Chris Norris

Hot take on a lot of early-stage digital health companies out there: You're not a tech company. Most tech-enabled care companies I've seen over the past two years are only tech-enabled in the sense that they use telehealth as their delivery mechanism for care. There are exceptions to this, of course - companies who build computer vision and applied AI tools to better the doctor-patient experience, companies who build tooling around risk scoring and stratification to enable more personalized medicine, companies who build truly novel intakes to better route patients to the appropriate care, etc. These companies have real technology chops and, if they sell it right to the market, can get credit for this from investors. But if you're truly a telehealth provider, you need to realize now that the goal post has shifted dramatically from 2021 and you're going to be valued at maturity at something like 3x EBITDA. That's profit. Not revenue. Throw a revenue multiple out the window. That's not the world we live in if you're a virtual doctor's office. Think of how that impacts venture math. If you're raising a seed round at $15M post-money (or $12M pre-money), it means you'll have to generate something like $150-200M in annual EBITDA to be a fund returner for your seed investors. Maybe even more with dilution, since telehealth businesses are not traditionally capital efficient and will likely need to raise material additional capital to reach that scale. You need to be ridiculously profitable (probably on $800M-$1B in annual revenue since you're likely going to be a 40% gross margin business). Here's the good news: you can set yourself up well (and probably be a contrarian founder relative to your peers), by talking about EBITDA growth and how you can grow into a fund-returning outcome based on realistic mature market comps. This will stand out for the investors you're pitching, even at the early stage. This is how you can beat the malaise of the tech-enabled care market. Focus on the right metrics and the right type of growth. You don't have to have all the answers (no founder does), but you need to make sure the ship is headed in the right direction. A focus on profitability for "tech-enabled care" (*ahem* telehealth) businesses is a good first step.

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Let’s geek out on name matching algorithms in the midst of a world full consent orders and burned out compliance teams.  An example to illustrate: There are lots of people named Jose Lopez or John Smith in the world, so when you are trying to automate names to watchlists, common names can yield a lot of complexity. Socure uses many novel approaches for name matching algorithms.  One example is the use of Siamese Neural Networks with Long Short-Term Memory (LSTM) layers. These models are designed to learn and compare sequential data, such as text or time series, and are particularly useful for tasks like name matching, sentiment analysis, or speech recognition, where the order of the input sequence matters. We use Siamese LSTM models because they are: 1️⃣ Well-suited for name matching from their ability to capture and learn the sequential nature of names. 2️⃣ Able to effectively capture long-term dependencies and contextual information within names, such as the order of the characters or the presence of specific patterns. 3️⃣ Enabled to learn robust representations for names and accurately compare them, even when dealing with variations, misspellings, or different name orders. This is one of thousands of examples of what innovation looks like in an industry that has not seen innovation in far too long.  Joshua Linn, Debra Geister, and Ganesh Kumar- we appreciate your leadership and dedication for always innovating.

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Kettleborough VC has been active for ~6 years, invested in ~30 companies, gone through ~80 funding rounds, witnessed ~12 exits including ~4 instances of partial principal erosion, seen ~4 seed to $100M journeys, tracking ~29% XIRR across the portfolio. A couple of IPOs from the portfolio surely seem very much in line ahead.

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A blistering funding run has me revisiting a question I posed after Q3's VC funding data came out. Was Austin's modest $1.6B in H1 2024 signaling a slowdown or was Q3's $1B surge the real indicator? November's explosive activity gives us our answer: 💥Tricentis: $1.33B raise ($4.5B valuation) New 🦄 💥FireFly Aerospace: $175M ($2B valuation) 💥Ladder: $105M 💥Halcyon AI: $100M ($1B valuation) New 🦄 With these mega-rounds, Q4 is already approaching $2B with several weeks remaining. I am hearing about more significant rounds in the pipeline, though I don’t know whether they will announce in Dec or early '25. What a difference a quarter makes! Austin sits at ~$4B YTD, knocking at the door of 2023's $4.2B. The first half numbers now look more like timing quirks than a true slowdown. Our sector diversity (seen here in AI, Space, Bio & Health and Cybersecurity) reinforces what Peter Walker's analysis shows below; Austin's strength comes from our broad foundation & tech convergence. As Peter notes in his original post, "Austin is good in many areas, great in few." I see this as a strength, not a weakness (not implying that he was making this implication either). With ATX consistently ranking somewhere between 5th-7th in funding, and having strong momentum metrics, we have a bright future ahead. What's Next?

