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E2E: 20/20

Why We Invest in Themes, Not Sectors

For decades, the question, “What type of work are you in?” had a straightforward answer. Most people did a specific job for a business in a defined industry. If you started a business on your own, it was in a particular sector, like travel, or food, or retail. Business investors followed the same path. The old venture capital model focused on sectors. The Wall Street Journal still tracks investment by sector, dating back almost 30 years.

But we’re in a very different world today. The best ideas aren’t confined to a single sector, but instead are disruptive across multiple industries. That’s why our approach to investing doesn’t focus on sectors. We focus on themes.

Thematic investing has been around for a while, and we can’t claim any credit for its creation. The Foundry Group published a great post on what thematic investing is and why they do it back in 2008. At Next Coast Ventures, we have followed that model and began our firm with seven themes that we focused on for our first fund (NCV I).

As innovation is not static, we are continually reevaluating our themes and on the lookout for new ones. This requires us to do deep research, to regularly consult experts across industries on specific emerging technologies and to monitor how a theme grows in strength and depth or dissipates. Markets change, new technology appears and society goes through big transformations—sometimes in just a few months.

Some Themes Persist

When we published our first set of investing themes four years ago, we felt confident that we had identified themes that we knew a lot about and in which smart entrepreneurs would be looking to shake things up.

And many of those themes have persisted. Take, for instance, our original theme of the Future of Work 2.0. This theme embodies both emerging trends and technologies. At the time we settled on it, we recognized that remote workforces were going to become more prevalent and the advent of technologies like 5G and VR/AR would support a gradual move to more remote teams. Little did we know then that a global health crisis like CV-19 would accelerate the trend to remote work and solutions like video conferencing would be adopted en mass overnight. It is fair to say now that remote work is here to stay in this new operating environment and there will likely be a second generation of tools to support distributed workforces.

Retail Retold is another theme that stands as a good example of how this approach works in the face of rapid change. When we first put it forth, we primarily saw two forces changing the retail industry: Amazon’s aggressive market share taking machine and the rise of a digitally native generation with major buying power.

One of the first innovative solutions to those forces that many VCs  (including Next Coast Ventures) invested in was the “Direct to Consumer Brand.” EverlyWell and Phlur are two examples of companies rethinking the brick and mortar model and go-to-market strategy in two very different industries: medical testing and natural beauty.

We will continue to see startups creating new solutions related to these two forces (Amazon’s market dominance and digital natives), but also new trends emerge, very likely around the retail supply chain due to increased pressure from CV-19, unique customer acquisition models given rising CAC on traditional social channels, and improved personalization of the consumer experience. The shopping experience is evolving quickly, and all aspects of a consumer journey—from discovery to purchase— continue to be ripe for disruption.

Finding New Themes

Our ongoing evaluation of themes means that our list will inevitably change. These last three months have given us the opportunity to finally take a deeper dive into a few new themes that we have been noodling on, but have never put pen to paper on.

So stay tuned for Part II of our “Thematic Investing” blog series to find out what new themes we see emerging due to macro moves in technology and society.

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E2E: 20/20

Communicating During a Crisis

Five Actions from the Frontline of Entrepreneurial Leadership

For many entrepreneurs, the last month has been the most challenging time in their careers. Having to balance health concerns for everyone in their personal and professional vicinity, along with a crushing change in the economy, has pushed business leaders to the edge.

But it’s also a time when employees, customers, and colleagues are looking to company founders for leadership and guidance. What should you say to people who are concerned about their jobs and their future? I’ve been talking with leaders and founders at companies both large and small over the past few weeks about how to communicate in a crisis. After hearing their concerns and constraints, I’d like to offer some suggestions based on years of work with more than 500 companies.

1. Find Your North Star

One of the first things to recognize is that not everyone has this figured out. Big companies may battle with a lot of input for various business units. Meanwhile, smaller companies may struggle to establish a position of calm leadership while feeling like waves are crashing around them.

Nearly everyone’s first reaction is that more communication is better than less. Not so. The most important aspect is to be in alignment around communication at all leadership levels. Decide, “What are the things that matter for the future of our business?” Identifying those non-negotiable things that you will always stand for—ethics, values, how you treat others (both team members and customers)—as a starting point will allow you to communicate from a position of clarity, strength, and sincerity.

2. Recognize Generational Differences In Communication

The current global pandemic is an unprecedented time for everyone. Some of your team members and customers have been through deeply challenging times before: wars, recessions, the dotcom bust, and terrorism. Other team members may have just taken their first job with your company and never experienced a macro-economic event like this while in the workforce. As a leader, it’s important to be sensitive to the views, perspectives, and experiences of other generations if you want to drive trust and engagement in your communication.

“As a leader, it’s important to be sensitive to the views, perspectives, and experiences of other generations if you want to drive trust and engagement in your communication.”

At CGK, our generational research and strategy center, we call this Generational Context. Without this context, the way you approach and communicate may not line up with your audience—both younger or older. The more you can put yourself in their mindset and perspective, the better you can serve and support them.

Generational Context is especially important when communicating with your team members. We find it helpful to step back and ask yourself, “What are their fears and concerns right now?” For some, it will be that they’re going to get laid off or lose their health insurance. Some may not be sure how to pay their rent, car payment, or help out another family member.

Great leaders realize that their top priorities and the top priorities of those on their team may not be the same. In times of crisis, people often move towards what’s most important to them, both in terms of overcoming fear and providing security. It helps to understand that not everyone is aligned and moving in the same direction as the organization’s leaders, but they can be with the right communication and leadership.

3. Choose the Right Medium for Your Message and Audience

What works with one group of team members may not work well with others, yet everyone must get the message you’re sending. A Zoom video or Slack channel may be efficient, but if the information you share in that video would also be of interest to an employee’s spouse or significant other, include another way to share that information outside the organization, such as an email or post on your company intranet.

Choosing the communication method is particularly important because people are afraid and anxious right now with so much uncertainty swirling around. That makes it hard to hear a message, remember the message, and then accurately repeat it to someone else who wasn’t there. FAQ pages and other mobile-friendly resources are effective ways to reinforce messages that are delivered internally by video, chat or email.

4. Don’t Fall into The Trap That Crushes Trust

Because we’re all under stress, you may feel additional pressure to fall into the trap of reassuring people by telling them what they want to hear. Resist this temptation. If you don’t know whether everybody will keep their job, don’t go out and tell people that they’re all going to get to keep their job. Because if you end up having to do layoffs two weeks later, you’ve significantly hurt your trust and credibility with those who stay on. As a leader, you must decide the key points that you can message based on the best information you have.

When it comes to communicating with customers, there can be a sense that your product or service is just what they need right now to deal with the current pandemic. It’s critical not to come off as an opportunist and sound tone-deaf to the difficult reality facing so many people and organizations. That’s one of the fastest ways to lose trust and credibility and ultimately lose customers. People don’t want opportunistic sales pitches or marketing pitches right now.

“It’s critical not to come off as an opportunist and sound tone-deaf to the difficult reality facing so many people and organizations. That’s one of the fastest ways to lose trust and credibility and ultimately lose customers.”

