A Note From the Redbud VC Team

After Taylor Swift migrated in for the winter, big things are happening here in Missouri. We’ve even considered changing our name to Swifties Capital, maybe a little tongue-in-cheek. That said, Missouri’s flagship university, Mizzou, ended the season, beating Ohio State and finishing 8th, and the Chiefs are headed to the Super Bowl for the third time in four years. Sports are the beating heart in Middle America; they pull great people in and keep them here. There’s also heightened entrepreneurial activity and fund managers raising funds. It’s an incredible opportunity to build a top-tier VC brand in the Middle America that supports founders coast to coast. We entered ‘24 drowning in deal flow, which led us to write our first check on January 23. We are looking forward to writing a dozen more this year. —> Pitch Us

Missouri Startup Weekend is Back!

Who’s ready to build a startup in one weekend and win $15,000 while getting mentorship from the founders of Zapier and EquipmentShare?

🚀 What | Missouri Startup Weekend is a weekend-long event that brings together aspiring entrepreneurs, developers, designers, and operators to build a startup in one weekend. MOSW has been the genesis point of billion-dollar startup companies like EquipmentShare and Zapier. Participants will have access to a diverse talent pool (100 participants / 10 teams) and hands-on support from world-class mentors (20 / 2 per team) who have founded companies like EquipmentShare, Zapier, and Balto and investors from great funds like Mercato, SixThirty, and slightly biased but Redbud VC

🚀Who | This is for the weekend hustler, the builder, the tinkerer, the intellectually curious. Bring your new idea, something you’ve been tinkering with (no pre-built products), or join a team!

🚀 When | April 5th -7th 2024

🚀 Where | EquipmentShare HQ

🚀 Prize | The winner of Missouri Startup Weekend receives up to $15k in cash (non-dilutive), office space, legal formation, PR, brand strategy, and a chance to work with Redbud VC, plus a potential investment of up to $150k.

There’s more, but we think this is enough reason to get a ticket ⤵

Redbud VC invests monetary ($50k-$150k) and social capital in early-stage tech founders. We bring monthly Redbud VC, tech, and economics updates. - We've filtered thousands of sources for our 14k+ readers, so you don't have to. Enjoy🥂

📣 Pitch Us for an investment | 🏆 Redbud Portfolio

🦸🏽 Become a Redbud VC Mentor | 🏉 Meet the Redbud Team 

😎 Join our talent network | 🛩️ Flyover Tech community

When the real world fails you, create your reality with Apple Vision Pro — this could be the billion-dollar marketing line Apple has been looking for. 🥽

🔥 Burning question of the month 🔥

📈 Macro Trend Report

• LAYOFFS | Starting 2024 off in the same fashion as 2023 with a slew of tech layoffs. Layoffs hit a 3-quarter high this month. Discord laid off a staggering 17% of thier employees this month, citing rapid headcount growth as thier labor force grew 5x since 2020. Maybe Discord wishes they could return to that $12B acquisition offer from Microsoft in 2021 😬 Cloudflare made headlines this month with a termination video going viral on TikTok. Even the CEO of Cloudflare acknowledged it was “painful to watch” as the company terminated 40 employees. Brex announced a cut to 20% of thier employees as the company looks to combat slowed growth. Outside of tech, Citigroup announced they will cut 20,000 positions, resulting in $2.5B in cost savings after radically disappointing Q4 results. In retail, REI announced cuts to 357 employees in their third round of layoffs in less than 12 months, and Wayfair layoffs slashed 1650 people, amounting to 13% of its workforce after CEO Niraj Shah warned staff ‘laziness isn’t rewarded.’ Looks like 2024 is going to be a rocky year for the job market. 🪨

• VENTURE CAPITAL | The month kicked off with a surprise announcement that Keith Rabois is returning to Khosla Ventures. Rabois started his career at Khosla Ventures before joining Founders Fund in 2019. Rabois shared with Tech Crunch that he was debating on launching his own fund before ultimately choosing to move back to Khosla. The decision to move to another Tier 1 over becoming an emerging manager is one that is not surprising. Emerging fund managers are being left out to dry as many give LPs more leeway on terms and extend their fundraising time frames. Jai Malik, GP at Countdown Capital, shared in his closing letter to LPs, “the future of this space favors larger firms than mine.”

