Tag: Elad Gil

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LiveKit co-founder believes the metaverse needs open infrastructure

When the global pandemic hit, Russell d’Sa was running product at Medium and recognized early on that with everyone working from home, the company’s culture was impacted, affecting a lot of the interaction between employees.

“What disappeared was the collegial conversations, the drinks on Friday evenings or making coffee together,” he told TechCrunch. “So much about becoming friends at work underpins how you ultimately collaborate.”

When Clubhouse was launched in its alpha form last year, it was discussed as being a new form of participatory media “that would change everything,” d’Sa said, and he wanted something like that for his work colleagues.

He dug into how the app was being powered by Agora and began developing a desktop app for his idea. He launched it and almost immediately accrued a 1,300-company waitlist. D’Sa ultimately shelved the app, but found that companies were “desperate in this new environment to try anything.”

In fact, one large social media company approached him about using his app for its 1,000-person company, but was concerned about security using Agora. He began looking at alternatives, but found that many were focused on conferencing and didn’t provide for the flexibility for native mobile.

That’s how LiveKit was born. D’Sa and his team, which includes co-founder David Zhao, developed a free, open source infrastructure for building and scaling real-time audio and video experiences, aka WebRTC, in applications.

It launched in July, and today the company announced $7 million in seed funding that includes backing from Redpoint Ventures and a group of individual investors, including Justin Kan, Robin Chan and Elad Gil.

Only five months old, the tool did trend on GitHub, going from zero to almost 2,000 stars, d’Sa said. It is also proving product market fit, especially as more talk revolved around the metaverse.

“COVID changed the world to where we are living online, even going to weddings over the internet,” he added. “We are already living in the metaverse and have been for over two years.”

He believes the conference call is not the future and that virtual and augmented reality will make calls feel more like real life. However, the challenge is how to move the data around quickly over the internet and have an infrastructure that works for cameras, microphones and 3D objects.

Initial use cases for LiveKit’s live audio and video experiences have been cameras at events, but a drone company is even using the technology. As the company saw more adoption, including over 100 projects utilizing LiveKit, d’Sa decided to go after venture capital backing to scale the team, which grew from three to 15 since the launch.

The company isn’t generating revenue right now, but they will be as new tools come online, like services offered beyond the baseline features, including analytics, telemetry, spam and abuse monitoring, transcription, translations or voice and face features.

Next up, the LiveKit team will be focused on technology development so the tools are more reliable, flexible and accessible to developers and the kinds of use cases they are building.

“The goal is to figure out a way to work, even with a bad network,” d’Sa said. “We talk to companies big and small, and the largest companies want massive scale to make million-person events all interactive.”

Investor survey results: Upcoming trends in social startups

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Writing helper Copy.ai closes on its second funding round this year

On the one-year anniversary of Copy.ai’s launch on Twitter, the company, a GPT-3 AI-powered platform that generates copywriting tools for business customers, secured another round of funding.

This time, the company brought in an $11 million Series A round, led by Wing Venture Capital, with participation from existing investors Craft Ventures and Sequoia, and new investors including Tiger Global and Elad Gil. This follows a $2.9 million seed round announced in March and brings the company’s total funding to $13.9 million.

Copy.ai’s software costs $35 a month and can, for example, write a blog post outline based on a few sentences and create link descriptions for Facebook ads and even generate a company motto.

A year since CEO Paul Yacoubian and Chris Lu co-founded the company, it is seeing $2.4 million in annual recurring revenue. Not profitable yet, the company did double its revenue over the last year and went from three employees to 13, Yacoubian told TechCrunch.

Writing helper Copy.ai raises $2.9M in a round led by Craft Ventures

Though it raised funding earlier this year, he and Lu felt the time was right to go after a Series A to expand the team and hire more engineers to provide capacity for new product features. One recent feature is Editor, which enables users to organize thoughts, save ideas and edit notes directly in the app. Copy.ai is also developing products for long-form content creation.

“AI is good at pattern-matching, and when you feed it more information about a business, it can assume the identity of the business, so we are also building a teams product so as the AI learns more, you can invite other business users to sign up, too,” Yacoubian added.