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We are excited to announce our lead investment in Draftboard, a recruitment marketplace for referral-based hiring. The premise of the platform is simple. More than 80% of companies offer referral bonuses for new hires, but they limit those bonuses only to their own employees. Draftboard wants to change that: employers can post their referral bonuses publicly for the world to see; any user can then join the platform as a ‘scout’ and refer quality candidates within their network in exchange for a referral bonus upon a successful hire. We think it is a win-win-win situation: companies can tap into a completely new pool of talent; scouts can act as “headhunters” by monetizing their network of friends and family for real rewards; and job-seekers can more easily find new employment opportunities. At Twelve Below, our belief is that recruiting, at its core, is about people, networks, and trust. That’s the premise behind Draftboard, and we couldn’t be more thrilled to partner with Zach Roseman, his team and our friends at ANIMO Ventures, Founder Collective and GroundUp as the company sets out to democratize recruiting for everyone.

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Dev agencies, if you don’t want to be treated as a commodity, stop acting like one. - Learn the business context for engineering needs - Stop squeezing your clients every opportunity you get - Prioritize transparency, communication, and accountability In short, position yourself as a partner that uses tech to solve business problems. You really can’t complain about being seen as a commodity if you treat everything as a transaction.

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I recently navigated a complex acquisition and learned 4 critical lessons during post-LOI diligence: 1. Tech diligence reveals more than just code quality—it highlights security and scalability risks. 2. Quality of earnings is less about the revenues (it's a recurring revenue biz, after all) and mostly about validating costs and working capital needs. 3. Asset purchase agreements are mostly about defining and minimizing risk (the asset bit is pretty straightforward). 4. A smooth closing depends on proactive ownership transfers - block off a day and chop wood. What lessons have you learned from the Post-LOI stage? #BusinessAcquisitions #PostLOI #GrowthStrategy

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Robinhood's stock closed yesterday above its 2021 IPO price for the first time in 3 years. Vlad Tenev leadership has been steadfast in the years after the GameStop saga. Moments like that coupled with the ‘22 market correction were hard things to manage a large team through, but he did it. Most importantly, he got them back to doing what they do best: shipping beautiful, industry-leading financial products at a crazy pace. He announced recently on a podcast they now have 8 product lines doing over $100m+. The laws of compounding will be in their favor. It will inevitably be a $100b+ company.

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💰🎓VALUATION CAP💰🎓 Setting a valuation cap in fundraising is crucial as it limits the maximum valuation at which a SAFE (Simple Agreement for Future Equity) converts to equity. This helps founders manage equity dilution and provides investors with a clear understanding of their potential ownership percentage, ensuring informed decision-making during fundraising rounds. Source: Peter Walker Great post! #valuationcap #investors #founders #raisingcapital #safes #fundraising #womenshealth #femhealth #medtech

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Reality Engagement —— I started PHX Ventures because I want to help founders in Arizona build high-growth software companies that achieve venture scale. I can handle the good, bad, and ugly of company building. I’ve lived it. I can handle losing money. I don’t like it, but I can handle it. I can handle bad news and disappointment. Company building is a roller coaster. I can handle a changing market and new competitors. Market opportunity and market dynamism go hand in hand. I can handle co-founder breakups and key team member departures. It’s not great but it’s fairly normal. I can handle bad quarters and product problems. Stuff happens in startups. What I can’t handle is a lack of engagement with reality. Willful ignorance or disregard for data won’t make your business better. If the math of your business is telling you something is broken then it means something is broken. Let’s just fix it. And let’s fix it right now. Let's at least try. I love optimism. But I love realism even more. Broken things tend not to fix themselves. In my experience, the best founders have the highest engagement with reality. Just tell me what about your current reality is giving you angst. Tell me the problems in the business. Just tell me. Don’t sell me. Tell me. I can handle it. And maybe I can help. #founders #startups #b2b #saas