  • SMALL ROUNDS | “Build more, raise less” seems to be the early tone set for 2024. Q4 2023 saw early rounds of capital shrink and small checks take up room in “pre-seed” rounds. According to Carta, small checks (under $25K) made up a full 62% of all checks signed in the earliest rounds (those under $250K total raised). Looking at the largest rounds in the "pre-seed" ($500k-$999k), 39% were composed of checks $25k and under, and another 39% of checks $50k+. 🤏🏽

  • DEAL ACTIVITY & VALUATIONS | Q4 2023 witnessed the highest deal count of the year. Sadly, we’re not back just yet; the 2023 early-stage deal value amounted to $39.5B, marking a significant 43.5% decline from 2022 and dropping below the 2018 level. Late-stage VC median deal size hit a 6-year low in Q4 of 2023 😢 Valuations were on the rise this quarter as median pre-money valuations increased across all venture capital stages except for Series C. The change was most apparent in Series A, which rose from $29 million to $45 million in median pre-money valuation.

💰 Micro Trends

• STARTUP SURGE | The US is starting to see the effects of an entrepreneurship boom due to the COVID-19 pandemic. In October 2023, over 3.5 years after the pandemic’s onset, Americans were still filing 59% more applications to start new businesses than they were before the pandemic. Small business growth has also been explosive. In 2023, Yelp tallied 762,200 new ventures, representing a 20% uptick compared to 2022. Many Americans are taking risks and building new companies; we can’t wait to see them! 🚀

• UNIVERSITY UNICORNS | Many exciting data and events surrounding building a company in the Midwest hit the press this month. Stanford Professor Ilya Strebulaev found that founders of a US startup who studied or worked at the University of Cincinnati are 3.3x more likely to achieve unicorn status than average, beating out multiples from top universities like Yale, Sanford, and Columbia! Turns out you can build a Unicorn anywhere 🦄 States are taking notice as a host of initiatives to engage young entrepreneurs have been rolled out in college towns across the Midwest. In Nebraska, the Governor’s New Venture Competition finals are set to take place this month, with 12 different student-founded companies competing for $20k. The Ohio State University launched the Startup Midwest, an event for rising technology entrepreneurs. In Missouri, Redbud VC launched the Mizzou Startup Community to accelerate network effects between student entrepreneurs and alumni. There could be some more unicorns on the horizon for the Midwest 👀

• CARTA CHAOS | Carta battled through a PR nightmare this month as a founder accused the company of mishandling confidential data. Karri Saarinen, CEO of Linear, posted on Linkedin that a Carta subsidiary, Carta Liquidity, allegedly solicited Linear shares from an undisclosed investor without proper authorization. Saarinen said he suspected that someone at Carta used Linear’s cap table to connect a potential buyer to a Linear shareholder (hint: that’s not good for a data security company). Carta's CEO, Henry Ward, acknowledged internal policy violations, prompting Carta to exit its secondary business and launch investigations into the matter. Lingering questions have been compounded by Carta’s previous controversies, including a CTO lawsuit alleging a toxic work culture, misogyny, and criticisms of poor customer service. Only time will tell if Carta will remain a trusted platform for startup data or if another firestorm is headed their way.

Check out our newly launched Mizzou Startup Community, where Mizzou students and alumni can connect to build massive companies together while accessing incredible resources 💪🏼

📰 Middle America Headline of the Month

Missouri is outpacing Middle American states in tech job growth, with 10.5% growth between 2017 and 2022. This is attributable to growing university initiatives like SLU’s new accelerator and Mizzou’s venture studio partnership with Redbud VC. In addition, the construction sector is heating up, with EquipmentShare being one of the fastest growing contech companies with ~5k employees. To add to this momentum, our friends at Gateway South are getting close to breaking ground on a 100-acre construction tech hub.

💰 Flyover Deals

A slow start to the beginning of 2024 - don’t worry, things are definitely picking up 🚀 

• Check out the 286 flyover deals for over $2.3B in funding we tracked here: a 7% increase in deals but a 17% decrease in funding MoM.

• Chicago-based Artisight closed $42M in an oversubscribed Series B funding round

• Alphathena secured a $4M Seed Round led by ETFS Capital, with Hyde Park Angels participating

• Consumer fintech platform tandem, based in Ann Arbor, raised a $3.7M Seed Round

• Omaha-based Fleet Defender added an additional $750k in funding to thier Seed financing

• Sioux Falls-based Prismatic raised a $22M Series B

• Lincoln-based Corral closed a $1.38M Seed Round led by our friends at M25 and Invest Nebraska

• St. Louis-based Clever acquired Gravy Technologies for an undisclosed amount

🐄 Middle America vs. National Macro Trends

The consumer price index increased 0.3% for the month, higher than the 0.2% estimate at a time when most economists and policymakers see inflationary pressures easing (thank goodness 🙏🏽).