The company will be investing the new capital into hiring. It is a fully remote team with employees all over the country. Copy.ai already has over 300,000 marketers using its tools, like eBay, Nestlé and Ogilvy. Over 3,000 have signed up for a free trial since the seed round and it has more than 10,000 premium customers.

Copy.ai is early into AI natural language generation, something Yacoubian said the company is just scratching the surface of, so it will continue to improve the core app experience and the quality of the text that is generated.

The founders also hit it off with Wing Venture Capital partner Zach DeWitt, who Yacoubian said understands the company’s vision and how well artificial intelligence can help marketers.

“While looking at the creative capacity of AI, we hear a lot about automation taking away jobs, but not a lot of narrative to create value for yourself or your company,” Yacoubian added. “If AI progresses, it will be a source of empowerment and another tool that has uncapped potential. It is interesting in how it can unlock human capital, and in a smaller company that can’t afford full-time agencies, provide a quick, simple tool that solves their problem.”

DeWitt said customers are fully moving online as digital penetration increases, and companies have to meet customers where they are, whether that be newsletters, blogs, social media or email.

In speaking with small business customers of Copy.ai, he got a sense that  the amount of written content is overwhelming to some, and to enable marketers or founders to write a great piece of copy, using AI is the best way to do that.

DeWitt, himself, used the product to generate his initial email to the company. He also writes a weekly blog and is active on Twitter, so Copy.ai’s products have come in handy as he thinks about blog post ideas and content formats, he said.

He added that the company is one of the fastest-growing that Wing had come across for a company this young. They are also leveraging social media to make their metrics public, which in turn generates loyalty and provides a way for them to learn in public as well, something that initially attracted Wing to the company.

“This round was massively oversubscribed, so you can get a sense of the interest in the company, the quality of the team and their traction,” DeWitt added. “Chris and Paul had the luxury of being selective in the investors they chose to set them up for future success.”

4 ways startups will drive GPT-3 adoption in 2021

 

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From $0 in revenue to a $7.25B valuation: Why TripActions’ $275M raise has fintech to thank

Prior to the COVID-19 pandemic, TripActions was primarily known for merging many aspects of corporate trip booking — flights, hotels and rental cars — with expense tracking.

But Palo Alto-based TripActions was among the startups that was hit very hard by the COVID-19 pandemic. In fact, the global crisis resulted in its revenue dropping to $0, according to CEO and co-founder Ariel Cohen. In March 2020, the company made headlines for laying off nearly 300 employees in the face of a slowdown in business related to the pandemic.

It was at that point that TripActions made the decision to accelerate the timeline for its fintech expense product, TripActions Liquid, which had launched only a month before the pandemic. As the pandemic led to increased digitization across the board, employees were suddenly making spend decisions from outside the office and more merchants were accepting digital payments.

“We realized quickly that we needed to meet the needs of our customers to manage not only travel spend, but all employee spend of company money,” Cohen told TechCrunch. “We knew that employees were dispersed and that, instead of travel, they would now be expensing home office equipment and virtual software. And so we broadened the types of expenses employees could submit.”

That pivot has proven to be a smart move for the company, which today announced it has raised $275 million in a Series F “growth” funding round at a $7.25 billion valuation. Greenoaks led the financing, which also included “strong participation” from Elad Gil, Base partners and “all key existing financial investors.” Previous backers in the company include Andreessen Horowitz (a16z), Zeev Ventures, Lightspeed Venture Partners and Group 11.

TripActions closed a $155 million Series E investment earlier this year at a valuation of nearly $5 billion. With the latest round, the company has raised a total of $1.3 billion since its 2015 inception — about $780 million of which was secured during the pandemic.

TripActions raises $155M at $5B valuation as corporate travel recovers from pandemic lows

The latest financing is notable for a few reasons. For one, it signals an expansion for TripActions from being a primarily “corporate travel” startup to also, more broadly, a spend management company. This means it is in the same category as fast-growing fintechs such as Brex and Ramp. But the biggest difference, in Cohen’s view, is that those two companies “are disparate from travel” and thus focus more on SMEs while TripActions is more focused on enterprise companies.

