Oil and water do not mix. When one attempts to mix them, they separate. Despite the laws of basic chemistry, it turns out oil and water do, in fact, mix in the Haystack portfolio.
Oil and water have been in the news lately. Regarding oil, where the price of a barrel has dropped about 75% in less than two years. This caught most of the world by surprise. It will also likely create a big surplus (some estimate $3 trillion), though some believe it can swing back just as quickly — personally, I think U.S. fracking has been the main driver here and this is the new normal.. And, with water, we have a long-term narrative about the dangers of rising, warming oceans, and more recently, of contaminated drinking water in the world’s richest, most advanced country: In Flint, Michigan, tens of thousands of residents have been exposed to water poisoned with lead.
Even in crisis, opportunities arise to find solutions so that we do not repeat history.
Let’s start with water.
Back in 2015, as I began investing more in SaaS and what I refer to as “Industrial Software and Industrial IoT,” I began looking for two types of companies: Those which could build and sell products to either large conglomerates (think: Boeing) or non-corporate entities such as governments and municipalities (such as OneConcern, which you can read about here); and those which used cheap, low-power sensor networks to collect and monitor new data sets. As I was tweeting about it, my friend Matt reached out and introduced me to AquaCloud.
And, after months of getting to know the team, I’m excited to share that I’ve invested in AquaCloud. Check them out here. With AquaCloud sensors, municipalities, water companies, and private companies with reservoirs can use custom sensor networks to measure depth, temperature, pH, dissolved oxygen, and conductivity, along with a host of other ailments, such as ammonia and other nasty elements. With a modern sensor network connected to cloud services, a city like Flint would not only receive real-time alerts about issues, it would also receive predictive monitoring to head off calamity. Specifically, AquaCloud could have protected Flint’s water system by notifying water managers of contamination.
And, what about oil?
Almost a year ago, my friend Boris sent me a note about a company he just committed to in the on-demand space. Having invested all over that category, I was initially disinterested in doing more in the space. Boris still suggested I meet the founder. So, I did, and in the first five minutes of meeting the CEO of Booster Fuels, I knew I wanted to invest.
Booster’s vision is that the manner in which we get our gasoline is potentially outdated. I immediately started the conversation by asking about (1) the shift to fully electric vehicles and/or self-driving and (2) the narrative around declining car ownership. Frank, the CEO, had a great answer on the tip of his tongue — the size of the market. It turns out the average U.S. household spends thousands of dollars on gasoline; that while electric, self-driving cars represent the future, it will still take a long time to make them mainstream; and that car ownership is actually on the rise, despite what one may glance at on Twitter. Even in the age of ride-sharing, falling gasoline prices and auto competition pushed the cost of ownership down that it stimulated demand.
Booster started smartly by targeting large office parks and campuses in the midwest, avoiding the early-adopter crowd in the Valley. By doing so, Booster ensured they would have a viable business model to start with and could operate away from the shine of the tech world’s klieg lights. The franchise model of gas stations which have swept across the U.S. made sense in a world of sprawl, but also added retail, real estate, and infrastructure costs to consumers. Though more complex initially, a network of Booster Fuels trucks can theoretically help consumers save even more on gasoline as the price continues to fall and present larger oil and gas companies with a new retail model for delivering goods and services to consumers.
As I’ve been writing about here, I’m becoming even more thematic in my investing as my fund experience slowly matures. In my current fund (Fund III), I am looking specifically for startups in any of these categories, and sometimes there’s overlap:
- Industrial Software & Industrial IoT: I’ve done the most here so far. 3D printing software, drone applications, sensor networks. I’m looking for people who are determined to bring solutions to heavy industry.
- Enterprise SaaS & Security: Pretty straight-forward startup stuff here. Particularly, I want folks who are creating new categories and/or who are creating or leveraging a proprietary data set which can hold long-term value.
- Consumer Technology and Markets: I’m more open here because it’s harder to predict. I’ve only invested in one consumer play in the last 10 months. In particular, I’m looking for founders who are trying to find ways to help consumers save money on home rental or purchase costs, as well as costs associated with healthcare, such as reducing visits to see doctors and specialists, and so forth.
If you’ve read this far, what would be helpful to me is to see more consumer-focused startups at the angel or pre-seed stage. Thank you for reading.