Austin Startup Funding Nears Peak Levels as 2020 Approaches

October the outlier. That's what it has been, at least in terms of venture capital funding for Austin-based startups.

With RigUp's massive $300M round, SparkCognition's $100M haul and sizable fundings for Shipwell, Literati and Tenfold, October was the type of month that seems to represent a new milestone for Austin's booming startup scene.

And Austin's 2019 funding totals were surpassing its funding totals from last year.

The MoneyTree report put out by PricewaterhouseCoopers and CB Insights earlier in October showed that Austin companies had raised $1.1B in the first three quarters of the year, and that didn't include some of the aforementioned mega rounds.

For context, the same report showed $1.4B for investment in all of 2018. But the report shows the true high water mark for Austin investment was during the dot com boom -- $2.5B was raised in 2000.

While the dollar totals are up, the number of recorded deals is slightly down, based on the MoneyTree report, which may not reflect all angel investments and accelerator funding. That fits a national trend of more money spread across fewer deals.

But make no mistake. These are booming times for Austin startups as we head into 2020.

The local ecosystem also had about a dozen mergers and acquisitions in October, representing hundreds of millions trading hands. And Escalate Capital Partners, Trust Ventures and other local VC firms bolstered their coffers with new funding, as well. And that comes on the tails of news in late September that Silverton Partners and Capital Factory filed SEC paperwork indicating they are both, separately, planning to raise new venture capital funds.

Now, here's a look back on the month's startup funding, mergers and acquisitions and VC firm activity.

Fundings

Diligent Robotics announced it has raised $3M in seed funding co-led by two California-based firms, True Ventures and Ubiquity Ventures. Next Coast Ventures, Capital Factory, Pathbreaker Ventures, Boom Capital and Grit Ventures also added to the round, along with angel investors. That brings total funding, including a $2.1M seed round and a $750K National Science Foundation grant, to about $5.8M.

Locally based preventative home maintenance startup PreFix has landed a new round of funding led by Chicago Ventures. The company, founded by James Bilodeau, didn’t disclose the amount in its announcement. Other investors included Brand Foundry Ventures, Brian Spaly (founder at Bonobos and Trunk Club), Paul Hedrick (Founder and CEO of Tecovas), Brett Hurt (co-founder and CEO of data.world) and Firebrand Ventures. Its other investors have included Moonshots Capital, Generation Partners, Capital Factory and Techstars. As part of the move, Rob Chesney, a partner at Chicago Ventures, will join PreFix’s board. The new money will support the startup’s expansion in Texas and new markets.

Austin chemical sensors startup Lantha Inc. has raised a $2.6M round led by GOOSE Society of Texas, a Houston-based group of investors. Lantha, led by CEO Robert Toker, makes a chemical sensor platform that provides moisture analytics, chemical detection and other tools. Lantha’s technology emerged from research at the University of Texas where Simon Humphrey, an associate chemistry professor and CTO of Lantha, developed the concept, which may have applications in pharmaceutical, defense and oil and gas sectors. The new money will help make a couple key hires and launch its product early next year.

AppClose, a co-parenting app that helps parents manage child care across multiple families, reported raising $500K in equity funding from a single investor. The company was founded in 2015, and it’s led by Igor Litinsky. It reported raising a prior $500K in August. Prior to that, it raised about $600K in August last year, and had prior rounds of $505K and $335K.

SparkCognition, a local artificial intelligence company, announced it had raised $100M in a Series C funding round led by California-based March Capital Partners. The investment values SparkCognition at $770M, according to a September PitchBook profile. The company has raised a total of $175M since CEO Amir Husain founded it in 2013.

Austin sales software and data startup Tenfold announced a $7.5M Series C investment led by local venture capital firm Next Coast Ventures. The startup noted that its prior investors — Andreessen Horowitz, Geekdom Fund and Salesforce Ventures — also contributed to the new round. That brings its total funding to just north of $38M. Tenfold’s platform connects phone systems with CRMs and other enterprise management systems. The software brings data from those systems into a dashboard to equip customer service representatives with information from internal programs that may show the customer’s history with the company and other relevant data.

Austin’s Place Technology, which makes a Salesforce application for financial forecasting, budgeting and collaboration, has raised $3M for its initial product launch. Leading the round was San Antonio-based Geekdom Fund, with additional backing from Austin-based Star Vista Capital and angel investors. The startup was founded last year by CEO Brandon Metcalf, who previously founded and scaled Salesforce-powered Talent Rover (acquired by Bullhorn in 2018).

RigUp, a local company that caters to the energy sector with a marketplace for skilled workers and services, announced a $300M funding round — a move that puts the company in a relatively exclusive club of tech unicorns that are valued at over a billion dollars. The new Series D round of funding was led by Andreessen Horowitz (also referred to as a16z), and David George, a general partner at the firm, is joining RigUp’s board. Previous investors Founders Fund, Bedrock Capital and Quantum Energy Partners also participated, as well as newcomers Baillie Gifford and Brookfield Growth Partners.