“Just as TripActions continues to disrupt the corporate travel market, TripActions Liquid is set to replace traditional spend management solutions,” he said. “No other company is able to provide a single, unified T&E [Travel & Expense] solution for enterprise companies on a global scale.”

Today, TripActions has more than 5,000 customers, including Crate & Barrel, Wayfair, Pinterest, Lyft, Zoom, Toast, Amplitude, Ancestry, Box, Axios, SXSW, Glassdoor, SurveyMonkey, Lennar and Qualcomm.

TripActions

Image Credits: TripActions

While Cohen declined to reveal hard revenue figures, he said TripActions has now exceeded pre-pandemic levels in terms of booking volume and revenue. The startup, Cohen added, has more than doubled its aggregate travel budget under management, while expense budget under management grew 1,400% over the same period. And, in the past six months, TripActions Liquid has recorded more than 500% growth in transaction volume and nearly 400% growth in active users. Recent enterprise customer wins include Heineken, Snowflake, Thomson Reuters and Adobe. 

TripActions presently has 1,500 employees compared to about 800 when it conducted layoffs in March of 2020.

The company plans to use its new capital primarily to double down on TripActions Liquid, its fintech payments and expense management solution, with the goal of expanding more globally.

It is also planning a “deeper” investment in Reed & Mackay, an agency that it recently acquired that provides high-end support (including VIP and M&E for TripActions). TripActions is also planning a broader expansion in Europe, which has grown to represent 30% of its business. Specifically, the company intends on adding more than 150 headcount in the United Kingdom, Israel and across Europe this fiscal year. 

The company also plans to continue to invest in core travel with the goal of becoming “an essential tool for companies as they enter the future of work.” In particular, it will continue to ramp its personal travel booking offering, Lemonade, which Cohen says has grown nearly 10x in booking volume this fiscal year.

“A sea change is underway in the corporate travel and spend industries as companies look for powerful and streamlined travel solutions in the post-pandemic economy,” said Neil Mehta, founder and managing partner of Greenoaks, in a written statement. “TripActions is rapidly gaining traction among some of the world’s largest enterprises, and no company is better positioned to lead the way as global travel recovers.”

Investor Elad Gil, who recently raised his own fund, describes TripActions as “an N-of-1 company in a massive TAM.”

The company has executed well and continues to do so, he said.

“You’re starting to see corporate travel snap back, and TripActions is well positioned to capture the opportunity,” Gil wrote via email. “And, new add-on businesses like Liquid are scaling nicely.” 

In general, he believes the startup offers “lots of great features to make the travel experience much better, including clever features around COVID-related trip planning.”

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Anduril raises $450M as the defense tech company’s valuation soars to $4.6B

The AI-powered defense company founded by tech iconoclast Palmer Luckey has landed a $450 million round of investment that values the startup at $4.6 billion just four years in.

In April, reports suggested that the company was on the hunt for fresh investment and headed for a valuation between four and five billion, up from $1.9 billion in July 2020.

The new Series D round was led by angel investor and serial entrepreneur Elad Gil, a former Twitter VP and Googler with a track record of investments in companies with exponential growth. Andreessen Horowitz, Founders Fund, 8VC, General Catalyst, Lux Capital, Valor Equity Partners and D1 Capital Partners also participated in the round.

“Just as old incumbent institutions with little to no organizational renewal impacted our ability to respond to COVID, the defense industry has undergone significant consolidation over the last 30 years,” Gil wrote in a blog post on the investment. “There has not been a new defense technology company of any scale to directly challenge these incumbents in many decades…”

Anduril launched quietly in 2017 but grew quickly, picking up contracts with Customs and Border Protection and the Marine Corps during the Trump administration. Luckey, the young high-flying founder who sold Oculus to Facebook before being booted from the company, emerged as one of President Trump’s most prominent boosters in the generally Trump-averse tech industry.