Instead, people want a resource they can trust and want to know that you have their back. Let them know that you’re there for them, working on their behalf, and ready to jump on the phone or on Zoom to talk. You understand it’s tough, and you’re there to help.

People will remember if you took the time to reach out and check on them—even if it’s just to say hello and that you’re thinking of them. You don’t have to mention your brand, product, or the latest sales pitch. They know where you work, and they’ve received 87 sales pitches in the last week, all with COVID-19 in the email subject line—so be different and connect with them as a human. If you have resources that might be helpful, make them easy and free to access. We’re all in this together. The more you show you are there for them, the more they’ll buy when they’re ready because they know they can count on you.

5. Deliver Bad News With Empathy

Even if you do everything right, circumstances may still force you to deliver bad news. Layoffs, furloughs, and unfulfilled commitments are in the headlines every day and will likely stay there for a while.

Keep in mind that when you deliver bad news, it’s not the only bad news your audience has received in the past few weeks. That makes it more critical than ever that you deliver the news with empathy and candor, and remain available to answer any questions. How you deliver bad news not only impacts those you are delivering the news to, but also word will travel to everyone else about how you handled the situation.

The worst thing you can do for company culture, trust, and buy-in right now is to deliver bad news in a generic email because that makes people feel like you don’t care about them. I would go so far as to say that if you have the choice of sharing bad news by email or Zoom, share it by Zoom. Show people you took the time to talk with them personally whenever possible. Hiding behind a mass email makes it easier for them to have a very negative response versus actually seeing you, talking with you, and getting treated with dignity.

Most of All—Remember That We’re All In This Together

It’s okay if your communication isn’t perfect. People are more forgiving right now, whether for a child walking into the background of a Zoom meeting or memos that are not grammatically perfect. We all are in this health and economic tornado together. When in doubt, lean on your own humanity, candor, and desire to get your message across quickly, honestly, and clearly.

Last but not least, it’s always good to remember that effective communication is two-way, so avoid making your message one-directional. Let them know who they can talk to, whether that is you, their direct leader, HR, or another person who can answer their question or respond to their comment. People appreciate being in conversation, not just being told what is going to happen and what to do.

Remember, in times of crisis, often the most effective message is not just what you say, write, or send, but what you do that shows your humanity, integrity, and that we’re all in this together.

Jason Dorsey is a member of the Next Coast Ventures’ Entrepreneur Council. He is president of The  Center for Generational Kinetics, a Gen Z and Millennial research and strategy firm. Dorsey has served on the board of directors of both public and private technology companies and is passionate about helping leaders scale companies.

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E2E: 20/20

The Top Actions Entrepreneurs Should Take Right Now

Our way of business at Next Coast Ventures is “built for entrepreneurs, by entrepreneurs.” And while we’re going through this unprecedented time in history, we know we don’t have all the answers. But we do have experience and empathy. We asked members of our Entrepreneurs Council and leaders of the firm about how entrepreneurs should think about their business right now. Some actionable highlights are listed below - we hope these help.

Cash Is King

“The most obvious is cash. I am close to a company that has seen its receivables literally balloon overnight. Payments down 50%+ year-over-year. All the old assumptions have to go out the window. Slow your payables, skip a rent payment, cut non-essentials, etc. If you are out of business, you can’t help anyone.” (Cotter Cunningham, Founder, former Chairman and CEO, RetailMeNot)

Over-Communicate

“Consistent communication across all levels. Not only from the CEO to their teams, but double- and triple-check that all managers are having consistent video calls with their teams and that they are sharing the key messages. It is so easy to get isolated or disoriented when everyone is working from home.” (Julian Castelli, Chairman, Chargeback)

“Engage your board. Sometimes entrepreneurs feel like going into their board with problems or challenges or not knowing an answer is a sign of weakness. But right now, this is a real sign of strength. The businesses that are going to survive and thrive will do so based on their collective strength, talent, intelligence, and experiences of everyone involved.” (Jason Dorsey, President, The Center for Generational Kinetics)

Make the Call

“Call your customers and vendors. Start at the top and call 'em to check in. I wouldn't push for cash on the first call—unless you have to, but remember they will be sitting in a Zoom meeting later this week with the topic being ‘what do we cut?’ and if they just heard from you with a supportive message, it should help. I know some people subscribe to ‘out-of-sight-out-of-mind.’ I do not.” (Cotter Cunningham, Founder, former Chairman and CEO, RetailMeNot)

“Too often, what gets overlooked in times of crisis is the customer. As a CEO, you can make ‘just checking in’ calls with your key contacts and do so without an agenda. This will build trust, develop personal relationships and strengthen your value as a vendor. There will be a time when you do make these calls with an agenda in mind. Not now. Make the relationship calls—as many as possible—with some of the time freed up from working from home. Schedule it on your calendar and make it a priority.” (Mike Smerklo, Next Coast Ventures Co-Founder and Managing Director)

Keep Selling

“Keep making sales calls. It's easy to go into 100% defense mode. Don’t. Someone REALLY needs your product soon. Get in front of them!” (Cotter Cunningham, Founder, former Chairman and CEO Founder, RetailMeNot)“Keep making sales calls. It's easy to go into 100% defense mode. Don’t. Someone REALLY needs your product soon. Get in front of them!” (Cotter Cunningham, Founder, former Chairman and CEO Founder, RetailMeNot)

Have a Plan for the New Normal

“Figure out the offensive plan and make sure everyone knows what it is. Hard to do so when you don't have whiteboards and group meetings. Be explicit and have cross-functional meetings so all who are necessary can take part in playing offense (growth/sales) instead of just hunkering down.” (Julian Castelli, Chairman, Chargeback)

“Finish scenario planning and decide what the new normal looks like. The last two weeks have been consumed by projecting different scenarios and modeling P&L and cash-flow impact. We’ve taken the obvious actions (e.g. cost-cutting, etc.). Now the teams are starting to drift back to scenario planning, and the truth is we don’t yet know what will happen.” (Zeynep Young, Founder and CEO, DataNarrative)

Get Aligned, Stay Aligned

“I think in times like these (if your business is negatively affected) it's essential that your management team gets aligned on your top priorities, in order, to weather this crisis and come out strong on the other side. Some of the obvious things, like conserving maximum amounts of cash, preserving goodwill with employees and continuing to serve your customers at the highest levels can be at odds—and you have to wrestle with these tradeoffs as a team and get aligned.” (Brian Sharples, Co-Founder, former Chairman and CEO, HomeAway)

“I’ve had to spend time to get the leadership team off of discussing additional scenarios and into an action plan that allows us to move forward beyond the obvious immediate actions. We’ve explicitly outlined some mile-markers that will give us more direction in the next couple of weeks about where our specific industry is headed and we may revisit scenarios when we know more. But the biggest challenge has been to define an action plan for what comes after ‘immediate no regrets moves.’ I think the job of the CEO is to start defining what the new normal looks like until we know more” (Zeynep Young, Founder and CEO, Data Narrative)

Stay Productive

“Assuming workplace safety rules and procedures are in place (with work from home being the new standard), you need to put a massive focus on measuring and driving productivity under this new paradigm. Productivity is the fuel that allows you the latitude to preserve cash while continuing to serve customers and drive sales at adequate levels, and it deserves daily communication and attention by management across all functions.” (Brian Sharples, Co-Founder, former Chairman and CEO, HomeAway)

