Ridgeline Quarterly Update
Updates on deals, portfolio news, and interesting things in our world
We’ve been having quite a few conversations with founders, LPs, and within our partnership about early stage venture in the context of all the uncertainty in the world, the continued slide for public market technology companies, and anxiety across the venture market.
We feel confident here at Ridgeline to continue executing on our thesis and in our current portfolio of companies—many of whom have 2+ years of runway in front of them.
Our thesis and market focus is where we believe our durability and differentiation lies and it couldn’t be more apparent today. There are three reasons we think our portfolio will excel through this highly uncertain period in venture capital and a sustained downturn in the larger economy.
First, our focus on the earliest stages of venture has allowed us to make investments with 5+ year time horizons. The early stages are still active and presenting exciting opportunities to invest in great companies. Additionally, we invest alongside other patient investors that have similar expectations and a long-view. As a firm, we will continue to invest in great companies at early-stages and support our existing portfolio with runway extending capital, when appropriate.
Second is our focus on enterprise technology. As commercial revenue opportunities remain active, our deep network within the Fortune 500 gives us insight to invest in future needs and true pain points at the customer level. We are confident that the best customers during this period will be large corporates with cash to spend. Given that product tends to win, we will use our insights into enterprise technology needs to make sure our companies have the best products that meet these needs.
And last, our value prop to all of our investments—supporting product-market fit activities and revenue creation—will become key during this period. If we can create opportunities for our portfolio to extend runway or even grow during and hit fundraising milestones, we have put them in a better position to succeed. Our unique insights into the federal government market allow us to develop the right approaches for early-stage companies to best access revenue. We expect government revenue to remain stable throughout a downturn, which will serve as an excellent safe harbor for many portfolio companies.
An adage we keep hearing is that great companies, firms, and funds are born out of downturns. If true, we feel that we are positioned well and are excited to take advantage of the opportunity in front of us.
One Big Thing
Wallaroo was our first investment as a firm. We began working with Vid Jain and team in October of 2019 and invested in a seed extension in January 2020.
We saw two things in the company and technology. First, Vid and his team had clear insights and expertise into the data and machine learning space, painting a vision for the future where model development and use would explode, amplifying the pain points around deployment and management. Second, the product that Wallaroo had built was clearly differentiated in the market and allowed data science and engineering teams to focus on deriving value from the models, not managing the underlying infrastructure.
After our investment, Wallaroo was successful in securing multiple deals with the U.S. Air Force (USAF), proving out multiple new use cases with the USAF customer before taking it to market. The company used that work in the DOD to broaden their commercial work and began to see meaningful traction throughout the second half of 2020 and into 2021.
Earlier this year, M12 led the $25m Series A in Wallaroo. Priyaka Mitra from M12 laid out a great vision for their investment. We are fired up about their story because Wallaroo is exactly what we aim to accomplish at this stage when partnering with a founder.
New Investments
Smallstep. Smallstep announced $26m in funding across two rounds at the end of April. Ridgeline participated in the Series A led by StepStone Group that included existing investors, Boldstart, Bain Capital Ventures, Accel, and Upside Partnership.
S+V Technologies. Ridgeline led a pre-seed round with Memphis, TN based S+V Technologies. The product, Stock-in-Motion, creates visibility throughout a supply chain. We were joined by Chicago Ventures and Jett McCandles, CEO of Project44.
Mesomat. Ridgeline led the seed round for Mesomat, a nano materials company that produces stretchable threaded sensors. AceCap participated in the round with Ridgeline.
Follow-On Investments
Wallaroo. Wallaroo raised a $25m Series A from M12 with participation from existing investors Boldstart Ventures, Contour Venture Partners, Eniac Ventures.
SatelliteVu. As Satellite Vu prepares to launch its thermal imaging satellite constellation, the company raised a $21M Series A round. The round was led by Seraphim Space with participation from Lockheed Martin Ventures, In-Q-Tel, and Contrarian Ventures.
Agolo. Agolo completed a Series A financing. The new funding round was led by Lytical Ventures along with Franklin Templeton Investments. Existing investors M12, Google, Tensility Venture Partners and Thomson Reuters also participated in the round.
Portfolio Updates
Ridgeline portfolio company, Streamsets, was acquired by German technology company Software AG. Streamsets is an enterprise DataOps platform and had most recently raised a Series C.
Reddit announced that it would buy Spell, a platform for running machine learning experiments. Spell most recently raised a Series A in 2019 led by Two Sigma and Eclipse.
Last month, a portfolio CEO had to make a very difficult decision to let staff go in order to push the company to cash flow positive. Grant Miller, CEO of Replicated, went through the process with maturity and empathy and showed why he is the type of leader we want to back.
Q-CTRL achieved a breakthrough in its technology, posting a 25x improvement on its autonomous error correction techniques. These improvements increase the likelihood of quantum computing algorithm success upwards of 9000x.
AI Squared announced the closing of their $6 million seed round led by NEA. We published a blog on why we invested alongside the announcement.
MachineMetrics achieved its ISO 27001 certification demonstrating a strong commitment to data and customer security.
National Nuclear Security Administration awarded Cornelis Networks an $18m grant for High Performance Network R&D.
Satellite Vu, an Earth observation and satellite imagery analytics company, has partnered with Landmark Information Group to provide vital climate data to the UK real estate market.
Interesting Stuff
It has been an extremely interesting six months in ventures. The beginning of the year we were seeing articles like this one from TechCrunch, showing how far revenue expectations had fallen.
Now, we are in a period of high uncertainly with many larger firms offering major warnings to portfolio companies. Like many, we found the Sequoia decks to be quite helpful. Particularly, the “forecasting and scenario planning” and “extending your runways” decks. We also took a lot out of these two short posts from Tomaz Tunguz at Redpoint on startup states in a recession and raising money in a downturn.
In the end, we see fairly consistent guidance for companies: work to extend runway 12 months beyond your next fundraising milestones and build the right metrics and fundamentals into your business that will allow you to raise from smart money.
We are also keeping our own future fundraising in mind as we approach the next stage of our firm journey. This thread from Samir Kaji was an excellent set of advice.
The government market continues to be a sustainable advantage for our portfolio and it is encouraging to see a conversation about ROI in this market and the DOD beginning to understand the incentives on the other side of the table.
Now, more than ever, the DOD market will be an excellent source of revenue, non-dilutive capital and channel opportunities. Josh Mendelsohn and Mike Farence detailed how companies and investors can take advantage of this non-cyclical market.