Austin startup Eterneva, which creates diamonds from the ashes from cremations, landed a $600K investment from Mark Cuban on ABC‘s “Shark Tank.”

Launch Code After School, an Austin startup that provides programming skills to kids, reported raising $112K in new debt funding, an SEC filing showed. The company is led by co-founder and CEO Ravi Parikh, who co-founded MakerSquare in 2012 and RoverPass in 2014.

Auto insurance comparison startup The Zebra reported to the SEC that it has raised $13.5M in new equity funding. It appears to be the first chunk of a larger round with a $30M target. This appears to add to the roughly $61M the company has previously raised.

Literati Inc. announced Oct. 23 a $12M series A funding round led by Nikhil Basu Trivedi of Shasta Ventures, a Silicon Valley-based investment firm that helped propel Dollar Shave Club and Nest Labs to fame. The valuation was not disclosed.

Milestone Brands, an Austin-based alcoholic beverage company, reported raising $10.2M in new equity funding. The company, founded in 2015 by former Deep Eddy Vodka CEO Eric Dopkins and Deep Eddy co-founder Chad Auler, acquires and markets beverage startups. Its portfolio includes Dulce Vida Spirits, American Born Whiskey & American Born Moonshine and Naranja Orange Liqueur.

Austin-based Shipwell is preparing for a hiring surge after raising a $35M series B round led by Toronto-based Georgian Partners. Shipwell has raised $47M since it was founded in 2016, including $10M in October 2018. The company’s mission is to “connect, automate and optimize” supply chains, said co-founder and President Jason Traff. The company, which now has 88 people in Austin, has primarily operated in freight shipping but is now expanding into parcel shipping, Traff said. It also recently opened a Chicago office.

Locally based sustainable fashion startup Raven + Lily reported raising about $800K in new equity funding. The company, with stores in the Domain and in Fredricksburg, sources bags and jewelry from communities around the world.

Locally based health benefits startup Sana Benefits announced a new $3.6M seed round led by Austin-based firms Gigafund and Trust Ventures. The company, which uses intelligent backend automation and other integrations to provide health benefits for small- and mid-sized businesses, launched in Texas last year and is hiring in Austin and remote locations. It has now raised a total of $6.3M.

Mergers & Acquisitions

Austin real estate tech startup OJO Labs is acquiring fellow Austin real estate startup RealSavvy, the ABJ reported. Terms of the deal weren’t disclosed. RealSavvy, founded in 2014 by Rick Orr, had raised $6.2M through debt financing backed by TIMIA Capital, Pathfinder, Capital Factory, StagedotO, Corsa Ventures and a few local angel investors, including Henry Yoshida and Chris Palmisano, according to Crunchbase. RealSavvy’s software helps realtors manage websites and customer relations. The deal marked OJO Labs’ first acquisition since it raised a $45M round in March. In 2018, it scooped up Wolfnet Technologies.

Q2 Holdings, an Austin-based banking technology and software company traded on the NYSE, said that it is acquiring Charlotte-based SaaS company Lender Performance Group for about $510M. Lender Performance Group had previously raised an undisclosed amount of private equity funding from Georgian Partners, Global Venture Capital, Insight Partners and Assurant Growth Investing, according to Crunchbase. Its platform is used by about 150 banks globally to structure and negotiate commercial lending transactions.

Upland Software, an Austin enterprise work management software company that trades on the Nasdaq, has acquired InGenius, an Ottawa-based telephone systems integration company. Upland is paying about $26.4M in cash, plus an additional $3M (subject to change). Upland said the deal will bring in about $9M in new annual revenue. That, the company says, will put it at $237M revenue run rate.

Austin-based Epicor Software Corp, which is owned by private equity firm KKR & CO, has acquired 1 EDI Source, an Ohio-based on-premise electronic data interchange company focused on manufacturers and transportation companies. Terms weren’t disclosed. The move follows recent talk that Epicor could be sold for as much as $5B.

Threatcare, which has raised funding from local venture capital firms and is known for its inclusive business practices, was scooped up by Tampa-based security company ReliaQuest. No financial details were provided. As part of the deal, Threatcare founder and CEO Marcus J. Carey will work with ReliaQuest CTO Joe Partlow on integrating Threatcare’s tech into their product line and build out new products. All of Threatcare’s employees will join ReliaQuest, and the Austin team will continue growing. Threatcare, founded in 2014 by Carey, provides cybersecurity attack simulations and has developed an AI-based security assistant for security teams. It has raised $2.1M from investors, including Firebrand Ventures, Flyover Capital, Moonshots Capital, Techstars and Right Side Capital Management.

Vida Capital, Inc, an Austin alternative asset management platform in the life settlements space, has been acquired by RedBird Capital Partners and Reverence Capital Partners. Terms of the deal weren’t released. Vida was founded in 2009 and it is integrated with Magna Life Settlements. It is led by President and CEO Jeff Serra.