On a 12-month basis, the CPI closed 2023 up 3.4%. Economists surveyed by Dow Jones had been looking for a year-over-year reading of 3.2%.

• Unemployment in Missouri rose slightly this month to 3.3%, but still well below the steady national average of 3.7% and marginally above the steady Midwestern average of 3.1% ✅

• The Midwest Consumer Price Index was at 2.8% this month, slightly below the national rate of 3.1% ✅ 

🧠 This Month's Recommendations

📚 What We’re Reading

• Charles Hudson is optimistic about outliers 🎯 (one of our favorites from the month)

• Betting on Unseen Forces: The Role Individual Experiences Play in Molding Outlier Founders by our very own Maria Heyen  🎉

• This original Sequoia 2005 YouTube Investment memo had our eyes glued to the page; it was so cool to see Sequoia’s thesis that has now come true

• The Puritans of Venture Capital → will small funds cease to exist?

• 🎨 Glasswing VC’s AI Palette mapping the different facets of AI and machine learning

• Chicago:Blend released thier new data on the state of venture for underrepresented founders. In 307 Chicago startups that raised a total of $2.9 billion in VC funding 112 startups (36.5%) had at least one woman founder and 75 new startups (24.4%) had at least one founder of color

🎧 What We’re Listening To

• 📈This Week in Startups: Bill Gurley, Brad Gerstner, & Jason Calacanis on the state of tech markets [1 hr 28 min]

• Adam Besvinick, Founder of Looking Glass Capital, chats with 20VC on prepping to raise, the benefits of thematic investments, and the biggest mistakes founders make [1 hr 17 min]

• “What is the dumbest possible idea we could have?”💀Mike Cessario on building iconic water company Liquid Death [1 hr 23 min]

• Watching 👀: Quick Study → How Venture Capitalists Make Decisions [6 min]

📆 What We’re Doing

• Shoutout to our friends at Genesis for hosting The Windy City Venture Crawl in Chicago this month!

  • We had a fantastic time networking with other VCs and meeting some awesome founders who are building great things 🥂 (Bullish on the Midwest as usual)

• The team is gearing up for Missouri Startup Weekend, April 5-7, 2024! Ticket sales are now live, and here’s the link in case you missed the one above 🔥

• The judging for InvestMidwst has begun, looking forward to attending April 17-18.

🪝 Middle America Picks of the Month

🚀 Redbud Portfolio Company Highlights

Introducing our latest investment - Reffie!

Reffie is an AI-powered workflow platform for the real estate industry to manage prospective renters' past, present, and future. Reffie allows for multi-family operators to manage prospective tenant management and communications in one place to decrease lead time decreasing lead time by 50%.

Explore why we believe Reffie is reshaping how renter data is being unified and used 🏡 ⤵

Victor Zhang, CEO and Co-Founder of Trestle joined Swamini Khanvilkar on the Founder Q&A YouTube series to talk about all things building Trestle, failing fast, and innovating in construction tech. 🏗 🛠

🛠️ Resources

• Alex Oppenheimer from Verissimo Ventures shared his 9 key points for founders and investors to remember about pre-seed and seed-stage investing 🧠

• Asking or facilitating an intro → here’s a quick guide on intro must haves!

• 🦄 10 Unicorn Pitch Decks before they were the Unicorns

• In SaaS, growth > profitability

• Is the pitch deck dead? Introducing — The Pitch Cycle

• 📣 Calling all female founders, get featured in the Brydge Club Newsletter with 20k+ subscribers!

• Generate websites with a prompt, edit without code

• Here’s Sequoia Capital’s pitch deck template

• A Founder’s Playbook to Raising in a Down Market

• 100 Incredible Resources For Tech Entrepreneurs And Startups 💫

• How long until I should raise my next round? Here’s the quick notes on the average time between raises

• “Your startup is not venture-backable.” What does it mean?

• DocSend data on 100k+ pitch decks and the must-have slides!

• Resource page for founders we made here 📒

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The information provided in this newsletter is intended for general understanding and educational purposes only, not as a guide to investment decisions. The authors, publishers, and distributors of this newsletter are not licensed financial advisors and are not providing financial advice or investment advisory services.3