Stay Productive

Manage Your Time Wisely

“Working from home is a new paradigm for most people. It’s easy to get lost and work away without prioritzation. For me it’s somewhat therapeutic to do this, but at the same time, I already find myself going down ratholes of things I’m wasting time on that I shouldn’t be. My time mix is now easily talk to entrepreneurs 40% of my time (portfolio company execs, other entrepreneurs in network, etc.) but try to limit the calls to 15 minutes tops.” (Thomas Ball, Next Coast Ventures Co-founder and Managing Director)

Take Care of Yourself

“Look out for you. It’s so easy to get stressed out right now and worry 24/7. Get some exercise and/or fresh air every day!” (Cotter Cunningham, Founder, former Chairman and CEO, RetailMeNot)

“Showing up as a confident, enthusiastic leader is hard in the best of times. Now with all the added stress and uncertainty it is even harder. Meditate, exercise, call your mom or just read a good book. Whatever it is that brings you calm and comfort—make sure you don’t neglect yourself in these stressful and uncertain times.” (Mike Smerklo, Next Coast Ventures Co-founder and Managing Director)

Empathy is your biggest asset during this time of crisis, so don’t be afraid to deploy it widely. We hope this post helps in some way and would love to see your comments and suggestions so that the entire entrepreneurial community can benefit. There’s a lot of fear and anxiety out there, but it’s important to remember that we’re all going through this together.

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E2E: 20/20

NCV’s Top 8 in ’18

We are so incredibly grateful to have so many great milestones in our short history — and 2018 was no different. We founded NCV on the idea that the best entrepreneurs are building companies outside the coasts, and with the support from our great investors who believe in our mission, we have found that to be even truer than we imagined. Through numerous strong additions to our portfolio, expanding our Venture Partner program and ramping up our E2E programming, we couldn’t be prouder of our entrepreneurs’ accomplishments in 2018. In no particular order, here are some of the highlights.

8. Meat-Ups

We love any opportunity to bring Austin’s entrepreneurial ecosystem together, and we are firm believers that it shouldn’t take an industry conference or panel of experts to do it. That’s why we founded our series of ‘Meat-Ups’ in 2018 — with pig roasts, grilling demos and fresh meat from Austin’s finest ranches courtesy of Rosso & Flynn. Whether it’s kicking off summer or discussing the rapid developments in the world of eCommerce, we have truly enjoyed bringing Austin’s founders, investors and service providers together in our backyard for great BBQ, and even better conversations.

7. SXSW

SXSW has always played a large role in Austin’s innovation ecosystem and has done a tremendous job putting the Texas capitol at the forefront of people’s minds when they think about startups and entrepreneurship. That’s why we were so thrilled to put on our first-ever SXSW panel featuring our portfolio CEOs Julia Cheek of EverlyWell and Eric Korman of Phlur, as well as Localeur CEO Joah Spearman. Our panel focused on one of our major investment themes: digital natives disrupting time-honored industries. The panel’s great turnout and lively Q&A showed us that this shift in consumer behavior isn’t going anywhere anytime soon.

6. First Annual Meeting

One of the more never-wracking parts of 2018 was our first-ever Annual Meeting. Our mission is to source and support the best entrepreneurs in Next Coast markets, and none of it would be possible without our incredible investors. We were so pleased to have the opportunity to share our firm’s progress over the past year and give our investors the chance to hear directly from out portfolio CEOs. Their enthusiasm for our founders’ business ideas and development as leaders makes our whole mission possible, so our first-ever — and successful! — Annual Meeting was certainly a highlight of 2018.

5. New Venture Partner Jason Dorsey

At NCV, one of our main goals is to leverage our network and industry expertise to provide our portfolio with the best resources to scale their businesses, and our Venture Partner program is a key part of that. This year, we added an atypical Venture Partner, bringing on Jason Dorsey to advise our portfolio on consumer trends, brand building and customer acquisition. Jason is an expert on digital natives and generational behavior, and he has helped us refine our investment themes and evaluate big trends that impact our investment decisions. Jason is not a garden variety Venture Partner, and we’ve already seen his incredible impact on our firm and our portfolio.

4. New Talent Venture Partner Jeff Browning

As early-stage investors we know that one of the key parts to successfully scaling is having a strong and well-suited executive team at the helm. That’s why we brought on Jeff Browning as a Talent Venture Partner in 2018. Jeff has helped our portfolio companies with all aspects of organizational design, talent acquisition and executive development — as well as helping our founders round out their executive teams. He has 30 years experience in executive talent acquisition and spent 15 years as the Recruiting Partner for Austin Ventures. He’s already been an invaluable resource to our portfolio companies as they rapidly scale their companies.

3. Clarity Money Acquisition

We were absolutely thrilled to have our first exit in our short history from our portfolio in 2018. Clarity Money, a fintech startup that helps consumers manage their personal finances, was acquired by Goldman Sachs. Clarity Money’s sticky traction with digital natives and intuitive UI made it an incredible addition to Goldman Sachs offerings as they seek to reach Millennials and Gen Z with modern banking platforms. Founder Adam Dell created an intuitive product that’s disrupting a massive market, and we were so excited to be a part of his journey.

2. OnRamp Acquisition

We had not one, but two exits in 2018. Our portfolio company OnRamp, an Austin-based data center and cloud computing company, was acquired by Des Moines-based IT company LightEdge. LightEdge now runs one of the largest interconnected data centers outside the coasts in key Next Coast markets. OnRamp didn’t just have a great suite of products, it was also led by two great entrepreneurs: CEO Lucas Braun and President Ryan Robinson. Helping them through the acquisition process and their excitement around thinking big made an exhilarating liquidity moment even greater — and reminded us of why do exactly what we do.

1. 11 New Portfolio Companies

There were so many great milestones in 2018, but to us one of the greatest has been expanding our portfolio with the top founders in Next Coast markets that are building innovative companies disrupting massive markets. Investing in these types of entrepreneurs is exactly why we founded this firm. This year, we added 11 new companies to our portfolio in everything from SaaS to at-home health testing to blockchain platforms. Our collaborative approach has allowed us to source some of the best glass eaters in a wide variety of industries, and we couldn’t be more excited to help them scale and grow as leaders in 2019.

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E2E: 20/20

10 Things Our Founders Are Grateful for this Year

The holiday season is often about taking time away from work to spend with family and friends, but as entrepreneurs ourselves, we know that is no easy feat for a founder. The entrepreneurial journey is 24/7, and with all the ups and downs, it can be an isolating experience fraught with burnout. But with the right support system, being an entrepreneur and scaling a company can be an incredibly rewarding experience. So we decided to speak with our portfolio leadership to see where they get their support from, and what they’re grateful for this holiday season.

“I’m most thankful for the entire EverlyWell team this year — which has grown from 13 to 50 since last holiday season. As a solo founder, I’m so grateful for colleagues who will run alongside me and who care deeply about our mission. It’s been a great transition to watch this year!”

