One-Eyed, One-Horned, Flying Purple LaserWeeder

This is The Startup Breakdown, the newsletter where we breakDOWN startUPs (just had to make sure you appreciated the word play). By joining this growing community of hundreds of curious individuals, you're getting firsthand access to my observations and opinions on the current state of the startups and venture scene. If you'd like to receive these newsletters directly in your inbox once a week, go ahead and subscribe to never miss an email!

Happy Monday, folks.

Before we get started, a couple of quick asks:

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Thank ya ❤️ 

Whatever shirt you’re wearing, never wash it again. We finally found an industry which didn’t suck last quarter and don’t want to jinx it 😋

Fintech was up 55% QoQ, raising a total of $15 billion through 3 months. I’m particularly nerdy about this space (if you are too, hmu and let’s chat all things neobanking and payments), so this news had me playing Trophies by Young Money and Drake.

While this is certainly a nice dose of positive news, the reality might be slightly less awesome than the big number summary would suggest. A whopping $6.5 billion of the total raised came from Stripe’s massive deal, and without this, the industry would have been DOWN 12% from last quarter. This would have put the industry down in line with 2017 lows.

Deal count was down 2% to 983, reflecting how much one massive deal can make a mark. However, this decline was still better than the -12% growth in deal count across all startups. Early stage fintech deals dominated, making up 72% of the total for an all time high share. The biggest such deal was Carbonplace’s $45 million Seed. Back in my day, that was an IPO.

For you Arthurian geeks, you’ll be disappointed to hear that the quarter saw the birth of just one lonely unicorn. A uniunicorn, if you will. MNT-Halan’s ascension in solitude was the first such Green Day reference since 2016, and the billion dollar knighting ceremony was down 97% from Q1 of last year.

Of particular note, the startup exit scene was finally more lively than a Wednesday night in Cleveland. There was a quarterly increase of 15% in exits, totaling 172 deals, far from Q1 2022’s all time high 259 exits but still progress. The most zeros came from PAYCOMET’s $371 million sale to Nexi. M&A was the deal of choice with IPOs only totaling just 4.

If there has been a story in the VC scene as of late, it has been the Hoarders episode that could be written on investors and their heaps of dry powder. This has been a large factor in the downturn in valuations as founders get increasingly desperate for cash. What frees up some of this capital for investors to profit and reinvest? Exits.

The uptrend in exit prospects for private investments makes it far more likely that investors will be more inclined to invest. Another quarterly improvement like this, and we might finally see some of this cash put to use.

And somebody get Stripe an icepack. Back must be absolutely shot after carrying like that…

I can tell that all of you beautiful people know your way around the beauty aisle. There’s simply no way you look ~that good~ naturally. I must admit, however, that for a “startup enthusiast”, I shamefully neglect to stay informed on all things concealers.

Luckily, Vogue Business published a super interesting article discussing how founders in the space are raising capital amidst a market that’s overlining its lips. According to Google, that’s means bad. Rookie mistake.

After a 5-10 year period of soaring valuations, many companies are seeing their numbers coming back down to Earth. Makeup and hair are still rebounding post-COVID, but most other sectors, like skincare, are hurting in an oversaturated climate making it tough to stand out and justify higher prices.

The industry has also been deeply affected by the SVB collapse. Interestingly, despite the bank’s reputation as a tech-friendly institution, the collapsed company’s venture debt packages were a particularly popular option for cash-hungry beauty brands.

While investors in other industries have been flush with too much cash, beauty investors are having a tough time attracting outside investors, largely because of the competition in the market. This has forced founders to get creative to find less conventional ways to fundraise.

If you notice more brands hitting the small screen, this could be why. Just look at Fiona Co Chan, founder of Youthforia, who managed to get the Cubes to commit $400K on Shark Tank. Plus, it’s one helluva way to advertise.

Others are increasingly pursuing friends and family, angel, and crowdfunding options. Maybe go ahead and invest in your niece’s hairbraid brand while you can get good terms.

On the investor side, many big companies are launching their own venture arms. This corporate venture is part of a broader trend of consolidation which is impacting many industries. The unattractive outside options have left plenty of companies open to acquisitions from larger players in their spaces scooping up discounts on cheap startups like a soccer mom at Whole Foods.

On a related note, I recently learned that the cofounder of Topicals skincare, Olamide Olowe, became the first Black woman to hit $10 million in capital raised a few weeks ago. In fact, she was the youngest to raise even just $2 million.

The overachieving CEO is only 26, and her accomplishments had already earned her a spot on the Forbes 30 Under 30. The benchmark was crossed when Topicals raised $10 million in a round from CAVU Consumer Products, a follow up to the $2.6 million she had already raised from angels.

She is excited to continue to grow the company’s product, which provides skincare solutions designed to treat stigmatized skin conditions, and to continue to spread her own personal mission of promoting healthy skin and mental health.

Olamide? More like Ola-midas, amirite?

Confession time: my typical Indian joint order is butter chicken with garlic naan. I know. I’m irredeemable.

However, you aren’t, and Rustic Flute will ensure you can fully immerse yourself in the vibrant startup ecosystem that is South Asia. Check them out and learn more about the Indian companies making waves and how you can get involved 👀

Weed is finally having its moment to shine in the VC world.

