1Mby1M Virtual Accelerator Investor Forum: With Rob Schultz of Serra Ventures (Part 3)

Sramana Mitra: Let’s talk about your portfolio. What are the highlights that you’ve invested in? Especially help us understand at what stage you got involved. What excited you about that particular opportunity that led you to invest so we can get a feel for how you think about opportunities?

Rob Schultz: I can talk about one company in particular that I’m very excited about. We just closed a seed plus round for about $2.2 million in a company called Reconstruct here in our backyard. Reconstruct is in the construction software space. They work with large construction managers. They’re building big buildings such as stadiums. These are buildings that are a hundred million dollar plus of opportunities. They’re using technology to help them be more efficient in managing those projects.

What really attracted us to this is the size of the opportunity. The construction management space is a trillion dollar industry. The software isn’t as big. It’s rife with problems and a lot of incumbent technologies can help solve those. They’re notorious for schedule overruns due to poor visibility into what’s at risk in your schedule.

What makes Reconstruct unique is a couple of trends. They spun out of the University of Illinois. It was grant-funded initially with about a million and a half dollars in grant funding. The technical team is very strong in both industry and technology. They utilize machine learning and computer vision to deliver the product to construction managers. Drones are great image capture devices now. We’re seeing them all over.

Customers are flying drones taking thousands and thousands of images of their construction projects. They take those images and overlay them on current 3D model and link that to a schedule. Using computer vision technology, they have the ability to identify whether there is risk in the project. It’s getting tremendous results working with some of the largest construction managers in the world. What’s really exciting is we’ve made enough progress. We recently hired a CEO out of Menlo Park who is currently building the go-to-market team.

Sramana Mitra: When you’re putting a team in Menlo Park with the development team in Champagne, is your thinking that you are going to then raise money in Silicon Valley and build the CEO and go-to-market team fully in Silicon Valley?

Rob Schultz: That’s a possibility but not necessarily. A lot of our customers are in Silicon Valley. From a business development standpoint, it made sense to be there. When we did our CEO search, we were open to geographies. Silicon Valley was a good spot obviously.

Sramana Mitra: In a lot of geographies that we work with and interface with, this is a common strategy. They build up to a level of validation, get the product built outside of Silicon Valley, and put some amount of a stake in Silicon Valley to be able to access the much greater amount of funding available here. Is that part of the thinking in your firm as well as in the Chicago area?

Rob Schultz: The access to capital wasn’t the driver. I think great companies can raise money anywhere. When you look at a small ecosystem like Champagne, what we’re mostly missing is business talent. A number of our companies might have dual offices.

Sramana Mitra: We are very big supporters and believers in virtual companies because we run one ourselves. If you look back on the years you just completed, what are the trends in your deal flow? I’m not asking about what you’ve invested. What are the trends that you’ve seen in the deal flow?

Rob Schultz: The first trend is geography. The amount of high quality deals that we’re seeing in non-traditional geographies has been mind-boggling. You’re starting to see capital emerge around those opportunities. For example, today, I just had a very exciting phone call with a $30 million new VC fund in Memphis, Tennessee. They’re doing some exciting work in the Tennessee area. We collaborated last week with a new fund that was investing in the Iowa ecosystem. We’re seeing this more and more.

Sramana Mitra: Broadening geography. That’s awesome. That’s very much in our vision to see more of that ecosystem emerge. Especially with virtual companies, that ecosystem can very well play with the existing ecosystem in the bigger hubs where there’s a lot of money floating.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Rob Schultz of Serra Ventures
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