“I am extremely thankful to NCV for allowing 101 to incubate in their offices for many months. Not having to worry about an office or rent allowed us to focus and blast off quickly. Perhaps just as importantly, the daily casual collisions with the NCV team also helped us solve problems and form our own thoughts - super helpful value add. The second thing I am extremely thankful for: NCV allowing us to completely overstay our welcome - helped us solve even more problems and form more thoughts!! Thanks NCV!”

“I could not be more thankful and appreciative for the amazing people on the AlertMedia team. Everyone here, some of them taking great risk to join us when we were small/early, has been an absolute pleasure to work with, and each has contributed meaningfully to AlertMedia’s success. Finding the best people has been our focus from the very beginning, and it remains our focus. That approach has resulted in a surprising and spectacular level of productivity, efficiency, customer success, and employee happiness (#3 on ABJ’s Best Places to Work!!). I’m thankful every morning I come to our office, because the people at AlertMedia are making my job so enjoyable and rewarding!”

“Just last week, we had 8 new employees start on the same day. It was our biggest new hire group to date, and we had to get a little creative with seating arrangements. We started the year out with 30 employees and could fit into a corner of our office space. Now, our office is bursting at the seams. Moments like this, when we’re compelled to look up from the work and take stock of our growth, inspire a lot of gratitude. This team we have built is amazing and I’m thankful to be their leader.”

“I'm incredibly thankful for my new wife (as of September) and all her support during the highs and lows of leading a high-growth startup. Her patience, perspective, and unwavering backing let me tackle each challenge with confidence. Beyond her… I'm thankful for a very long list of people.. including Next Coast for supporting us last Winter and the incredible partnership consistently demonstrated by Mike and Tom.”

“I’m grateful for my collective team - and that means our investors, employees, advisors partners, and families. It’s very challenging to go through a pivot, especially when you have raised capital and your profile to run after something else. To keep your team intact, and then to execute against a different set of goals, takes a tremendous effort and I’m lucky enough to be surrounded by the best people I could be associated with.”

“This year we are most thankful that Gen Z has finally(!) become the emerging “hot” topic when it comes to consumer and employee trends. We’ve been talking about Gen Z – and leading original research – on the generation as consumers and employee trendsetters for several years. Our new book on Gen Z comes out next year. Seeing this new, fast-emerging generation finally starting to get the buzz and attention we believe they deserve is very exciting for us as researchers and strategists, and we’re thankful for the interest because we believe this new generation will change the world. The sooner and more accurately we can share our understanding of this new generation, the sooner leaders can better unlock the generation’s tremendous potential.”

“My team as a whole. They are fantastic and their hard work and dedication make it much easier for me to sleep at night than if I didn’t have them.”

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E2E: 20/20

The Rise of the Female Founder and Robotics in the Human Environment with Andrea Thomaz

Diligent Robotics is an Austin-based NCV portfolio company developing a suite of artificial intelligence that enables robots to collaborate with and adapt to humans in everyday environments. Their service robot works together with teams of people in healthcare and is currently operating at a hospital in Dallas, Texas. The Diligent team began with just three female engineers and one prototype of a robot arm working out of NCV’s office. Now, they are a team of 12 engineers with their own robotics lab and fully-operational hospital robot: Moxi.

It feels like just yesterday that the Diligent team was working at NCV’s offices with one, single robot arm. Now you have Moxi, a fully operational robot – how did you guys approach the design process to make the first-ever hospital assistance robot?

We worked with a fantastic designer that I had designed previous robots including Simon, Curi and Poli with and we began by digging into what we imagine Moxi is going to do, along with how people will perceive and feel around Moxi based on the thorough industry research we’ve done. The product design is a very visual process, so we do storyboard sketches of the robot in hospital environments and in various human interactions, almost like it’s a movie. While storyboarding is crucial to designing the robot, our designer has a concept called ‘body storming’ – instead of brainstorming you actually physically move to think about the scenarios where we need Moxi to perform and interact with humans. So we actually dress somebody up as the robot and dress people up as nurses and literally act it out.

How did you decide on the name Moxi?

We didn’t want to it to be human name nor did we want it to be gendered, so we ran a program that searched for all two-syllable words that end in ‘i’ or ‘e’ and it generated about 50 names. Then we had everybody on the team bring pictures that should be used as inspiration for the robot, the design and the brand. One of our engineers brought in a picture of the Rosie the Riveter and so we thought that was a ‘she’s got moxie’ type of image. That’s when we landed on Moxi.

What has been the reaction to Moxi?

We’re so thrilled and surprised at how overwhelmingly positive the reaction to Moxi has been so far. Typically you’ll see robots in factories, but not in a public space, so we’re one of the first companies to put a human-size robot and have it manipulate things in a human environment. The staff at our 1st beta testing hospital, Texas Health in Dallas, just love Moxi, they even threw it a welcome party complete with cupcakes and a brand of soda called ‘Moxie’ that’s from Maine. They also awarded Moxi ‘HRO’(Honorary Coach Recognition) risk assessment award after Moxi demonstrated that it asks a person for help when there was a task it didn’t know how to complete. Their nursing team doesn’t want Moxi to leave! It’s been so satisfying to build a thing and then see it move in the world.

What has been the most surprising reaction to Moxi in a human environment?

Well, the funniest thing is we were doing a sales pitch at a children’s hospital and the nurses were like: ‘Could the robot make fart noises? The kids would absolutely love that.’ I’ve been in the field of human-robot interaction for 15 years, and I’ve never had to think if an appropriate HRI element would be fart noises. But that’s just one comedic example of how unpredictable and how out-of-the-box you have to think when creating a robot for a human environment. (The robot can, in fact, make fart noises).

You often hear about robots taking over humans’ jobs, how did you sell the idea of Moxi in the workplace?

The challenging, but exciting part with investors and with hospitals is trying to get them to see the sweet spot of what robots can and can’t do – and how those abilities can be useful now. And even more importantly with us, we’ve realized our biggest focus is reiterating what value humans bring that robots will never be able to match, such as the ability to connect with other humans and the critical analysis of human behaviors. We’ve designed Moxi with that concept in mind. Core to our mission is for the robot to be a successful member of the service team – it won’t and should never replace the human-aspect of clinical care, but it will actually give clinical staff more time for that human care by autonomously doing their non-patient facing tasks. In the hospital world they describe this as ‘performing at the top of your license,’ meaning nurses shouldn’t be doing a task that doesn’t require a nurse’s license. Nurses should be caring for patients and learning the latest developments in their field, not fetching water or taking out the trash. Across the industry, hospital administrators feel that if they could get all of their staff performing at the top of their license, they would be more effective organizations – and Moxi’s goal is to help them achieve that.

Not all of your investors have deep domain expertise in robotics, how have you still found them useful?

Our conversations with Michael have been really interesting because even though our product is a robot and not software, we’re really doing a B2B sale. Both Michael and Tom have been super helpful about what milestones to hit and what metrics to look at so we can grow into this huge B2B business and scale the sales process. Additionally, we have an investor who has worked with a robotics company before and he was very helpful when we were undecided about whether to do PR around the launch of Moxi. In robotics, a lot can go wrong with these beta pilots and there’s so much public perception with people infusing too much sci fi and overblown expectations into robots’ useability. We consulted with this investor and ultimately decided to do a PR push for our Moxi launch. Moxi isn’t working behind the scenes in an industrial warehouse somewhere, it’s working in a human environment and interacting with patients, so we thought it was important to show the public how it operates and interacts.