Austin sales software startup Olono was acquired by Boston-based InsightSquared. Terms of the deal weren’t disclosed. Olono was founded as Nexd in 2015 by James Davison, a former product manager at Austin-based SailPoint and IBM, and Dan Greff, a former director of engineering at SailPoint. It has raised around $7M, which includes funding from ATX Venture Partners (formerly known as ATX Seed Ventures), Wildcat Venture Partners and angel investors including Bill Bock, former president of Silicon Laboratories, SailPoint co-founder Kevin Cunningham.

Austin-based software company Asure Software, which trades on Nasdaq as ASUR,sold its Workplace Management business to FM:Systems. The asset and equity deal is worth about $120M, the company said. Asure, led by CEO Pat Goepel, has grown its workplace software business from $5M to about $28M. The new deal will help the company expand its payroll, time and attendance and consulting businesses. Asure has made about 15 acquisitions in the past decade, including Payroll Maxx earlier this year, according to Crunchbase. The company was founded in 2007, although its previous iteration, Forgent Networks, dates back to the mid 1980s.

Madwire, a Colorado-based business management and marketing software company, acquired Austin-based SpaceCraft, a cloud-based website platform. Terms of the deal weren’t disclosed. SpaceCraft is led by co-founder and co-CEO Adam Moore. Its other co-CEO is Dan Isaacs. The companies said SpaceCraft’s roughly 10K paid subscribers will expand Madwire’s overall paid subscribers to over 20,000 small- and mid-sized businesses. According to Crunchbase, SpaceCraft, founded in 2010, has raised $2.9M, including backing from Austin’s Capital Sports & Entertainment and angel investor Dave Marmonti.

Upland Software, an Austin enterprise work management software company, acquired San Jose-based Altify, a customer revenue optimization software company for about $84M. The deal will add about $24M in annual revenue for Upland. Altify will become a platform in Upland’s Sales Optimization product line. A week before that, Upland acquired InGenius, an Ottawa-based telephone systems integration company.

SailPoint, a publicly traded Austin identity security company, announced that it acquired two other security companies. It scooped up Denver-based OverWatchID and Las Vegas-based Orkus. The cost of both acquisitions totals about $37.5M — the company didn’t say how much each cost separately. The company said it doesn’t expect any new revenue from the acquisitions during this quarter. The acquisitions beef up SailPoint’s access management lineup, which provides a layer of security across apps and access points. The two acquired companies will be integrated into the SailPoint Predictive Identity Platform.

Intersys Consulting, an Austin-based IT consultancy, was acquired for $67M in cash by ASGN Inc., a major staffing company. Intersys will become part of ASGN’s Apex Systems division. Intersys, founded in 1993, expects to end 2019 with $31M in revenue.

VC Funds and News

Austin-based Elsewhere Partners led a $5.5M Series A round for Denver-based health care software startup BurstIQ. The company, founded in 2015, provides blockchain-based apps for health care customers.

Austin’s Escalate Capital Partners, which has backed local notables including HomeAway, RetailMeNot, Lifesize and Sailpoint, announced its first close on its fourth fund with $282M. The new fund was backed by limited partners including JP Morgan Asset Management, The University of Texas/Texas A&M Investment Management Company, Bespoke Private Strategies and others. It has a hard cap of $290M. Escalate, founded in 2005, says it provides mezzanine capital for growth companies in a variety of tech, service and health care industries. Its new announcement notes it will expand on its strategy with $1M to $2M equity investments in existing portfolio companies. The firm also announced two new hires: Travis Wood as a director and Brendan Scher as an associate. It also promoted Chris Hall to principal.

Trust Ventures, an Austin VC firm backed by Koch Disruptive Technologies, a subsidiary of Koch Industries, reported plans to raise its second fund with a target of $100M -- and it said it has raised $70M already. As we reported in 2018, its previous fund had targeted $50M. The firm is led by Brian Tochman, former president of Kasita, a tiny home manufacturer in Austin, and Salen Churi, a professor at the University of Chicago Law School and former associate with Kirkland & Ellis. Its portfolio currently includes ICON, Visibly, Emergy Foods, Oklo, Sana, Veryable and a company that’s still in stealth.

CPG VC firm Springdale Ventures expanded its first fund from $20M to $25M. The firm, created by Dan Graham and Genevieve Gilbreath earlier this year, has already backed eight companies, seven of which are in Central Texas, the ABJ reported.

Steve Case and Washington, D.C.,-based investment group Revolution are doubling down as they launch another $150M Rise of the Rest seed fund. ROTR is one of three Revolution divisions, and focuses on small, early-stage investments in companies outside of major tech hubs like California and New York. The division’s first $150M fund has made about 80 investments since launching in 2017, averaging check sizes of $500K. Another arm, Revolution Ventures, recently closed on a $215M fund. The Rise of the Rest fund recently helped back a $15M round for Austin-based ZenBusiness, and it had made at least four prior investments in Austin startups.