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An excerpt from our weekly newsletter: (a link to subscribe is in the comments) Enterprise software malaise. The biggest news in tech this week seems to be a widening sense of capitulation around enterprise software valuations. Jamin Ball of Altimer Capital wrote that software sentiment had crumbled. There are concerns around AI, but the main issue seems to be a slowdown in growth in general. As Jamin writes, “growth hasn’t rebounded - there was no v shaped recovery. In fact, forward estimates are starting to go down, not up. Sure, the strong headwinds have abated, but the headwinds haven’t been replaced with tailwinds. Everyone is still waiting for growth to “re-accelerate,” and a number of companies are implying this will come in the back half of the year, but will it? Feels like investors are broadly more comfortable waiting for the data to show up. What’s more likely is the current state we find ourselves in is likely to be the equilibrium.” Anita Ramaswamy, writing in The Information, argues that the selloff and the collapse of sentiment is overdone: “The market’s panicked reaction may be overdone. It’s far too early to judge how much companies will shift their spending from existing enterprise software firms to new AI services, and when. Given questions about large language models’ accuracy and cost, which have caused many businesses to hold off spending on AI-powered services so far, the near-term impact on software spending may be minimal. And, of course, software companies such as Salesforce are adding AI tech to their existing products in an effort to cash in on the AI boom. That complicates the issue, as some software believers think AI can help drive growth for older companies, while others think it will kill them. Whatever happens, the shift is likely to take years.” Jared Sleeper pointed out that software is just naturally growing slower as it goes logarithmic. “As bad as all of that sounds, there is nothing to fret about here per se over the long run. It isn’t surprising that an adjustment away from behaviors learned over two decades. It is actually an altogether more benign explanation for the current malaise than some of the others circulating. In this scenario, SaaS still has a healthy decade of well-above-GDP growth ahead of it (without considering AI’s impact). There are still plenty of exciting startups which for one reason or another are less mature than the sector overall and merit investment levels that harken back to headier days. We're experiencing a normal adjustment period of a disruptive, exponentially growing technology- not an existential crisis.” Tomasz Tunguz also addressed these concerns, pointing out that “In the last 12 months, public software companies will grow on average 17%, which will add $100b in revenue across these businesses.”

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The VC funding model when everything works out fine... In real life: Only a few startups make it! So if you are considering going the VC route: Have a backup plan!

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DoD is pushing startups to take on venture capital pretty hard these days. VC funding can be a great option but it's not an out-of-the-box great fit for Defense Tech. Relying on private debt to effectively dictate what new tech into Defense agencies will have consequences and I don't want to experience that particular learning curve. #defensetech #emergingtechnology #venturecapital

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r/PropTech, 2018 someone asked: "Anything new and interesting in prop tech lately?" Didn't get much of a response. I think I can help answer... If I was going to answer this in 2018, I'd say we were seeing a lot of exciting things around residential fintech. Our residential fintech investments have been premised on the fact that there's these inherent inefficiencies, these archaic and anachronistic processes, around buying and selling real estate in the U.S. and all of the ancillary financial products you have to buy. This was of course affected by rising rates and lessened home affordability. I actually think now more than ever is an exciting time in proptech, because difficult times for the real estate industry (and it's been very, very difficult over the past few years) have totally opened up the industry to seeing the value in adopting technology. This adverse environment has totally thrust this imperative to become innovative (which is something the real estate industry has historically not been good at) front and center onto the real estate industry. I think that attitude shift is going to make for a really exciting time, and it's going to lead to some amazing new companies being born, doing everything from the proptech classic of "digitizing pen-and-paper processes to make them more efficient" to building entirely new real estate businesses on the backs of data and technology -- much like we saw Lineage do with cold storage and logistics. #proptech