Diligent has an all female-founding team in the STEM field, an uncommon phenomena – how do you feel it’s helped drive your mission?

We definitely didn’t set out to be an all-female founding team, but I do think that there is a big gender difference in robotics and the STEM fields, and I think it’s hard to keep diversity top-of-mind when you’re growing fast. I’m proud that we now have 12 people and we have both women and minorities on the engineering team. So we’ve done a good job, but we’ve had really to make that a priority. I could see how if you weren’t making that a priority, you would ‘accidentally’ have no women on your team given the gender disparity in STEM educational fields. I do feel as though being an all-female founding team has also helped our business development. We’re selling to the nursing industry that is a very female-dominated field, so I think there is something to be said about these two women – Vivian and myself – coming in and selling technology made by women, for women.

What advice do you have for women that are thinking of becoming engineers or entrepreneurs?

One thing that Vivian and I are really passionate about is setting an example and showing that we’re women working on very, hard technical problems and we’re hoping that inspires women to go and get their degrees in hard, technical fields. In academia, many women don’t believe that they can succeed in these fields, I tell them: ‘Look to your left and look to your right, one of you is going to be a professor one day,’ and their reaction often is ‘Really? You think I could do it?’ They typically see only male professors, so they just need somebody to tell them they can do it. And they can.

How has your background in engineering prepared you to become a founder?

Working in an academic lab is great preparation for starting a company: you have a small team of graduate students, you have a strict budget and you have to sell yourself and your idea to find funding for your team. All of that system-building knowledge has really helped us be thoughtful about how we scale and encouraged us to think five steps ahead. Additionally, being female engineers and founders in an industry where that isn’t the norm and having our founding mission validated by investors and successful beta testing have given us a lot of confidence. Entrepreneurship is all about sticking your neck out even if you’re worried in the back of your mind, so the confidence we’ve gained has been invaluable.

What was the biggest lesson you learned when you were pitching investors?

My advice to women for entrepreneurs is to forget the standard Airbnb pitch deck. You have to sell yourself to the room first, then they will listen to the rest of your pitch. When we went on a week-long pitch-fest in the Bay Area, the first few meetings we spent the first third of our time just going over our idea for Moxi and walking them through the market opportunity. We didn’t show them the slides with our backgrounds and who we were until about halfway through. We met with a female investor and when she saw our deep domain expertise in robotics she stopped us said: ‘Oh my god, you guys need to lead with this instead.’ Maybe it’s different for women because people assume you don’t have all the credentials you have, but we decided to flip the order of the deck and led with our backgrounds and it was like night and day.

What was bad advice you received as a founder that you’re glad you ignored?

I had this complex for a long time that we had to find this business person for our founding team. Both Vivian and I are technical founders and people are always saying you need to have a technical mind and a business mind for a founding team to be successful. But, I believed that Vivian and I were the best people to sell this idea because we had been developing these types of robots for years – we weren’t going to oversell it, we knew the use case and its limitations better than anybody. In the end, people don’t need to always listen to what people think is the ‘perfect’ founding team or the ‘perfect’ way to start your company. There’s so much advice out there, but in the end every founder’s story is so different and unique. We’re lucky that we found investors who believed in our vision and that we were the right team to execute Moxi at the right time.

About Andrea Thomaz

Andrea Thomaz is CEO and Co-Founder of Diligent Robotics and recognized for her expertise and research in AI and social robotics. She was awarded Kavli fellow by the National Academy of Science, served on the US President’s Council of Advisors on Science and Technology, recognized on Popular Science‘s “Brilliant 10” list with her robot Curi appearing on the magazine’s cover and recognized on MIT Technology Review’s “The Next Generation” of Innovators Under 35 list with her robot Simon appearing on the magazine’s cover. Andrea’s passion for social robots started during her time at MIT Media Lab where she was inspired by AI industry experts and developed a keen interest for taking AI computing one step further into the real world with robots, specifically with social robots that work seamlessly with people in every day environments. She co-founded Diligent Robotics to pursue that vision of socially intelligent robots working collaboratively with people. Andrea earned her PhD from MIT and spent 15 years in academia and as a professor in AI and social robotics at UT Austin, Georgia Tech and MIT.

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E2E: 20/20

The Future of Work with Scott Harmon

Scott Harmon is the Co-Founder and CEO of Swivel, an Austin-based Next Coast portfolio company that is changing the real estate game for startups by focusing on one of our investment themes: the changing future of work.

You’ve had a lot of experience scaling tech and software companies, what made you want to shift your focus to the future of the work for your latest venture?

Swivel is the result of 25 years of frustration with how we provide workspace for our people and how we empower them to do their best work. I’ve been part of six different companies from startup through IPO, so my first thought was that I had just wrestled with these exact issues myself, whether it was with a five-person company or a thousand-person company. Right now, the way we approach ‘work’ is nearly 100 years old, a by-product of the industrial revolution. It’s just crazy. We’ve revolutionized digital tech like Slack and video conferencing, but the physical aspects of how teams organize their space hasn’t changed a bit. Just like AWS allows you to flex the amount of storage you need up or down, you should be able to flex your workspace up or down as well. It’s a really transformative idea and there’s an enormous amount of value to unlock.

Why is flexible working so crucial to growing companies?

From a financial perspective, renting office space for 5 or 10 years at a time is a huge structural problem for companies. Companies typically get offered a five or ten-year lease if they want to control their own workspace. How many companies honestly know how many employees they will have ten years from now? Why would you want to pay for all that space ten years in advance? It’s outrageous and it’s a big structural problem for companies. If you’ve turned the corner and you have a real company, you’ve raised capital from some prominent VC firms and you’re off to the races, you don’t want to work in a fishbowl. If an entrepreneur is trying to escape the fishbowl and their only other option is a ten-year lease, they’re stuck. Those are your only two options and they’re both bad. Flexible working allows entrepreneurs to be leaner in their budget and more flexible with their time.

How does Swivel compare to other workplace-focused companies like WeWork?

Swivel is part of the second generation of ‘flexible working’ where coworking, like at WeWork, is part of the first wave that began about ten years ago as a result of the recession. Coworking targeted the needs of freelancers or people that were self-employed, which was really important especially after the financial crisis of 2007. But freelancers are only about 3 percent of the U.S. workforce – the other 97 percent work for more traditional enterprises. Swivel and this second wave of flexible working is about those small and mid-size businesses and introducing those workplace alternatives to the mainstream economy. The second generation is all about combining the flexibility and ‘ready-to-work’ aspects of the first generation of coworking, with the ability to have your own private office in a location of your choosing, but without the burden of a traditional lease.

Swivel has evolved a lot over the past year, as a founder, how do you stay true to your original thesis while still adjusting your product to the market’s needs?