The company makes defense hardware, including long-flying drones and surveillance towers that connect to a shared software platform it calls Lattice. The technology can be used to secure military bases, monitor borders and even knock enemy drones out of the sky, in the case of Anduril’s counter-UAS tech known as “Anvil.”

Anduril co-founder and CEO Brian Schimpf describes the company’s mission as one of “transformation,” pairing relatively affordable hardware with sensor fusion and machine learning technologies through a contract partner more nimble than established giants in the defense sector.

“This new round of funding reflects our confidence that the Department of Defense sees the same problems we do, and is serious about deploying emerging technologies at scale across land, sea, air, and space domains,” Schimpf said.

Anduril launches a smarter drone and picks up more money to build a virtual border wall

Border wall bill draws on Palmer Luckey’s new defense company

The company set its sights on work with the Department of Defense from its earliest days and last year was one of 50 vendors tapped by the DoD to test tech for the Air Force’s own piece of the Joint All-Domain Command & Control (JADC2) project, which seeks to build a smart warfare platform to connect all service members, devices and vehicles that power the U.S. military.

The company’s work with U.S. Customs and Border Protection also matured from a pilot into a program of record last year. Anduril supplies the agency with connected surveillance towers capable of autonomously monitoring stretches of the U.S. border.

In April, Anduril acquired Area-I, a company known for small drones that can be launched from a larger aircraft. Area-I counted the U.S. Army, Air Force, Navy and NASA among its customers, relationships that likely sweetened the deal.

Palmer Luckey’s new defense company Anduril looks interested in AR and VR on the battlefield

Anduril among companies tapped to build the Air Force’s ‘internet of things’ for war

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Reduct.Video raises $4M to simplify video editing

The team at Reduct.Video is hoping to dramatically increase the amount of videos created by businesses.

The startup’s technology is already used by customers including Intuit, Autodesk, Facebook, Dell, Spotify, Indeed, Superhuman and IDEO. And today, Reduct is announcing that it has raised a $4 million round led by Greylock and South Park Commons, with participation from Figma CEO Dylan Field, Hopin Chief Business Officer Armando Mann and former Twitter exec Elad Gil.

Reduct was founded by CEO Pabhas Pokharel and CTO Robert Ochshorn (both pictured above). Pokharel argued that despite the proliferation of streaming video platforms and social media apps on the consumer side, video remains “underutilized” in a business context, because it simply takes so much time to sort through video footage, much less edit it down into something watchable.

As Pokharel demonstrated for me, Reduct uses artificial intelligence, natural language processing and other technologies to simplify the process by automatically transcribing video footage (users can also pay for professional transcription), then tying that transcript to the video.

“The magic starts there: Once the transcription has been made, every single word is connected to the [corresponding] moment in the video,” he said.

Reduct.Video screenshot

Image Credits: Reduct.Video

That means editing a video is as simple as editing text. (I’ve taken advantage of a similar linkage between text and media in Otter, but Otter is focused on audio and I’ve treated it more as a transcription tool.) It also means you can search through hours of footage for every time a topic is mentioned, then organize, tag and share it.

Prabhas said that AI allows Reduct to simplify parts of the sorting and editing process, like understanding how different search terms might be related. But he doesn’t think the process will ever become fully automated — instead, he compared the product to an “Iron Man suit,” which makes a human editor more powerful.

He also suggested that this approach changes businesses’ perspective on video, and not just by making editing faster and easier.

“Users on Reduct emphasize authenticity over polish, where it’s much more the content of the video that matters,” Prabhas said. He added that Reduct has been “learning from our customers” about what they can do with the product — user research teams can now easily organize and share hundreds of hours of user footage, while marketers can turn customer testimonials and webinars into short, shareable videos.

“Video has been so supply constrained, it’s crazy,” he continued. “There are all these use cases for asynchronous video that [companies] haven’t even bothered with.”

For example, he recalled one customer who said that she used to insist that team members attend a meeting even if there was only two minutes of it that they needed to hear. With Reduct, she can “give them that time back” and just share the parts they need.