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📈 Demand for fertility services is rising -> 💼 PE recognizes this and wants in -> 🏜 but opportunities are scarce (https://lnkd.in/g6zXEVZh). Highly recommend anyone who wants a deeper understanding of what's going with fertility and fertility tech read Aya Spencer's *2024 State of fertility tech report* (https://lnkd.in/gVjK_UpX) - it's a great summary

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There's been a big divergence between security and compliance, especially with a framework like SOC2 that is entirely customizable. When I talk to founders, I emphasize the importance of security fundamentals over "check the box" exercises. When I talk to vendor security teams, I emphasize the importance of proper due diligence that is directly related to the exact use case of that vendor at your company. For companies that have minimal time to focus on vendor and supply-chain security, checking for SOC2 is all they do, but the reality is there's much better low-effort ways to assess vendor security. If you want to crush through your vendor review backlog and not just rely on compliance attestations - we're happy to help 😄

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Seeing discussions unfold around QA and Coaching calibration amongst humans is interesting, as a “real-ai-zation” I’ve had in the last few months is that the same holds true for calibration with AI, and one of the core issues we’ve seen is a lack of clarity and resources for agents themselves on call handling. As example, if you’re going to build a prompt that can determine if your agents are correctly verifying PHI or perhaps are following the correct call transfer process, then you have to be very explicit in your instructions to the model on how to evaluate for these things. Accurate assessment requires clarity into every scenario that an agent may face and how to evaluate for each one. But here’s the rub, in most cases, that level of detail doesn’t exist in a document anywhere, it’s mostly in people’s heads and accumulated through tribal knowledge. So how do we expect agents to be consistent if the right resources aren’t in place? Or, in the case of QA calibration- how can we expect an AI model to be correct if the humans that are programming it can’t even agree on process or criteria? As a result, we’ve shifted the notion of a Knowledge base to be more than just FAQs and into housing the “code” of a contact center. By creating detailed instructions for every scenario, we have a common data source for both agent training as well as for AI models. #callcenter #ai #ai4real

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The (Healthcare) Ground Beneath Our Feet… This year it is likely that over $10 billion will be invested in the digital health sector – a robust amount, no doubt, but inconsequential when compared to the amount of capital tied up in healthcare real estate assets, which is estimated to be $1.2 trillion by Jones Lang Lasalle. Of that amount, approximately $790 billion is in the hospital sector while the remaining $490 billion is in medical office assets. It is estimated that there are 48.6k facilities with 3.4 billion square feet of healthcare real estate, 42% of which are owned by REITs and another 33% held by other private investment vehicles. Much of the digital health investment is meant to make the physical healthcare infrastructure more productive: greater operating efficiencies, greater patient throughput, more relevant personalized care models with better outcomes. As the healthcare system is being pushed to be more distributed to lower cost sites of care, accelerated now by the rapid proliferation of automation and AI capabilities, the potential impact on healthcare infrastructure assets will be profound. Thoughts on what that might look like... https://lnkd.in/eTfAdUbS #digitalhealth Flare Capital Partners

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I'm not sure we could navigate modern life without the tech that allows asynchronous communication. But it comes at a price. For example, with multiple tools like digital whiteboards, cloud-based storage systems, video recording, AI note-taking, email and chat, teams can work together even when they are distanced both by geographic location and by time. The tradeoff is that there must be broad agreement on and fastidious adherence to guidelines about how and when each team member will use each tool. If they can't be together physically, they'll need to be together systemically. Putting these systems in place and creating a culture of using them properly is an ongoing battle. How is your team managing it? #async #smb #remoteworklife #worklife #management #leadership #productivity https://lnkd.in/gTWhiaUN

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