That is the one of the real tricks of the first couple years of a business: how do you hold on to the founding principles and the reason you started the business, but not be tone deaf to what the market needs? There are well-documented processes for how you dial in product-market fit, and just by probability, your original product assumptions are almost always wrong in some important ways. Most books and experts say that it can take 6 to 18 months – or even longer. So you have to be prepared and embrace the fact that in the early stages, your first job is dialing in product-market fit. That’s really what seed financing is good for, so keep your burn down until you have product-market fit dialed in. You’re iterating, so you just have to be facile and flexible on the way to what your value proposition looks like when it’s reflecting what people want. The lucky people are right with their original guesses, but we weren’t. We were probably off by 20 degrees, and we changed quite a bit about our core product offering and go-to-market strategy to fit what people that run small businesses really wanted. You have to just hold those things with a loose grip, not a white-knuckle grip, and just let the world tell you what it wants. Prideful entrepreneurs don’t tend to do that well unless they’re insanely lucky.

How should founders balance the need to create company culture without spending too much bandwidth on hunting for office space?

What you want is control and ability to set your own culture and get these things in place in the early days without it consuming too much time. The problem before Swivel was it was all or nothing. You just hang out in the Next Coast office or WeWork because you’re too busy to find office space, but the price you pay is you’re putting off creating culture for another year. That can be really dangerous because you’re in your formative stages. What we’ve found in our market research is that what really triggers the jump to finding their own office space is recruiting. We hear a lot of: “I had to move out of the WeWork because it was just killing my recruiting.” That is the number one catalyst for getting out: “We’re hiring and we don’t look like we’re really a company yet.”

WeWork has a $35 billion valuation because the founders believe it provides more than just physical workspace, how much do the ‘extras’ play a role in the flexible working world?

It’s a war for people and people are impressed by that stuff, especially in tech which can go over the top with amenities. Ordinarily the people who win those wars are Google or Facebook who have the budget to create a physical space that is almost Taj Mahal-esque. When you bring developers in there they just swoon. Little companies have to compete with that, and the answer is not to spend a billion dollars, but you do have to be thoughtful about it and make some statement with your office space that this is a cool place to work. WeWork likes to argue that they do have extras that merit their unicorn-like valuation; things like ‘spirit’ or ‘community.’ While these can be valuable, I think it’s mostly relevant to freelancers or self-employed individuals. We are targeting small and mid-size businesses that need both a flexible business terms and the ability to curate their own workplace design. These companies tend to be lean and growing like crazy, so they are looking for another tool to streamline their hustle and be more competitive for talent, that’s when Swivel comes in.

You’ve scaled several successful businesses in Austin, what is your perspective on looking for local vs. Silicon Valley investment dollars?

I’ve learned it’s important to mix Austin money with Silicon Valley money in every round because I think you get some things from SV money and some things from Austin money – some are good and some are bad, so blending them is best.

The amount of gasoline – capital – they can throw on the ‘fire’ of a good idea with market traction is just beyond belief. But in Silicon Valley, you can only hold on to key employees for 18 or 24 months max and that’s it because 15 competitors will be booted up within 9 months of a great idea because you can spin up companies so fast these days. So SV investment partners give you the confidence and the resources to be bold and grow rapidly when the time is right. But in Austin, there aren’t as many competitors that can steal your people and there won’t be 15 competitors popping up around the corner as soon as your idea is made public. Capital can be more patient, focused and determined here, which makes it easier to keep your burn rate low and be able to thoughtfully dial in product-market fit, which makes for a very strong foundation. And while I think you should have capital from both places, I would never put a company in SV. It’s too unhealthy there, it’s a crazy cauldron and it’s just too expensive.

What does the future of work look like over the next few decades?

We think we’re early on in the life cycle of getting companies to embrace this phenomenon. I think what we have now is two extremes, and the way I see the future unfolding is a rush more towards the middle trend. Right now, there are a lot of companies where people work remotely all the time and employees have never met each other face to face. There’s also a lot of traditional companies that rule with an iron fist and want their employees in one central office, at a desk, five days a week. The middle means being physically together and remote in ways that match what the company and its constituent teams are doing – and what problems they are trying to solve – at any particular time. In essence, technology will make it possible for workspace to flex and adapt to the changing needs of the business, rather than the other way around.

About Scott

Scott started his career by applying his comp science degree from Iowa State in the computer industry, working for Hewlett Packard. In the early 90s, Scott caught the software startup bug, first with Tivoli Systems (IBM) as vp of marketing and strategy, and then as cofounder and CEO of Motive Communications, which went pubic in 2004.

He then led two other tech startups, Alterpoint and Noesis Finance, both to private exits. In 2016, Scott launched Swivel with the purpose of making office space radically simple for growing businesses, bringing his startup count to five companies over a 25 year span.

Clearly, Scott has a thing for startups.

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E2E: 20/20

Blockchain is the New Social Network with Dave Hendricks

Dave Hendricks is the Founder and CEO of our portfolio company SeriesX, an Austin-based company that turns traditional assets into a security token for blockchain application. As part of our E2E: 20/20 series with our portfolio CEOs, we spoke to Dave about the hype around blockchain, its applications and their new blockchain-based platform, Vertalo.

‘Blockchain’ has become one of the hottest tech trends, did you set out to create a blockchain company?

I think a lot of the problems that you see in this new blockchain craze is that you’ve got people who come in and say: ‘Blockchain is really cool so now I’m going to find something to do with it.’ We didn’t do that – we backed into blockchain. I was rolling off of the last company I had co-founded and I was thinking about some of the problems that I saw in the years of building out a company. We started working out this one problem that started with this Series D funding round. These investors are about to sign a $25 million check and they ask for a list of everybody who had worked at the company and every document they had signed. I had cleared six diligences before this, but we almost blew up a round because we couldn’t tell a VC what documents our employees had signed. We had to repaper the entire company, it ended up costing us $1 million in dilution and it almost blew the round. So we got together and built a platform to create a ledger for companies and their associates to share and document all of this, that’s how we got to blockchain – we wanted ‘truth’ and decentralized ownership.

Dave Hendricks, Founder and CEO of SeriesX

Blockchain is pretty intricate, how complicated was it to get the business going?

In order to create a blockchain company you have to become an expert in securities law. It’s not as simple as saying: ‘Oh this is an amazing idea let’s do that on blockchain.’ Because as soon as you introduce the token, you immediately have to make considerations that you wouldn’t have to make if you were just starting a mobile-app company. The operating team required to issue a security token requires a completely different set of skills and you certainly can’t do it without a securities lawyer on staff. Luckily, one of my co-founders is a former SEC attorney and he worked with our lawyers, and one of our another advisers is an expert in patent and tax law. We spent the last six months figuring out a way for our users to actually use the product and be in compliance with securities law. So not only did we have to come up with an amazing idea for applying blockchain for normal people, we had to structure it a certain way so that users can actually use it. So we skinnied our platform down to what would work on the blockchain and ultimately created a network based on truth of work history and association.

Courtesy of SeriesX.com

Where are we in the lifespan of blockchain?

Some people think we are in 1993 in internet terms. I think we’re 2008 and Twitter or Facebook. I think that we’re not at the genesis, but we’re in the second inning. The only reason we’re not in the first inning is regulators know about this technology and took action. Your grandmother has heard of it so it’s got mainstream acceptance and awareness, with likely adoption over the next two years, but there’s still a lot of work to be done.

