Human composting and timber marketplaces: talking “industrial” VC with investor Dayna Grayson | TechCrunch

While the venture world is abuzz with generative AI, Dayna Grayson, a longtime venture capitalist who co-founded her own firm five years ago, is leading the charge. build capital, focused on comparatively boring software that could transform industrial sectors. Their mission does not exclude AI, but it does not depend on it either.

Construct recently led a seed-stage round, for example, for timbereyeA startup that is developing vertical workflow software and a data layer that it says can more accurately count and measure logs and, if all goes according to plan, allow the startup to become its Will help in achieving the target. Market to buy wood. You might be wondering how big that market can be? According to an estimate, the global forest products industry was affected by $647 billion In 2021.

Another construct deal that seems less sexy than big language models is Earth, a startup focused on creating human compost, which turns bodies into “nutrient-rich” soil over a period of 45 days. Yes, ok. But also: This is a smart market to pursue. Cremation accounts for 60% of the market today and could exceed 80% of the market in the next 10 years. Meanwhile, the cremation process has been compared to its equivalent 500 mile car trip, As people are focusing more on “green” solutions across the board, Artha thinks it can attract a growing number of those customers.

Dodging some of the AI ​​hype doesn’t entirely exempt Grayson and his co-founder at Construct, Rachel Holt, from many of the same challenges facing their peers, as Grayson told me recently in Washington. , said during a Zoom call from Construct’s headquarters in DC. Their challenges are time. Pair launched before them Three The fund amid one of the weakest markets in the venture industry. Like every other venture firm on the planet, some of their portfolio companies are also struggling with indigestion after raising too much capital. All that said, they are moving toward the future and – seemingly successfully – dragging some stagnant industrial businesses with them. Excerpts from our recent conversation, edited for length, follow.

You were investing during the pandemic, when companies were investing very rapidly. How did those rapid-fire rounds impact your portfolio companies?

The quick news is that they did not impact many of our portfolio companies based on the fact that we actually deployed the first fund in seed companies – new companies that were starting in 2021. Most were getting out of the gate. But [generally] It was tiring and I don’t think this round was a good idea.

is one of your portfolio companies Vehiclea package delivery company that picked up a Demon A Series A round, then a larger Series B two months later in early 2022. This year, it laid off 20% of its employees and there have been reports of business,

I really think WeHo is a great example of a company that has managed very well despite the economic turmoil over the last year or so. Yes, you could say they cracked a few whips in the financial markets by garnering so much attention and growing so fast, but their revenue has more than doubled in the past year, and I can’t say enough good things about management. How stable is the team and company? They have been and will remain one of our top brand companies in the portfolio.

Of course, these things never move in a straight line. What is your view on how involved a venture firm should or should not be in the companies it invests in? This seems somewhat controversial these days.

With venture capital, we are not private equity investors, we are not controlling investors. Sometimes we’re not on board. But we are in the business of providing value to our companies and being great partners. This means contributing our industry expertise and contributing to our network. But I put us in the category of advisors, we are not controlling investors, nor do we plan to become controlling investors. So it’s really on us to provide the value that our founders need.

I think there was a time, especially in the pandemic, where VCs advertised that ‘We won’t get too involved in your company – we’ll step aside and let you run your business.’ We’ve actually seen founders shy away from that notion and say, ‘We want support.’ They want someone in their corner, who will help them and organize those incentives appropriately.

VCs were promising the moon during the pandemic, the market was so bleak. Now it seems that power has shifted away from the founders and into the hands of the vice-chancellors. What are you seeing day to day?

One of the things that hasn’t gone away since the pandemic days of the rush to invest is SAFE Notes [‘simple agreement for future equity’ contracts], I thought that when we get back to a more measured investment pace people would want to invest only in equity rounds – capitalized rounds versus notes.

Founders and investors, including us, are open to SAFE Notes. What I’ve noticed is that those notes have become ‘fashionable’, sometimes including side letters [which provide certain rights, privileges, and obligations outside of the standard investment document’s terms]So you really have to ask for all the details to make sure the cap table isn’t becoming more complicated than it already is. [the startup] Is [gotten going],

This is very tempting, because the safe can be closed so quickly that anything else can be added to it. But take boards, for example; You can have a side letter [with a venture investor] He [states that]’Even if it’s not a capitalized round, we want to be on the board,’ actually SAFE notes are not designed for that, so we say to founders, ‘If you’re going to go into all the work of forming the company, The goods are there, just go ahead and take advantage of the round.

Construct’s focus is on “transforming the core industries that power half the country’s GDP, logistics, manufacturing, mobility and critical infrastructure.” In some ways, it feels like Andreessen Horowitz has taken the same concept and rebranded it as “”.American mobility, Do you agree or are these different topics?

This is a little different. There are certainly ways in which we align with their investment thesis. We believe that these foundational industries of the economy – some call them industrial space, some call them energy space that can include transportation, mobility, supply chain and decentralized manufacturing – need to become tech industries. We think that if we are successful, we will have a lot of companies that are maybe building software companies, maybe actually manufacturing companies, but they will be valued the same way technology companies are valued today, Margins over time with similar revenue multiples and similar EBITDA. This is the vision behind which we are investing.

We’re starting to see some old industries closing down. A former Nextdoor executive recently raised money for a hvac roll-up, For example. Do these types of deals interest you?

There are many industries where there are existing players and it is very fragmented, so why not put them all together [in order to see] Economies of scale through technology? I think it’s smart, but we’re not investing in old world technology or businesses and then modernizing them. We are in favor of introducing new technology in these markets. is an example Monaire We have recently invested in it. They are in the HVAC field, but are providing a new service to monitor and measure the health of your HVAC through their low tech sensors and monitoring and measurement service. One of the founders previously worked in HVAC and the other previously worked at [the home security company] SimpliSafe. We want to support people who understand these places – understand the complexities and the history there – and also understand how to sell them from a software and technology perspective.