Video creation and editing platform InVideo raises $15 million

 

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Render raises $4.5M for its DevOps platform

Render, the winner of our Disrupt SF 2019 Startup Battlefield, today announced that it has added another $4.5 million onto its existing seed funding round, bringing total investment into the company to $6.75 million.

The round was led by General Catalyst, with participation from previous investors South Park Commons Fund and a group of angels that includes Lee Fixel, Elad Gil and GitHub CTO (and former VP of Engineering at Heroku) Jason Warner.

The company, which describes itself as a ‘Zero DevOps alternative to AWS, Azure and Google Cloud,’ originally raised a $2.25 million seed round in April 2019, but it got a lot of inbound interest after winning the Disrupt Battlefield. In the end, though, the team decided to simply raise more money from its existing investors.

Current Render users include Cypress.io, Mux, Bloomscape, Zelos, 99designs and Stripe.

“We spoke to a bunch of people after Disrupt, including Ashton Kutcher’s firm, because he was one of the judges,” Render co-founder and CEO Anurag Goel explained. “In the end, we decided that we would just raise more money from our existing investors because we like them and it helped us get a better deal from our existing investors. And they were all super interested in continuing to invest.”

And the winner of Startup Battlefield at Disrupt SF 2019 is… Render

What makes Render stand out is that it fulfills many of the promises of Heroku and maybe Google Cloud’s App Engine. You simply tell it what kind of service you are going to deploy and it handles the deployment and manages the infrastructure for you.

“Our customers are all people who are writing code. And they just want to deploy this code really easily without having to worry about servers, or maintenance, or depending on DevOps teams — or, in many cases, hiring DevOps teams,” Goel said. “DevOps engineers are extremely expensive to hire and extremely hard to find, especially good ones. Our goal is to eliminate all of that work that DevOps people do at every company, because it’s very similar at every company.”

Image Credits: Render

One new feature the company is launching today is preview environments. You can think of them as disposable staging or development environments that developers can spin up to test their code — and Render promises that the testing environment will look the same as your production environment (or you can specify changes, too). Developers can then test their updates collaboratively with QA or their product and sales teams in this environment.

Development teams on Render specify their infrastructure environments in a YAML file and turning on these new preview environments is as easy as setting a flag in that file.

Image Credits: Render

“Once they do that, then for every pull request – because we’re integrated with GitHub and GitLab — we automatically spin up a copy of that environment. That can include anything you have in production, or things like a Redis instance, or managed Postgres database, or Elasticsearch instance, or obviously API’s and web services and static sites,” Goel said. Every time you push a change to that branch or pull request, the environment is automatically updated, too. Once the pull request is closed or merged, Render destroys the environment automatically.

The company will use the new funding to grow its team and build out its service. The plan, Goel tells me, is to raise a larger Series A round next year.

Render challenges the cloud’s biggest vendors with cheaper, managed infrastructure

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Most tech companies aren’t WeWork

Shin Kim Contributor
Shin Kim is working on a new SaaS startup and is also chief of staff to entrepreneur Elad Gil . Previously, Shin was at Oak Hill Capital and J.P. Morgan and earned a Master’s in EECS (data science) from UC Berkeley.

With the recent emphasis on Uber and WeWork, much media attention has been focused on high-burn, “software-enabled” startups. However, most of the IPOs of the last few years in tech have been in higher capital efficiency software-as-a-service startups (SaaS).

In the last 30 months (2017 2H onwards), a total of 21 U.S.-based, VC-backed SaaS companies have gone public, including Zoom, Slack, Datadog and others1. I analyzed all 21 companies to understand their fundraising and revenue-generating trajectories. A deep dive into the individual companies’ trajectories can be found in this Extra Crunch article.

Here are the summary takeaways from this data set:

1. At IPO, total capital raised2 was slightly ahead of annual run-rate revenue (ARR)3 for the median company

Here is a scatterplot of the ARR and cumulative capital raised at the time each company went public. Most companies are clustered close to the diagonal line that represents ARR and capital raised matching each other. Total capital raised is often neck-and-neck or slightly higher than ARR.

For example, Zscaler raised $148 million to get to $146 million of ARR at IPO and Sprout Social raised $112 million to get to $106 million of ARR.