Your past headaches as an entrepreneur led you to your latest venture, what advice do you have for entrepreneurs given your experience?

I would say it’s never too early to think about due diligence – full stop. As a business leader, you are only as good as the people you work and associate with. If you don’t start early, you’re never going to catch up. You’re going to get so busy, especially if you’re successful, that if you don’t have your human-data hat on, whether it’s HR or investment, you’re not prepared for the luck of somebody saying they want to invest. You’re going to miss that opportunity. So it’s critically important for entrepreneurs to get their house in order, you have to have your documents straight. I think it’s also an excellent indicator when you accept $10 million bucks from somebody when you’ve shown them you know how to run a business, that’s the start of a great relationship.

Your company is focused on changing how people work, what does the future of work look like to you?

Well, our platform – called Vertalo – is allowing us to combine the qualities of a cap table with the features of a social network – it’s a certified investor relations network. Our platform uses two-sided attestation to certify the real-world work or education history of a startup or project team members so that investors, hiring managers and other parties can properly diligence the investment. It leverages the ‘trustless’ elements of the blockchain to help people work together and solve the problem of association – to help investors assess a team. It can not only prove that somebody worked for a company, but prove what the shared knowledge or shared expectation was in whatever role they had, whether it was as an advisor, investor, temp or full-time employee. As we move from the ICO era to the security token era, it will be critical to understand who is working and investing in a project. But it goes beyond that – as the world shrinks, and the concepts of the gig economy takes hold, payment and investment based on tokenization will also take hold. I think everybody in the tech investment community will be paying their associates partly in crypto by 2020. It won’t be weird, it will just be another thing that changes the way money changes hands, like Venmo.

“As a business leader, you are only as good as the people you work and associate with.”

About Dave

Dave Hendricks is a career entrepreneur and technologist at the intersection of identity and marketing. In 2016, SeriesX was founded to solve problems related to HR and Finance data. Named one of NY’s top technology innovators by Business Insider, Dave worked with his SeriesX/Vertalo cofounding partner William Baxter in 2000 at ExperianCheetahMail. Prior to founding SeriesX and Vertalo, Dave was the cofounding CFO/COO of LiveIntent, one of the top ad technology platforms in the world and the inventor of programmatic advertising in email.

Dave Hendricks

About Vertalo

Vertalo is the first networked platform that helps crypto investors, entrepreneurs and their associates to manage their ‘stakeholder communities.’ Based on an attestation framework, Vertalo helps people prove themselves by smart contracts that establish agreements related to time-bound accomplishments such as investor status, employment, investment and education history. Projects that use Vertalo can certify, communicate with, and distribute documents and tokens to community members.

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E2E: 20/20

SXSW Panel Preview: Digital Natives Disrupting Fragrance with Eric Korman

Next Coast Ventures co-founder Michael Smerklo will be moderating a panel on digital native disruption featuring PHLUR CEO Eric Korman during this year’s SXSW conference. The panel will focus on how the rise of digital consumers has upended many industries that were previously dominated by brick and mortar. Eric discusses what the audience can expect from the panel and how PHLUR, a Next Coast portfolio company, has come so far since last year’s SXSW conference.

Eric Korman, CEO of PHLUR

You’ve had a unique road to entrepreneurship spending the majority of your career in the corporate world, why was your idea for PHLUR the one that made you take the leap?

I started reading Fortune when I was 13 years old while other boys my age were reading Sports Illustrated, so the history of brand and branded products were always interesting to me. Many of the business ideas I had before PHLUR were easy to poke holes in or were coming to me at a time I was fortunate enough to have rapid career progression in the corporate world. But in the corporate world I was able to work on projects that were entrepreneurial in nature, constantly asking me to reexamine: ‘How does an existing business go back to market?’ I think the biggest difference this time was where I saw the internet as it related to brands. Prior to social media, the only brands that were created online were media brands like YouTube or Google, or aggregator brands like an Expedia, Match.com or Amazon. But with social media we saw digital first brands like Warby Parker emerge, and being a brand guy, that got me very excited. So I leveraged my 20 years of e-commerce experience with a brand background, and my interest in consumer products, and decided: well, maybe now’s the time.

Selling fragrance digitally was a radical idea, how did you paint the picture to investors?

There are so many reasons why big companies don’t innovate. For fragrance, considering to sell online is hard and it’s non-obvious how the experience should work. The hard and non-obvious didn’t feel like such a tremendous barrier for us, because I’ve seen watched so many different e-commerce verticals successfully shifted online. For instance, 15 years ago there were a lot of doubters that anybody was ever going to buy shoes online, and now Zappos is obviously a huge business, but shoe brands have been built digital-first like M.Gemi and others. So part of painting the picture for investors is to point to similar moments where there was a tremendous amount of doubt being able to shift online – and yet those few who did believe were able to create a lot of value. We’re also not the first company into the sampling economy, we’re leveraging the behavior that’s been built from the last five to six years, so we knew it would be something natural or comfortable for consumers.

As you develop your products and digital marketing strategy, what has been the best source for feedback? How did that change your business?

The biggest part of the feedback loop for us is the high level of engagement we get through Instagram and Facebook, it has provided us crucial insights early on. From the beginning, we took a specific approach to how we formulate our fragrance with clean ingredients and sustainable packaging, but our initial research concluded that “clean” messaging would not be a primary hook. Instead, our research said what will convince consumers will be the design of our packaging and the initial sampling experience. So we didn’t hide the fact that we removed a lot of the harmful products from fragrances, but we certainly weren’t leading with that message. But when we went to market. what we immediately heard from through our social channels completely contradicted the research. The commentary from the community was that they loved the transparent messaging, that we’re non-toxic, etc. That feedback pivoted early on how our brand message. So while it didn’t change how we were making the product – that was a core value – it changed how we communicated our value set.

What metrics did you look at once you launched to improve your business strategy?

A key part of our model is the percentage of customers that buy a full bottle after ordering our sample set. Originally, we had a two-fragrance sample, and while full bottle conversion was good, obviously we wanted it even better. So we started examining sample set behavior in a variety of ways. We realized people that were buying two sample sets were converting at a higher rate than those that were buying just one sample set and we dug in with those customers to understand why. That led to us relaunching with three samples in a box. It turns out, humans – from a behavioral perspective – are much better with three choices in front of them than two. It’s true across almost any category. So it started with the community speaking to us through their behavior, and I’m not kidding literally from the first day we launched three samples in a box, we saw the full-bottle conversion rate increase.

What do you see the role of social media influencers playing in your digital marketing strategy?

The influencer space is a challenging one and one that is always rapidly evolving. Five or six years ago brands that launched and were very influencer-savvy benefitted from a tremendous amount of really organic media. Now, paid influencers can be expensive because the market is highly competitive, with very large brands paying for influencers at scale – and now the largest influencers even have agents. So what worked for those brands a few years ago is not relevant today. Emerging brands have to build up a community and do a good job of organizing that underlying group in an effective way. That means identifying the collective thread of an audience that can be mobilized and get them excited to help spread a message on the brands behalf. Some of these influencers will have 50 followers while others will have 50,000. It’s a lot of work because you have to understand the underlying groups and it takes real man power to create programs like these. Organic doesn’t just happen organically.