And, while it is true that cannabis has also been a hot commodity lately for many investors after centuries of illegality, I’m actually talking about the non-Mary Jane kinda weed. Sorry, Snoop.

AgriTech in general is a fairly unexciting industry for many people. Unless you grew up in the American heartlands, you’ve prolly been missing out on the juicy drama surrounding John Deere’s rule against right-to-repair, a lawsuit reminiscent of that surrounding Apple over the last few months.

Heck, at this rate, you prolly don’t even have “get married by Phil Robertson in the Bass Pro Pyramid” on your to-do list… city slicker.

However, maybe we should be paying just a wee bit more attention to the fine folks quite literally growing the food we put on our tables. Farm production makes up just under 1% of US GDP, and just over 1.3% of the population is employed on farms, but by my count, 100% of us require the fruits (and veggies!) of their labor.

This employment number is shrinking by the year, though, and with both fewer young American adults choosing the profession and higher barriers for immigrants who make up a sizable portion of agricultural employment, the average age of farmers is increasing. Luckily, overalls manufacturers can rest easy knowing that their product has been adopted by Gen Z. Long #LEVI.

Given the number of kids choosing TikTok over tractors, it only makes sense that the ag space is finally getting its first sip of Silicon Valley oat milk innovation. It’s a completely valid, objectively better tasting alternative to the real thing anyways…

Over the last few months, young robotics companies in the space have been eaten up and acquired by larger players, namely the aforementioned (and only one we know tbh) tractor company.

One that might be next in line is Seattle-based Carbon Robotics. They’ve built the terminator for undesirable plants.

The LaserWeeder is a (say it with me) AI-powered machine that automatically scans, identifies, weeds, and thins crops using its 30 lasers, tracking cameras, and deep learning model. Yeah, maybe don’t connect this puppy to ChatGPT… 😅 

Unsurprisingly, this is a massive improvement over the current man-powered system, allowing for 200,000 weeds to be #ELIMINATED per hour, the equivalent of 75 humans. I guess real grease > elbow grease, though both are certainly better than slicked back hair grease.

The robots don’t sacrifice sustainability for the sake of ka-chow, either. Not only do the machines not harm the soil, but they actually remove the need for harmful chemicals and pesticides, something which is becoming increasingly important for health-conscious consumers but also as weeds grow resistant to existing formulas, increasing the price of mixtures already costing upwards of $100/acre every year.

In case that wasn’t enough, they can even use those fancy cameras and models to analyze and evaluate soil and crop health over time, allowing for scientifically-backed insights to better care for the plants. This is leading to higher yields and healthier crops. Or, healthier yields and higher crops if you’re this little guy 👇️ 

While you might not need to go out and buy a LaserWeeder for your succulent yet, that doesn’t mean the company is having a hard time finding willing customers. The machines were as hard to come by as a PS5 last year, selling out with a long waitlist of farmers wanting to flex on their neighbors.

In total, the robots have been used to kill 500 million weeds on 40 farms. Customers include Triangle Farms, Duncan Family Farms, and Grimmway Farms. Revenue is already estimated at $27.2 million, and this can be expected to grow with plans to reach 17 more US states and 3 provinces in Canada this year, and there are plans in place to expand across the pond, too.

Carbon recently raised a $30 million C round led by Sozo Ventures, upping the total outside capital to $67M. Far from being ag-focused firms, the list of investors cover those active in the most innovative of frontier technologies.

The weed control market (promise i’m not a narc) hovers just above $30 billion globally, and there is a strong trend towards more sustainable, increasingly affordable alternatives to dangerous pesticides. While the broader industry is growing at 4%, that for mechanical solutions is closer to 10%.

There are a few other startups building their own root-seeking Death Stars, including Ecorobotix, Naïo Tech, and Agrointelli. Of the trio, only Ecorobotix is looking to build something as scary as Carbon. The latter two have a much bigger immediate customer base, though, seeing as the LaserWeeder is currently retailing for a hefty $25K-$50K. At least you get free delivery with Prime?

As mentioned, though, like your uncle who swears he would have won state if coach had put him in, older companies are also looking to stay “hip.”

John Deere in particular has acquired companies such as Blue River which is building machine learning and computer vision for precision agriculture. It’s clear that this is the future of the industry, and there are many companies looking to ensure that the people of tomorrow have much cleaner fingernails.

Carbon has a brilliant team. CEO and founder Paul Mikesell (Mike sell what?) took his previous company, Isilon, public before being acquired by EMC for $2.5 billion. It wasn’t even his first startup to be acquired. What an underachiever…

Some of the other leadership team members have experience in Uber’s autonomous driving and AI divisions (CTO Alex Sergeev) or started their own high tech companies in computing. They have experienced business and sales execs.

They’re up to more than 85 employees, and if they can keep up with demand, that number can be expected to grow as Carbon becomes a housebarnhold staple on farms across the nation.

TLDR: Carbon Robotics is providing security for the food on your plate, building an AI-powered precision agriculture robot which eliminates weeds and provides insights on soil health. Its rapid growth and growing customer base points towards this high-powered solution being the standard for the crops of tomorrow.

Cheers to another day,

Trey