It is useful to introduce a metric instead of looking at gross dollars, given the high variance in revenue of the companies in the data set — Sprout Social had $106 million and Dropbox had $1,222 million in ARR, a 10x+ difference. Total capital raised as a multiple of ARR normalizes this variance. Below is a histogram of the distribution of this metric.

The distribution is concentrated around 1.00x-1.25x, with the median company raising 1.23x of ARR by the time of its IPO.

There are outliers on both ends. Domo is a profligate outlier that had raised $690 million to get to $128 million of ARR, or 5.4x of ARR — no other company comes remotely close. Zoom and Datadog are efficient outliers. Zoom raised $161 million to get to $423 million of ARR and Datadog raised $148 million to get to $333 million of ARR, both representing only 0.4x of ARR.

2. Cash burn is a more accurate measure of capital efficiency and may diverge significantly from capital raised (depending on the company)

How much capital a company raised tells only half of the story of capital efficiency, because many companies are sitting on a significant cash balance. For example, PagerDuty raised a total of $174 million but had $128 million of cash left when it went public. As another example, Slack raised a total of $1,390 million prior to going public but had $841 million of unspent cash.

Why do some SaaS companies end up seemingly over-raising capital beyond their immediate cash needs despite the dilution to existing shareholders?

One reason might be that companies are being opportunistic, raising capital far ahead of actual needs when market conditions are favorable.

Another reason may be that VCs that want to meet ownership targets are pushing for larger rounds. For example, a company valued at $400 million pre-money may only need $50 million of cash but could end up taking $100 million from a VC that wants to achieve 20% post-money ownership.

These confounding factors make cash burn — calculated by subtracting the cash balance from total capital raised4 — a more accurate measure of capital efficiency than total capital raised. Here is a distribution of total cash burn as a multiple of ARR.

Remarkably, Zoom achieved negative cash burn, meaning Zoom went public with more cash on its balance sheet than all of the capital it raised.

The median company’s cash burn at IPO was 0.77x of ARR, quite a bit less than the total capital raised of 1.23x of ARR.

3. The healthiest SaaS companies (as measured by the Rule of 40) are often the most capital-efficient

The Rule of 40 is a popular heuristic to gauge the business health of a SaaS company. It asserts that a healthy SaaS company’s revenue growth rate and profit margins should sum to 40%+. The below chart shows how the 21 companies score on the Rule of 405.

Among the 21 companies, eight companies exceed the 40% threshold: Zoom (123%), Crowdstrike (119%), Datadog (76%), Bill.com (56%), Elastic (55%), Slack (52%), Qualtrics (44%) and SendGrid (41%).

Interestingly, the same outliers in terms of capital efficiency as measured by cash burn, on both extremes, are the same outliers in the Rule of 40. Zoom and Datadog, which have the highest capital efficiency, score the highest and third highest on the Rule of 40. And inversely, Domo and MongoDB, which have the lowest capital efficiency, also score lowest on the Rule of 40.

This is not surprising, because the Rule and capital efficiency are really two sides of the same coin. If a company can sustain high growth without sacrificing profit margins too much (i.e. score high on the Rule of 40), it will over time naturally end up burning less cash compared to peers.

Conclusion

To apply all of this to your favorite SaaS business, here are some questions to consider. What is the total capital raised in multiples of ARR? What is the total cash burn in multiples of ARR? Where does it stack compared to the 21 companies above? Is it closer to Zoom or Domo? How does it score on the Rule of 40? Does it help explain the company’s capital efficiency or lack thereof?

Thanks to Elad Gil and Denton Xu for reviewing drafts of this article.

Endnotes

1Only includes U.S.-based, VC-backed SaaS companies. Includes Quatrics, even though it did not go public, as it was acquired right before its scheduled IPO.

2Includes institutional investments prior to the IPO. Does not include founders’ personal capital investment.

3Note that this is not annual recurring revenue, which is not a reporting requirement for public companies. Annual run-rate revenue is calculated by annualizing quarterly revenue (multiplying by four). The two metrics will track closely for SaaS businesses, given that SaaS revenue is predominantly recurring software subscriptions.