What has been your biggest surprise in marketing to digital natives?

So there are plenty of historical precedents of a new generation rejecting the values, morals and behaviors of the parents. What’s interesting with digital natives is that’s certainly true, yet at the same time digital natives are influencing upwards – meaning their brand decision behavior is being mimicked often by the parents. As a result, we see strength with millennials, but also with an older audience as well. For example, we see moms with young kids very active in social media and being a very vocal proponent of our brand, doing selfie videos and posting them on Facebook. There’s a stereotype that all influencers are millennial, but age is not what determines someone’s influence per se.

About Eric

Eric is the founder and CEO of PHLUR, a vertically integrated fragrance retailer and Next Coast portfolio company. He is the former president of Ralph Lauren Digital and Global E-Commerce where he was responsible for the company’s digital businesses. Prior to Ralph Lauren, Eric was president of Ticketmaster Entertainment Inc. where he was part of the management team that drove the successful public spin-off of Ticketmaster from IAC (InterActiveCorp) in 2008. He later helped lead the merger of Ticketmaster with Live Nation. Previous to Ticketmaster, Eric was a strategy and corporate development executive at IAC. Eric has served on the Board of Directors of Points International (PTS), Active Network Inc., BET Digital and OpenTable Inc. (OPEN). He received his MBA in finance from the J.L. Kellogg Graduate School of Management at Northwestern University and his B.A. in economics from Emory University.

Eric Korman, CEO of PHLUR

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E2E: 20/20

SXSW Panel Preview: Digital Natives Disrupting Healthcare with Julia Cheek

Next Coast Ventures co-founder Michael Smerklo will be moderating a panel on digital native disruption featuring EverlyWell CEO Julia Cheek during this year’s SXSW conference. The panel will focus on how the rise of digital consumers has upended many industries that were previously dominated by brick and mortar. Julia discusses what the audience can expect from the panel and how EverlyWell, a Next Coast portfolio company, has come so far since last year’s SXSW conference.

Julia Cheek, CEO of EverlyWell

EverlyWell has had a huge year since your last SXSW appearance in 2017, why do you think your company has had such good traction?

The reason why EverlyWell has resonated with consumers so quickly is because we took a consumer-first strategy, not a healthcare strategy. How do you take models that have worked in other areas and radically transform an individual’s healthcare experience? It’s driven by a combination of consumer demand, and frankly, building a platform that people didn’t even know they needed. We focus on e-commerce, digital as a delivery platform for lab tests and end-to-end consumer, and overlay that with the healthcare value proposition.

The SXSW panel is all about digital natives overhauling industries and healthcare is an industry that hasn’t quite experienced this yet, how did you paint the picture to investors?

Honestly, a lot of VCs rejected the investment when we were pre-revenue – it was hard to demonstrate real traction for very new model. I raised money from angel investors, and that was the money we used to launch the platform in beta. It’s a hard to raise money on a radical new concept, I’m really grateful that there were people that believed in the idea. Many VCs are, by design, quite risk averse and they have certain metrics that they’re looking for. They told me it was a cool idea, but nobody was going to buy the product because there were no companies doing it at this stage. But we’ve created the space. Now, 12 months later, it’s a very different story because our sales are verification that there is a huge market opportunity here. Note: Next Coast Ventures invested in EverlyWell’s latest round of funding.

What about millennials makes this self-testing product especially attractive to them?

Technology is radically changing the healthcare community in this country – look at the recent announcements from Apple, Amazon, etc. I think that’s due to a couple of factors. The economics of healthcare have radically changed, you’re no longer getting great quality healthcare that’s being paid for by your employer. There is also a self-care and wellness movement that is really targeted at the millennial generation. Now, the movement is driving people to use their disposable income on services that would have been doctor-focused in the past but are now consumer education-focused like 23andMe, Fitbit and lab testing like EverlyWell.

As you have adapted your marketing strategy, what has been the biggest surprise in growing your brand?

What surprised me was the purchasing behavior on digital platforms mimics non-digital behavior. The majority of healthcare spending on a family unit is managed by females, and our strongest customer base is females purchasing for their families. Typically, our main customer base is the older millennial, mainly women over the age of thirty. Another surprise was how powerful social advertising has been as a platform for us. Women refer the product, tag it on social platforms and suggest it to their friends. Online reviews and customer referrals are the new gold standard for consumer brands to build a reputation.

Does being an online-only platform inhibit your ability to build customer loyalty?

This was a hard product to sell without education. Less than five percent of Americans know that the home lab testing market exists, so there’s a huge lack of mass-market education. We still have a lot of education work to do whether that’s through home marketing or brick and mortar. Right now, I think that we’re at the tip of the iceberg, because although digital natives do most of their shopping online, you need to hit them through multiple points – exposing them to the brand several times as they consider the purchase. So eventually, to build broader brand awareness, you need to think about other mediums like retail to amplify the digital platform.

Where do you see your relationship with the healthcare industry going?

I think the consumer-driven healthcare marker is a huge hockey stick phenomenon you’re already seeing across multiple health services, but it’s not separate from traditional medicine. Our testing becomes part of their traditional doctor visit, working in tandem with their usual healthcare habits. When we started, there was quite a bit of physician resistance, but now 30-40% of customers were actually referred to us by their own doctors. Our lab testing is often times more cost effective, and doctors know if you have to go all the way to the lab and pay out of pocket, many patients won’t do it. So they send patients to products like ours instead.

EverlyWell's women's health testing kit.

Where do you look for feedback when evolving your digital marketing strategy?

From consumers that’s all we do, all we do is look at our consumer feedback and build new partnerships, new platforms and new products. Our drivers are what our consumers tell us. It’s always been about conversion to generating sales. They’re paying a lot of money and you have tough critics so it’s really easy to see what’s working and what’s not. From potential investors, everybody has an opinion of why a certain idea is not going to work. If founders listened to everybody telling them why their companies won’t work, no one would start companies. You want to be thoughtful and intellectually honest, but you also want to hone your ability to identify which feedback is critical and right – and which feedback can be ignored.

What has been the biggest lesson you’ve learned launching this company?

What I’ve learned the most is that initial user acquisition and retention engagement is an incredibly detailed, data-driven process. If you are not optimizing day in and day out, and really growth hacking the platform, you’re toast. Our team is constantly evaluating those metrics and trying to quantify what does and doesn’t work, and it is a never-ending process that our team is committed to. That’s our secret weapon.

About Julia

Julia is the CEO and Founder of EverlyWell, the Austin-based, next-generation health testing platform and Next Coast Ventures portfolio company. Julia was named the number one female entrepreneur to watch by CIO magazine for 2017. Prior to founding EverlyWell in 2015, Julia was the Vice President of Corporate Development and Strategy at MoneyGram International. Julia started her career in management consulting at Deloitte and went on to earn her MBA from the Harvard Business School, where she graduated as a Baker Scholar with high distinction. She also is a former multiple World Champion equestrian, officially retiring in 2009.