Software startup Physna LLC to create dozens of jobs with $6.9M investment - WCPO
Posted: 29 Jul 2019 06:48 AM PDT
A Cincinnati-based software company, Physna LLC, plans to add more than 20 jobs and open a Columbus office after landing a $6.9 million investment from Drive Capital.
That's a $1.1 billion venture capital firm co-founded by Mark Kvamme, a Silicon Valley transplant who ran the economic development agency, JobsOhio, for the Kasich administration. Physna is hoping Kvamme's experience as an early investor in Google and LinkedIn will help the three-year-old company become the world's first search engine for 3D models.
"I remember watching Google rise to become the company that would set the standard for text and image search," Kvamme said in a press release announcing the Series A investment. "I see the same potential here and believe Physna could become the market defining company for 3D search."
Founded in 2016, Physna developed software that breaks down 3D objects into smaller geometric units that can be more readily compared to a universe of similar objects. That lets designers see whether a part they're developing fits into the machine in which it will be used. It could also help inventors prevent their designs from being illegally copied and help maintenance crews diagnose whether a jet engine blade has worn out enough to be replaced.
"It helps you speed up the process," said Phsyna CEO Paul Powers. "It's a really cool tool that we're working on that's going to fundamentally change how design works. It's going to give 3D engineers the same tools that software engineers have."
Powers said Physna will use the $6.9 million investment to hire software engineers and senior-level sales executives with experience in computer-aided design and product lifecycle management solutions.
Powers said Physna attracted interest from Silicon Valley investors and funds in Cincinnati. But he believes Kvamme sees the potential of Physna's technology in a way that other investors did not.
"We don't want a walking ATM machine," Powers said. "We want people who actually are engaged and actually care about what the company does. It should be a collaborative effort to figure out how do we get this to the next level."
Kvamme said there could be many "next levels" for Physna to achieve.
"The biggest companies on the Internet have been created by search," Kvamme said. "Search is still very much a two-dimensional world. I can search for words very easily. I can also search for images. What Paul and his team have created is this capability to do a geometric search for three-dimensional objects. It is truly revolutionary."
Kvamme, a former general partner at Sequoia Capital, launched Columbus-based Drive Capital in 2013 to search for midwestern companies with innovative technologies in artificial intelligence, robotics and 3D. Physna is the second Cincinnati investment for Drive Capital, which also funded the travel-planning app Roadtrippers in advance of that company's 2018 sale to Airstream parent Thor Industries Inc.
Posted: 29 Jul 2019 07:21 AM PDT
Morning Markets: Startup valuations look strong as 2019 rolls into its second half. Especially software startup valuations.
A few weeks back the Crunchbase News team published a raft of information regarding the global and U.S. venture capital markets, along with dives into popular markets like Texas domestically, China globally, and more. One data point that we don't track, however, is the percentage of 'up rounds' versus 'down rounds' in the period.
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In English, that means we don't keep tabs on how many startups out of 100 who raise more capital do so at a higher valuation (price increase) or lower valuation (price decrease). It's useful data. And so, when a new report dropped including the information we took note. Let's explore.
The Q2 Fenwick & West (a legal shop that works with startups) venture capital survey writes that in the second quarter, "[u]p rounds exceeded down rounds 86% to 6%, with 8% flat in Q2 2019, an increase from Q1 2019 when up rounds exceeded down rounds 81% to 11%, with 8% flat." I imagined that the preceding 81 percent rate was high; to see it rise to 86 percent one quarter later in the same year was eye-opening.
Luckily for us, Fenwick et al graphed their findings. Observe:
The chart shows us that not only was the Q1 81 percent up-round percentage tied for the local maximum, Q2's 86 percent is the highest result in years. (An extended version of the same chart shows that the Q2 2019 up-round percentage is roughly tied for the all-time high set in early 2015.)
In contrast, while up rounds reached their recent zenith, down rounds slipped to their smallest portion of new capital events. Indeed, while up rounds reached their highest known percentage, down rounds managed to dip under flat rounds.
This may be all a bit more grokkable if we turn to probabilities. Here's how it shakes out: If a company raised in the second quarter of 2019, it had about a 1 in 16 chance of raising at a lower price, about a 1 in 13 chance of raising at a flat valuation, and a about a 1 in 1.16 chance of raising at a higher price. Those are good odds!
Not All Good News
The whole Fenwick document is worth reading (here) because you should imbibe the full context of the above information. That setting includes some weak points worth noting while we're here highlighting yet another bullish indicator.
Chief among which is a modest dip in the pace at which companies raising their Series D can boost their valuation, and a slightly sharper drop in "Series E and higher" up valuation increases. What that means is that the amount that companies raising a Series D, Series E, or later round can expand their value in between rounds is falling.
Not much, mind; the amount that Series D rounds repriced companies up was still 89 percent after its decline. That's not bad. But "Series E and later" price changes fell more sharply to a mere 39 percent gain.
This hints at a few things. Perhaps as startups reach deeper into the private markets, IPO prospects (ie the impact of public pricing on private valuations) is kicking in a bit more sharply, slowing private-market value accretion at late-stage startups. Or it could be that worry concerning the number of unicorns that will make it to a public offering before a correction is slowing super late-stage valuation growth.
You can fill in your own guess. What matters as a takeaway is that while early, and mid-stage startup valuations (Series B and C, say) are looking strong, things are weaker towards the end of the private capital game.
The Vision Fund 2 cometh, but perhaps not soon enough to reprice everyone at once. So, if you are looking for some big, late-stage checks, mind your expectations. For the rest of the startup world, the chances of raising at a nice premium from your last private round look good.
And those odds look the best for software-focused startup companies. Why? Because of all the categories of startups that Fenwick examined, the sharpest valuation increases were given, on average, to software firms. Once again, why? I'd reckon because as the public market rains favor on similar companies, venture capitalists can't help but pay a little more for their smaller, private relatives.
Illustration: Li-Anne Dias.
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