4This is a simplified definition as it will capture non-operational uses of cash such as share repurchase from founders.

5Revenue growth is calculated as the growth rate of the revenue during the last 12 months (LTM) over the revenue during the 12 months prior to that. Profit margins are non-GAAP operating margins, calculated as operating income plus stock-based compensation expense divided by revenue over the last 12 months (LTM).

What’s the right pace for raising capital?

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What’s the right pace for raising capital?

Shin Kim Contributor
Shin Kim is working on a new SaaS startup and is also chief of staff to entrepreneur Elad Gil . Previously, Shin was at Oak Hill Capital and J.P. Morgan and earned a Master’s in EECS (data science) from UC Berkeley.

A common question in the minds of many SaaS founders is the pace of raising capital. How much is too much too early? What amount of capital raise is typical for comparable peers? How capital-efficient are the best-in-class companies?

In the last 30 months (2017 2H onwards), a total of 21 SaaS U.S.-based, VC-backed companies have gone public, including Zoom, Slack, Datadog and others1. To answer the above questions, I analyzed all 21 companies to understand their fundraising and revenue-generating trajectories.

The charts below show each company’s annual run-rate revenue (ARR)2 and cumulative equity funding3 over time. Read endnotes for details on data source4 and methodology5. The backup for the full analysis can be accessed here.

I divided the companies into four patterns:

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Distru, a maker of supply chain software for the cannabis industry, has raised $3 million led by Felicis

Distru, a nearly three-year-old, Oakland-based startup whose platform aims to help track cannabis through its seed-to-sale process, has raised $3 million in seed funding led by Felicis Ventures, with participation from Village Global, Global Founders Capital, and numerous notable angel investors, including Elad Gil, Katie Stanton, and Avichal Garg.

The deal is an interesting one for numerous reasons, including that it marks Felicis’s first investment in the cannabis space after many months spent looking at a wide array of related startups, says Niki Pezeshki, a principal with the firm. Indeed, though interest in cannabis-related products and services is growing among traditional venture firms as a growing number of states move to legalize and regulate marijuana, there’s lingering concern about what will happen and when at the federal level.

Distru is also entering into a space that tech investors can grok: it’s a software as a service company, one that just happens to give cannabis operators insight into their inventory and order management, their customer relationship management, and their logistics. Most important, Distru’s software helps them automate compliance with complicated and growing state regulations by integrating with Metrc, which is itself inventory tracing software that’s being used by a growing number of states to record the inventory and movement of cannabis and cannabis products through the commercial supply chain. (We wrote about six-year-old Metrc last year when it raised $50 million in funding, including from Casa Verde Capital and Tiger Global Management.)

Not last, Distru’s team, headed by founder and CEO Blaine Hatab, comes from the tech world, even while most are in the formative stages of their careers. Hatab has spent much of his post-collegiate career as a software developer, as has his cofounder, Blake Gentry, who joined forced with Hatab after leaving a developer role with the startup Opendoor to create his own company, Actualyze, which merged with Distru last fall. A third cofounder, Johnny Li, who further serves as Distru’s chief technical officer, was most recently a JavaScript instructor. Altogether, says Hatab, the team is made up of just nine employees who work remotely, though with its new funding, Distru plans to fill five more roles imminently.

In the meantime, it seems to pick picking up momentum despite its scale. Among its customers are major cannabis producers and distributors Humboldt Farms and CannaCraft. More, though it has competitors, including nine-year-old, Denver-based, venture-backed MJ Freeway, Hatab says it’s growing steadily based solely on word of mouth. Perhaps most compelling to Felicis and its other backers, the company has been operating in the black for some time. Says Hatab, “I think [our investors] were surprised by profitable we were.”

And it has a lot of room to grow, no pun intended. Distru operates in California alone today, but Hatab says it plans to follow Metrc into the other markets where it operates today, including Colorado, Oregon, Alaska, Maryland, Michigan, Ohio, Massachusetts, Montana, Nevada and Louisiana.