in its first fund in 2005, $70 million for its second fund in 2010 and $105 million in its third fund in 2014. The firm typically waits four to five years in between raising new funds.

It targets SaaS, cloud, and data science/AI platforms 鈥渢hat make the industrial ecosystems of Middle America more competitive and efficient,鈥� according to its website. The firm was previously known as 鈥淒FJ Mercury,鈥� and was a member of the DFJ affiliate network, but 鈥渄ropped that branding in 2012,鈥� according to PE Hub.

Over the years, Mercury has had 16 known , according to its SA国际传媒 profile. Most recently in January, Austin-based portfolio company for $225 million.

Managing directors (also co-founder), (also co-founder), and are all listed as general partners on the filing.

The fund would be the latest in a string of new funds raised in Texas this year so far. Last month, we reported on听, an Austin-based healthcare and life science-focused venture firm, raising $250 million in its third fund. In April, we covered Austin-based 听close of its second fund, which topped out at $105 million.

I鈥檝e reached out to Mercury Fund for comment and will update this post if they get back to me.

Illustration:

Texas is the fourth largest state in terms of venture deals and the fifth largest when it comes to venture dollars raised. Since I鈥檓 lucky enough to live here, we wanted to dedicate a monthly column to covering cool startup happenings in Texas previously unreported on (by us at least).

The Balcony View

May was a pretty busy month for Texas startups. Combined, startups around the state raised (a known) $255.6 million during the month of May alone. For the first five months of the year, total venture funding in Texas topped $1.13 billion.

Subscribe to the SA国际传媒 Daily

That鈥檚 not too shabby considering that we reported in January how startups across the state had raised a total of $2.3 billion in 2018. Houston, in particular, had a good month thanks in large part to a $120 million Series B raise by Houston-based biopharmaceutical company (formerly known as ViraCyte) covered by our own reporter Jason Rowley.

Of course, SA国际传媒 data is subject to reporting delays, specifically impacting our seed and early-stage counts. If you鈥檙e an investor in Texas, join the to help us get the most accurate and up-to-date data on Texas鈥檚 VC market.

Street Level

Here is a list of news we reported on over the past month or so.

• , an Austin-based healthcare and life science-focused venture firm, recently raised $250 million in its third fund.
• Dooap, an accounts payable software startup, that it was moving its headquarters from New York City to Austin.
• We did an in-depth look at 鈥淭ech鈥檚 Major Migration to Austin, TX鈥� that examined the many company relocations and opening of second (or third) offices here.
• Austin-based digital health startup raised $50 million. EverlyWell鈥檚 digital platform connects consumers with existing, independent, certified labs for at-home collection tests that are ordered and reviewed by board-certified physicians.
• Austin-based announced the close of its second fund, topping it out at $105 million.
• San Antonio-based SaaS-focused acquired , an e-commerce search and navigation company

And, here鈥檚 some other news we didn鈥檛 have time to cover but is worth noting (note, this is not an exhaustive list鈥攖hat would just be too much for one column!):

• Houston-based , 鈥渁n automated system discovery and documentation software company focused on IT Managed Service Providers鈥�, . led the round, which also included participation from , the founder of Rackspace Managed Hosting, and others.
• Golden Section Technologies of , a new Houston-based venture fund with a focus on seed stage B2B SaaS companies. GSTVC said its goal is to invest 鈥渁longside talented entrepreneurs with a deep understanding of the end customer’s problems, a sellable product, and demonstrated customer traction.鈥� 鈥淭he $20 million fund plans to make its first investment by the end of the third quarter of this year,鈥� according .
• In April, + — presented by Twilio, AWS, and Redoc.ly — sponsored what organizers described as 鈥渢he only LGBTQIA+ themed startup weekend event in the world.鈥� Thirteen attendees hailing from every continent 鈥渢raveled to Austin to learn what it takes to start a new business, perfect their pitch and present it to a panel of esteemed judges,鈥� according to organizers. , which has developed an app to make a transition roadmap for trans individuals, won the competition.

• an Austin-based firm working in media/technology venture capital, incubation, and education, recently announced plans to acquire , an online music education and career development platform launched in 2013 by musician/music entrepreneur . Penick told me the organization鈥檚 goal is to 鈥渉elp artists become technologists, and technologists become artists.鈥� This seems appropriate considering Austin bills itself as the
• , an emerging specialty chemicals manufacturer seeking to decarbonize the chemicals industry, announced the closing of a $32 million Series B round led by Silicon Valley鈥檚 Founders Fund and including participation from . Founded in 2016, the Houston company is run by two 20-somethings and . The company鈥檚 revenue grew by 10 times in the last year thanks to several multi-million dollar oil and gas contracts for its bio-based peroxide solutions 鈥渨hich clean everything from scraped knees to wastewater from hydraulic fracturing without safety issues or environmental impact,鈥� according to officials. CEO Chakrabarti developed the company鈥檚 proprietary technology as a med student studying cancer cell treatment. The funding comes on the heels of a $13.5 million funding round in October.
• Seventy-four early-stage startups made it into the in the Austin cohort. This marked the Austin program鈥檚 second cohort. This year, the startups came from five countries and 14 U.S. states. They represented five industries鈥�42 percent high tech, 26 general, 19 percent healthcare and life sciences, 8 percent social impact and 5 percent energy/cleantech. Fifty-six percent were also female founded, according to organizers.
• Dallas area biotech startup in late April for its tumor-fighting therapies, according to the Dallas Business Journal.

That鈥檚 all for Texas in May. For more of our ongoing coverage, follow for startup news from all over the country. You can also follow me on Twitter .